Private Payer Reimbursement for Genetic Testing Hinges on Clinical Utility
Two revenue cycle management experts offer tips for clinical labs to improve coverage decisions for genetic tests
Clinical laboratories must consider the economics of their business operations, so it is no surprise that reimbursements for the testing they provide are often top of mind.
Genetic testing coverage by private payers is still relatively new. Ann Lambrix, vice president of payers and revenues management at GoPath Diagnostics, notes that it generally takes payers five to 10 years to streamline the reimbursements of new tests. Although reimbursement for genetic testing has enjoyed more efficiency in recent years, most payers still require prior authorization (PA) of the testing to ensure medical necessity.
The challenge for payers is significant. By some estimates—including from a “2024 Lab Trend Report” by Avalon Healthcare Solutions, for example—there are 175,000 genetic tests on the market.1 Trying to determine if any given genetic test has clinical utility can lead to reimbursement delays.
Recent trends in payer coverage of genetic testing
Lambrix reports that clinical laboratories have enjoyed more favorable coverage and reimbursements in the last three years. She says this was helped along by the Affordable Care Act (ACA) and the development of national coverage determinations (NCDs), which the Centers for Medicare & Medicaid Services (CMS) note are arrived upon for Medicare beneficiaries through evidence-based assessment, alongside public commentary.2,3
Reimbursement of genetic testing is especially favorable for cancer risk detection, according to Lambrix. This is due to its obvious medical necessity: the earlier the diagnosis, the better, in terms of both patient outcomes and decreased costs for payers to treat the beneficiary.
Lambrix emphasizes that the major trouble with reimbursement of genetic testing today is that there are hundreds of health insurance plans with various policies about covered tests. For example, some policies do not cover genetic testing to determine risk, even with a patient who has a family history of a disease with known genetic markers. Despite this problem with reimbursement, many insurers now recognize the medical utility of identifying risk factors as early as possible and have adopted favorable policies for the reimbursement of some genetic tests.
On the billing side of laboratory administration, Lambrix explains that coverage does not equate to reimbursement. Instead, there is still administrative burden to prove medical necessity for each patient in order to obtain PA. A failure to do so would mean negative economic outcomes for the laboratory, as offering tests that will not be reimbursed is not a viable long-term business model.
She recommends ensuring that a lab’s billing staff properly administer each individual healthcare plan and the PAs and claims for genetic testing for patients. Understanding what will and will not be covered and submitting information accurately and efficiently is of the utmost importance. Congress is discussing the administrative burden of PA, with a bill recently reintroduced in an attempt to remove some of the encumbrances associated with PA in order to assist with treatment timelines and patient outcomes.
Few CPT codes for genetic testing
Lambrix says there are four Medicare Administrative Contractors (MACs) participating in the DEX® Diagnostics Exchange Registry, a platform for obtaining Z-code assignment. Z-codes are unique alphanumeric labels used to identify certain molecular diagnostic tests, and these codes can be associated with non-specific Current Procedural Terminology (CPT) codes used by payers for reimbursement processes.
She says there are very few genetic tests that have established CPT codes. When there is not a CPT code assigned to a specific genetic test, an “unlisted” code is used, and the exchange registry is referenced to determine if and what reimbursement will be provided. This is an important economic factor for a laboratory to help decide if it makes sense to offer the genetic test in question.
When utilizing an “unlisted” CPT code, a lab must work directly with the private payer to communicate the clinical utility of the test. Lambrix notes that this can be a tedious process and that there is a chance the payer may deny any reimbursement for the test.
Although a denial can be appealed, in the meantime, a lab can expect zero reimbursement on that particular test. Lambrix emphasizes that if you can demonstrate solid medical necessity for a genetic test, there should not be a problem obtaining reimbursement other than the initial administrative burden of working with the payer to demonstrate clinical utility.
However, she details that while medical necessity for cancer tests is now widely understood and accepted, that is still not the case for many other types of genetic tests. As more laboratories work to prove clinical utility for various types of genetic testing, she believes this will open the door to continued improvements in reimbursement in the overall genetic testing landscape.
How to improve reimbursement for genetic tests
Most private payers have specific policies that outline the diagnosis codes and genetic tests that are eligible for reimbursement. These tests have proven clinical utility and are accepted by payers as medically necessary.
Lambrix says familiarizing yourself with the already approved test panels is one way to offer genetic testing and be confident that the lab will receive reimbursement.
Meanwhile, Liset Sanchez, client manager for the revenue cycle management team at Lighthouse Lab Services, relays that some payers require single gene testing as opposed to a full panel, and it can be a hurdle for established laboratories to alter test menus in this way.
However, knowledge of and adhering to each particular payer’s established approach to reimbursement for genetic testing is a way to optimize reimbursement and reduce revenue fluctuations. Sanchez advises her lab clients to proactively research and review specific payer policies, as well as perform internal audits on billing and reimbursement success.
Lambrix further explains that labs can offer testing for neurological and chromosomal disorders, which often have favorable reimbursement given their established genetic markers. This is because it makes more economic sense for the payer to offer preventive services to a patient than it is to treat a disorder once it is diagnosed and established.
Direct-to-consumer (DTC) testing is another way that laboratories can offer genetic testing panels that may not currently be eligible for reimbursement. Unfortunately, this limits the patients that can access said testing, as they must pay the laboratory out-of-pocket for it themselves.
That being said, many individuals are willing to do so in order to inform their lifestyle and health decisions. 23andMe, for example, reports having more than 15 million customers worldwide; although the company does not accept insurance, individuals have still opted to undergo this testing to better understand their ancestry and other potential genetic risk factors. Pairing DTC tests with those that have already been deemed reimbursable by private payers’ policies is a means by which labs can offer a robust menu of genetic tests while striving for favorable reimbursement outcomes for their laboratory operations.
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