NEWSFLASH: Quorum Consulting s Guide to the Medicare Clinical Diagnostics Laboratory Tests Payment System Final Rule.

Transcription

1 NEWSFLASH: Quorum Consulting s Guide to the Medicare Clinical Diagnostics Laboratory Tests Payment System Final Rule June 27, 2016 On June 17, 2016 the Centers for Medicare and Medicaid Services (CMS) released the Medicare Clinical Diagnostics Laboratory Tests Payment System Final Rule, much to anticipation of manufacturers, providers, and constituents of the laboratory diagnostics industry. i As required by Section 216 of the Protecting Access to Medicare Act of 2014 (PAMA), CMS is significantly revising the Medicare payment system for clinical diagnostic laboratory services. ii Executive Summary In brief, the Final Rule: Defines key terms such as Applicable Laboratory, Applicable Information and Advanced Diagnostic Laboratory Test (ADLT) Sets out the data reporting requirements and timelines for applicable laboratories Announces the implementation date of January 1, 2018 for the private payer ratebased fee schedule Establishes penalties for non-reporting Identifies the coding process for new and existing ADLTs and FDAapproved/cleared tests Presents the methodology for calculating the market-based payment system for each new and existing test paid under Clinical Laboratory Fee Schedule (CLFS) Describes the local coverage determination process This is perhaps the most significant change in Medicare payment for clinical lab tests since the inception of the competitive bidding program. Payment amounts will change significantly depending on test status as an ALDT or non-adlt. Laboratories, particularly smaller entities, must be prepared for new payment data acquisition and reporting processes. In a private-payer based payment system, methods to obtain new HCPCS Level II or Current Procedural Quorum Consulting June 27, 2016 page 1

2 Terminology (CPT 1 ) codes will become important strategic considerations for both ADLTs and FDA-approved/cleared tests. Background The main provision under PAMA requires all applicable laboratories to submit applicable information on both the volume and private payer payment rates for clinical laboratory tests. CMS will then use the volume-weighted median of private payer rates to determine Medicare payment for each laboratory test paid under the Clinical Laboratory Fee Schedule (CLFS) or Physician Fee Schedule (PFS). PAMA also defines a category of tests called advanced diagnostic laboratory tests (ADLTs), establishes a framework for ADLTs and FDA-approved/cleared tests to obtain unique codes, and provides CMS with the authority to restructure the Medicare administrative landscape for laboratory tests. Defining an Applicable Laboratory In the Proposed Rule, CMS defines an applicable laboratory as an entity identified at the Taxpayer Identification Number (TIN) level. After reviewing comments, CMS revised its definition to any laboratory that bills Medicare Part B under its own National Provider Identifier (NPI). A NPI-level entity is defined as an applicable laboratory if it meets both of the following criteria: More than 50 percent of Medicare revenues are paid through either the CLFS or PFS, AND At least $12,500 of Medicare revenues are derived from the CLFS over the 6 month data collection period However, the low expenditure threshold does not apply to any ADLTs a laboratory may offer or furnish. The revised definition of applicable laboratory continues to exclude most hospital laboratories, but does apply to hospital outreach laboratories (i.e., hospital-affiliated labs that furnish tests to patients who are not hospital inpatients or registered outpatients) that have their own NPI. CMS also defines reporting entities as distinct entities from applicable laboratories. The reporting entities are responsible for reporting applicable information, and are defined on the TIN-level. 1 CPT copyright 2015 American Medical Association. All rights reserved. CPT is a registered trademark of the American Medical Association. Quorum Consulting June 27, 2016 page 2

3 Quorum Commentary: Although public comments expressed significant concerns that the proposed CLFS framework would exclude a significant portion of the laboratory market, CMS maintains that the original PAMA statue does not necessitate reporting from hospital laboratories. The revised definition of applicable laboratories expands the population potentially to include hospital outreach laboratories that have their own NPIs. However, the final definition of applicable laboratories will mean that large independent laboratories still disproportionally influence the Medicare payment rates for non-proprietary tests, given that they offer high volumes of tests at prices often lower than competitor rates. Defining Applicable Information CMS finalized the requirement that every applicable entity must report, for each laboratory test: The private payer payment rates, including associated patient deductibles, copays, coinsurance amounts, and price concessions/rebates, AND The associated volume corresponding to each private payer rate, AND All Healthcare Common Procedure Coding System (HCPCS) codes associated with each laboratory test These reported items should not include information when a test payment is made on a capitated basis. Based on comments and concerns from the public, CMS clarified the following: A private payer rate is only considered applicable information if the laboratory receives final payment (including post-payment activities) for the test within the data collection period. Private payer rates associated with not otherwise classified HCPCS codes or unlisted CPT codes are not considered applicable information. Private payer payments for tests that have been grouped into a claim-level payment are not considered applicable information. Private payer rates should not include information about denied payments. In addition, CMS clarifies when they will impose civil monetary penalties (CMPs) for non- or mis-reporting. Although PAMA decrees that an applicable laboratory may be fined up to $10,000 per day per incident of failure to report, misrepresentation, or omission, CMS clarified that they would not impose CMPs for minor errors, and that they would release a subregulatory guidance to facilitate compliant reporting from laboratories. Quorum Commentary: Although CMS clarifications regarding applicable information addresses many public comments and concerns, there are still significant questions on how to report payment data to CMS, which will need to be addressed in additional subregulatory documents. Quorum Consulting June 27, 2016 page 3

4 Defining an Advanced Diagnostic Laboratory Test CMS proposed that a test defined as an ADLT must be covered under Medicare Part B, is offered and furnished only by a single laboratory, and is not sold for use by any other laboratory. In addition, the test must fulfill all of the characteristics of one of the following criteria: Criterion A Involves analysis of multiple biomarkers of DNA, RNA or proteins, AND When combined with a proprietary algorithm, yields a probability score for a certain health state, AND Provides new clinical diagnostic information that cannot be obtained from existing tests or a combination of existing tests on the market, AND May include other assays Criterion B Is FDA approved or cleared Is not exempt from FDA approval or clearance In the Final Rule, CMS provides substantial clarifications on how to define which tests are to be considered ADLTs, as profiled below: Most notably, CMS is not finalizing its proposed requirement that an ADLT, as defined by Criterion A, must include analysis of nucleic acids. CMS defines a single laboratory as an entity that furnishes the test, and may also design, offer, and sell the test. This definition would include multiple laboratories operating in different locations but linked under a common ownership. A laboratory that licenses intellectual property (e.g. from an academic center) to develop a test is not considered the original developer of the test, and as a result the test is not considered an ADLT. Quorum Commentary: CMS original framework for defining ADLTs was a major source of public consternation during the Proposed Rule comment period. Ultimately, CMS did revise the definition of ADLTs under Criterion A so that nucleic acid analyses are no longer mandatory. As a result, MAAA tests that solely analyze protein biomarkers are included under this definition. However, CMS also finalized the requirement that an ADLT must provide new clinical diagnostic information under Criterion A. As previously discussed, this likely excludes secondgeneration entrants into a given indication (e.g., Prosigna and MammaPrint are followers to Oncotype DX Breast in terms of determining breast cancer treatment options and may not be considered ADLTs under this framework). Quorum Consulting June 27, 2016 page 4

5 Coding for ADLTs and FDA-Approved/Cleared Tests CMS is required to establish coding mechanisms for ADLTs and FDA-approved/cleared CDLTs: New ADLTs and new FDA-approved/cleared tests not already assigned a CPT or HCPCS Level II code will be assigned a temporary G-code that is effective for 2 s. Existing ADLTs and FDA-approved/cleared tests not already assigned a CPT or HCPCS Level II code will be assigned a unique G-code. A unique HCPCS code may also be requested for the purposes of monitoring and tracking an ADLT or FDA-approved/cleared test that does not already have an exclusive identifier. Although the American Medical Association (AMA) and McKesson both expressed interest in managing the coding system for ADLTs and CDLTs with FDA-approval/clearance, the Final Rule makes clear that CMS will use the HCPCS G-codes to develop unique identifiers for tests that do not already have a specific HCPCS Level II or CPT code. Quorum Commentary: CMS officially stated that they would not use the McKesson Z-Code Identifier system to identify ADLTs and FDA-approved/cleared tests, but remained silent on the topic of the AMA PLA code set. The AMA is likely move forward with establishing new codes in the PLA code set, which was approved by the CPT Editorial Panel in February iii Thus, depending on the submission and timeline requirements, labs may have an option of applying for a CPT (PLA) or a HCPCS G-code for their test. Data Reporting Requirements and Payment Determinations Due to the delay in adoption of the new payment system, the initial data collection and reporting periods have also been pushed back: January June 2016 January March 2017 Mid-July 2017 September 2017 September October 2017 November 2017 January 1, 2018 Data collection period Data reporting period Annual Laboratory Public Meeting Release of preliminary 2018 payment rates 30-day comment period on preliminary 2017 rates Final rates are released CLFS payments implemented Following the initial, non-adlt payment reporting and updates will occur every three s while ADLT payment reporting and updates will occur every. CMS also shorted the data collection period from a full calendar to half a calendar. Data collection will occur from January 1 June 30. Data reporting will occur in the first three months the after the data collection period. Quorum Consulting June 27, 2016 page 5

6 These data will determine Medicare payment rates for laboratory tests that take effect one full calendar after the data reporting period begins. Sample timelines for non-adlt lab tests Sample timelines for ADLT lab tests Data Collection Period Data Reporting Period Applicable CLFS Rate 1/1/2018 6/30/2018 1/1/2019 3/31/ Continues every 3 rd Continues every 3 rd New CLFS rate every subsequent calendar subsequent calendar 3 rd for 3 s 1/1/2016 6/30/2016 1/1/2017 3/31/ Continues every Continues every New CLFS rate every subsequent calendar subsequent calendar As stipulated under PAMA, Medicare payment determination depends on whether the test is an existing test or new test. New tests are defined as tests for which Medicare payment has not yet been made under the CLFS prior to January 1, PAYMENT DETERMINATION BASED ON TEST-TYPE Non-ADLT Lab Test ADLTs Existing Tests New Tests Existing Tests New Tests Volume-weighted median private payer payment every three s Volume-weighted median private payer payment every During initial three quarters on market equal to list price* Determined through either crosswalking or gapfilling, with input from the Advisory Panel on the appropriate method of payment determination After initial three quarters on market volume-weighted median private payer rate *ADLTs whose actual list price exceeds 130% of the volume-weighted median private payer rate are required to retroactively pay back the difference between the actual list price and 130% of the market-based rate. This is a favorable adjustment made from the proposed rule, which stated that labs would pay the difference between the actual list price and the market-based rate. CMS also redefines the new ADLT initial period to begin the first full calendar quarter following the latter of: 1. The date a Medicare Part B coverage determination is made; OR 2. The date ADLT status is granted by CMS For a test for which CMS receives no applicable information, payment is made based on crosswalking or gapfilling, with consultation from the Advisory Panel on the appropriate method. Quorum Consulting June 27, 2016 page 6

7 CMS includes a phase-in payment reduction, which sets a maximum reduction for lab test payment rates in the first six s of the new payment system. There is no limit for payment increase as CMS believes private payers pay on average 20% lower than the Medicare CLFS : 10% maximum payment reduction for previous s national limitation amount : 15% maximum payment reduction for previous s national limitation amount. Quorum Commentary: CMS makes a number of positive changes in the Final Rule in response to comments, including shortening data collection periods and allowing ADLTs greater opportunity to receive favorable payment during the new ADLT initial period. There are still significant questions on how to report payment data to CMS, which need to be addressed in additional subregulatory documents. Designation of Medicare Administrative Contractors (MACs) CMS expresses concern over the consolidation of MACs issuing local coverage determinations (LCDs) and processing lab claims, stating that such efforts would require significant costs and at least 5 to 6 s to realize. The majority of commenters were not in favor of consolidating either process. If CMS chooses to exercise their authority to consolidate CDLT coverage policy development and/or claims processing, their options are as follows: One to four MACs would develop coverage policies that apply to all Medicare jurisdictions, or One to four MACs would both develop coverage policies AND process lab claims, or Other alternatives not yet outlined by CMS in the Proposed Rule Quorum Commentary: Considering Medicare s ongoing efforts to reduce costs and payment across the board, it is not likely that CMS will move forward with the consolidation of MACs issuing LCDs and processing lab claims any time soon. However, Palmetto GBA s MolDX Program has made significant progress in expanding their hold on coverage and payment determinations for other jurisdictions managed by CGS Administrators, Noridian and WPS. iv Remaining Questions CMS acknowledges they will need to publish subregulatory guidance documents prior to address the following issues, among others: How applicable information should be reported to CMS List of HCPCS codes for which laboratories must report payment rates Application process for ADLTs Notification process for FDA approved/cleared tests Quorum Consulting June 27, 2016 page 7

8 Conclusions The Final Rule lists significant and detailed explanations of CMS responses to public comments, along with the precise regulatory changes to the Clinical Diagnostics Laboratory Tests Payment System. Labs and manufacturers, especially those offering and furnishing ADLTs, now have a more precise profile of the new reimbursement environment. However, many key implementation details are yet to emerge, which will be addressed in future subregulatory policies. Quorum welcome inquiries regarding Final Rule and stands ready to assist companies in positioning and preparing for these new reimbursement policies. Please contact us at info@quorumconsulting.com regarding any of these opportunities. i Medicare Program; Medicare Clinical Diagnostic Laboratory Tests Payment System; Final Rule. ii Protecting Access to Medicare Act of 2014 (H.R. 4302, Pub.L ). iii Molecular Pathology Coding Workgroup Meeting. October 9, iv Palmetto GBA MolDX Program General Questions. Last updated April 19, ~Frequently%20Asked%20Questions~8N3ELL4072?open&navmenu=%7C%7C Quorum Consulting June 27, 2016 page 8