Los Angeles, CA—Major coding changes in cancer tests are ahead, including the elimination of stacked coding and the creation of new codes by the Centers for Medicare & Medicaid Services (CMS), which should improve the clinical application of cancer test choices. Speaking at the Fourth Annual Conference of the Association for Value-Based Cancer Care, Marc Samuels, JD, MPH, President and CEO at ADVI, a healthcare consulting company, Washington, DC, said that value-based testing is important for healthcare cost containment.
Cost of Diagnostics Rising
Cancer costs are rising at 3 times the rate of inflation, and the cost of cancer diagnostics is rising even faster than overall cancer costs, Mr Samuels said. Diagnostics is the fastest growing line item in the Medicare budget. “The diagnostic companies know that in order to evolve and to get the price they want—largely because the market is changing—stacked coding is going away,” said Mr Samuels.
“Payers on both sides, Medicare and the private payer market, will be able to tell the price, the outcome, and the value of individual tests.” With this knowledge, diagnostics companies will need to show greater overall value to their tests.
In a shift from the current fee-for-service model to pay-for-value, profitability will depend on increasing and managing utilization. “Today, the only real sort of contracting tool we’ve used, other than the bigger labs that have had some degree of capitation, has been adhering to guidelines,” Mr Samuels said.
The unknown is whether the FDA will ultimately regulate all products, he said. From the payer perspective, clinical utility of testing needs to be established, along with knowing the comparative and clinical effectiveness of testing. On the public payer side, evidentiary standards are also being set. “CMS will begin to come out with guidance that basically standardizes and makes transparent what they’re going to look for in terms of evidence for covering tests,” said Mr Samuels.
Advanced and Nonadvanced Tests
Mr Samuels also spoke about putting laboratory test coding into the hands of CMS by establishing advanced and nonadvanced diagnostics. An advanced diagnostic is defined as a test furnished and sold for use by a single laboratory, and is an analysis of multiple biomarkers combined with a unique algorithm to yield a single patient-specific result, or is cleared or approved by the FDA. Advanced tests will be evaluated much like cancer drugs are evaluated now, Mr Samuels predicted.
Non–FDA-approved tests, such as panel tests and single analytes, will continue to generate the same payment rates and coverage. The rates for nonadvanced tests (ie, newer tests that essentially have the same value as the older version) “will be crosswalked or gap-filled, essentially the way Medicare does those tests today,” he said. “At some point, both of these groups will move to being valued-based on commercial payer rates.”
Advanced tests will be paid a “list price” for the first 3 quarters, but manufacturers may be subject to penalty if the list price exceeds 130% of the market rate. If it does, the tests will be priced by the medical director at the Medicare Administrative Contractor. “After 9 months, you are going to be given a pricing based on the median weighted average of all of your commercial payer reimbursement,” Mr Samuels said.
Mr Samuels foresees that by 2017, all tests will be based on commercial payers’ rates, whether through contract or established rates. “We essentially are putting the power back into commercial payers to look at the evidence, help Medicare decide what the payment and coverage should be, and setting up the paradigm that way,” he said.
New Diagnostic Codes
CMS will be asked to create codes that are based on evidence and outcomes (Table).
“Just like they create Q codes for drugs, and then they have J codes, we’re going to ask them to create essentially a D code for diagnostics,” explained Mr Samuels. “On top of that, we’re asking that they overlay that with either a Z code [proprietary to a company] or by a modifier.”
The program would be evidence-based, with pricing based on inputs provided to the contractor. A Z code would be provided instead of stacking codes.