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Medicare Reimbursement for IVDs Gets an Upgrade

Mon, 04/07/2014 - 9:12am
Richard Park, Contributing Editor

Last Tuesday, President Obama signed into law the Protecting Access to Medicare Act of 2014 (H.R. 4302) that averted cuts to Medicare physician payments. (The Senate approved the bill the day before by a 64-35 vote, and the House of Representatives passed it the week prior.) This law also extended other health-related provisions that were set to expire, and made other changes to current-law health provisions. Most importantly to the IVD industry, the law will reform Medicare’s Clinical Laboratory Fee Schedule (CLFS), which it uses to determine reimbursement rates for IVDs, and avoid across-the-board reimbursement cuts that clinical labs have been subjected to repeatedly.

Various clinical laboratory and IVD industry associations applauded the passage of this legislation. The American Clinical Laboratory Association (ACLA; Washington, DC) voiced support for provisions in the legislation that reform the CLFS by providing a more rational process for transitioning to changes in reimbursement.

“ACLA worked diligently with Congress on many of the lab industry’s key priorities, and we are pleased that the Senate included in the bill several of our proposals for modernizing how Medicare reimburses clinical laboratories,” said Alan Mertz, ACLA’s president. “When the president signed this bill, clinical labs avoided another potential round of indiscriminate, across-the-board payment cuts, and, most importantly, seniors’ access to diagnostic testing will be protected.”

Mertz noted the legislation will bring predictability in reimbursement during the next several years, provide more transparency, allow more time for laboratories and other stakeholders to prepare for changes, and ensure that Medicare reimbursement for anatomic pathology services will not suffer significant cuts. In addition, the law will provide more opportunity for stakeholders to work with the Centers for Medicare and Medicaid Services (CMS) on implementing these reforms.

Specifically, the legislation repeals CMS authority to make changes to the CLFS based on technological changes, replaces it with a process to adjust reimbursement based on market rates, and provides a per test phase-in of reductions in reimbursement. The law also creates a payment adjuster for laboratories serving the most vulnerable Medicare beneficiaries, and requires a clearly defined, transparent process for reconsidering CLFS rates.

“We are committed to continuing to work with Congress, CMS, and other stakeholders in reforming the CLFS while ensuring that the process reflects the actual broad scope of the laboratory market, recognizes the value of laboratory services, and protects access for Medicare beneficiaries,” said Mertz.

AdvaMedDx, a division of AdvaMed (Washington, DC) focused on IVD policy matters, also vocally supported passage of the legislation. Andrew Fish, executive director of AdvaMedDx, said the law is “a significant milestone for the IVD industry.”

“AdvaMedDx applauds the passage of the historic diagnostics payment reform measures, which will modernize the CLFS and recognize the value of IVDs to healthcare outcomes,” said Fish. “For many years, Medicare’s flawed and outdated CLFS has stifled investment in this critical area of medicine by failing to recognize the value of diagnostics innovation. Furthermore, the CLFS has been frozen or cut in 16 of the last 24 years.

According to Fish, the new reforms in the legislation include a number of key improvements and provide solutions to long-standing flaws in the current payment system for IVD tests. These reforms include the following: 

  • Formation of an independent advisory panel of patients, clinicians, and technical experts to advise Congress and CMS on diagnostic payment rates, specifically for evaluating new IVDs and appropriate reimbursement
  • Creation of a mechanism to align Medicare payment rates with private sector market rates
  • Establishment of a system for rapid assignment of temporary codes for new tests to ensure that patient access is not delayed

“The provisions included in the legislation create a more transparent process for establishing diagnostics payment rates, ensure stakeholder and expert input, better recognize the value of diagnostics innovation, and support timely patient access to new IVDs,” added Fish. “AdvaMedDx commends Congress for addressing longstanding problems with Medicare’s diagnostics reimbursement system, recognizing the full contribution of modern IVDs to healthcare quality and outcomes, and taking these important steps toward ensuring that patients have access to the latest advances in IVD testing. We look forward to working closely with CMS on implementing these important reforms.”

The IVD industry is no stranger to Medicare reimbursement reform legislation, having seen it before in the past. In 2006, a bipartisan group of Congressmen introduced the Advanced Laboratory Diagnostics Act of 2006, which was designed to reform Medicare reimbursement policies that discouraged the development and adoption of new clinical lab tests.

The provisions in this bill aimed to do the following: improve current processes for obtaining adequate reimbursement for new clinical diagnostic lab tests; provide more transparency with respect to Medicare reimbursement decisions; and afford timely correction of historic payment errors that often lead to inadequate payment.

In 2007, Senator Charles E. Schumer (D–NY) introduced the Medicare Advanced Laboratory Diagnostics Act of 2007. This act was the Senate companion bill to the legislation of the same name that Rep. Bobby Rush (D–IL) re-introduced earlier in the House of Representatives.

The Schumer bill incorporated the same provisions from the Rush legislation: creating a new private-public process for evaluating the accuracy of payment rates for individual tests, defining more explicitly the current process by the CMS for gathering public input on payment rates for new laboratory tests, and requiring CMS to develop a new gap-fill process.

“Medicare's antiquated payment system stymies research and development that could generate cutting-edge screening and diagnostic tests,” said Schumer in a written statement. “This bill will ensure that reimbursements for these tests are appropriate so that Medicare patients are not deprived of the health benefits that come with access to the newest lab technology.”

Does any of this sound familiar? Granted the big differences this time around are that the reforms to Medicare reimbursement for IVDs are part of a larger piece of legislation and, more importantly, the bill was signed into law by the President. However, the question remains whether Medicare will actually follow through on the reforms dictated in this law and to what extent these reforms will affect and benefit IVD manufacturers.

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