CMS Relents on Crosswalking Molecular Codes For 2016 CLFS

The feds have walked back the crosswalk.

That was the news that awaited the laboratory sector late last month, when the Centers for Medicare & Medicaid Services (CMS) released its final molecular coding rationale for 2016 as part of the Clinical Laboratory Fee Schedule (CLFS).

Earlier in the year, the CMS had proposed crosswalking many of the molecular codes to existing codes, a process that would have led to payment cuts for the tests ranging from about 30 percent to more than 90 percent.

For example, CareDx, a California-based lab that provides molecular testing to provide surgeons data on potential heart transplant patients, could have seen the Medicare payment for its AlloMap assay dropped from $2,821 to $644.

However, the laboratory sector engaged in a fairly intense lobbying effort to get CMS to reverse course, and it succeeded.

CMS announced on Nov. 17 that it would use a gapfill methodology based primarily on the multianalyte assays with algorithmic analyses (MAAA) codes to set prices. It moves much of the grunt work for pricing in 2017 and beyond over to the regional Medicare contractors.

The news was greeted with a collective sigh of relief from many of the esoteric testing companies, whose stocks had been punished by CMS' prior crosswalking proposal.

"The reversal is a victory for transplant patients, not only for CareDx," said company chief executive officer Peter Maag. "We compliment CMS' consideration of the additional data, and its decision to apply the appropriate methodology to price AlloMap."

Another appreciative statement was issued by Kim Popovits, CEO of Genomic Health in Redwood City, Calif.

"We are pleased that the final 2016 CLFS reflects CMS's precedent over the past several years to delegate rate-setting for these complex tests to the MACs," she said. "The MAC-established rates for Genomic Health's Oncotype DX tests are consistent with the market-based rate-setting policies and procedures enacted by Congress under the Protecting Access to Medicare Act (PAMA)."

Amanda Murphy, an analyst with William Blair & Co., said the decision was a positive for the sector as a whole. "The gap-fill process puts the onus on the local Medicare contractors to price the test; Palmetto (considered to be the thought leader in molecular diagnostics) has in many cases performed rigorous evaluation of the analytical and clinical validity of the tests, and other contractors have adopted Palmetto's coverage decisions (including Noridian, the local contractor for many of the labs in question)," she wrote in a recent report. "Thus, under gap-fill pricing, we expect Medicare reimbursement rates to be retained close to current rates."

Bruce Quinn, M.D., a senior director at FaegreBD Consulting and a former director of the Medicare program in California, noted in a statement that tests such as AlloMap would likely wind up with final 2017 pricing no more than 10 percent lower than its current state. As a result, the stocks of many of the molecular labs rebounded significantly from their lows in recent months. Genomic Health's stock rose more than 40 percent, from about $20 a share to $29 in recent trading. Veracyte, which distributes the Afirma test for thyroid cancer testing, rose by about 50 percent. Myriad Genetics rose about 20 percent.

The lab sector was not entirely victorious in the decision. The CMS decided to continue crosswalking codes 81211 and 81213 to 81162, which impacts BRCA testing. Murphy believes it will impact Myriad Genetics the most, although the potential revenue losses are just a small proportion of the company's overall business.

Takeaway: Lobbying from the laboratory sector succeeded in getting the Centers for Medicare & Medicaid Services to relent on the use of crosswalking to set molecular test pricing for 2016.