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MDx goes toe-to-toe with Medicare/Medicaid
LEXINGTON, Mass.—The brief announcement might have received little notice, taken alone: "Predictive Biosciences will cease to operate and will lay off 91 employees because an insurance company contracted by Medicare will no longer cover the company's bladder cancer diagnostic." But the modest-sized company, which also ran a lab in Cleveland, tuned out to be far from alone.
When business results for the second quarter were made public, cancer genetics diagnostic company NeoGenomics of Fort Myers, Fla., reported flat revenues for the second quarter, "as changes to Medicare's reimbursement for molecular diagnostics negatively impacted operations," citing lost revenue of about $275,000.
Similar complaints were articulated by Sequenom and Luminex, which also said the changes to billing and payment codes related to molecular tests adversely affected their revenues during the second quarter. Late last month, New York-based Sequenom said it was reducing its head count by 75 employees, blaming the dip in revenues on a change in molecular billing and payment codes that delayed payments on testing services. Sequenom CEO Harry Hixson said the company may cut back on testing services for which there is no current reimbursement available.
How did this situation come about? No, it isn't due to the Affordable Care Act, although it has roughly paralleled Obamacare in its progression through time. Noel Doheny, CEO of the U.S. subsidiary of Epigenomics AG of Frankfurt, Germany, a cancer diagnosis company, explains it this way: When molecular diagnostics first came to market, "stacking codes" were created for reimbursement purposes. There were about 20, and Doheny cites examples such as DNA extraction, amplification, hybridization and analysis. But codes were not specific to diseases. Instead, labs said, "These are the steps in my assay, and I'm going to bill for them."
But as molecular diagnostics became more differentiated by disease and more complex, the government reached out to physicians for clarification. In 2010 and 2011, a taskforce led by Dr. Mark S. Synovec, a board-certified pathologist with the Topeka Pathology Group, began work on what became a two-tier set of codes for specific diseases. In November 2011, they submitted their recommendations. Medicare said local Medicare intermediaries—called MACs—could handle implementation.
"Because the government punted," Doheny laments, "stacking codes were eliminated, nothing existed to take their place and cash flow dried up. Labs, jobs, access to care all ceased to exist."
Dr. Bruce Quinn, senior health policy specialist with Foley Hoag LLP, a Boston-based law firm, has been closely following the coding and compensation dilemma and has provided DDNews with a key document in which the Coalition to Strengthen the Future of Molecular Diagnostics (CSFMS) sent a four-page comment letter to the Centers for Medicare & Medicaid Services (CMS). The coalition, which comprises 37 organizations ranging from Big Pharma to testing labs and venture capitalists, is "unified in our concern over interim 2013 MAC reimbursement rates for molecular diagnostic testing." CSFMS points out, "the rates posted represent a significant cut in payment for many critical tests by an average of about 20 percent—and as high as 80 percent in some cases."
Inveighing on patients' behalf, the group notes that while comprising less than 1 percent of total Medicare spending, "this critical testing ensures that patients get appropriate treatment and that Medicare dollars for costly therapies are spent treating patient who may benefit from the treatment. Advances in molecular diagnostics enable personalized medicine … that uses diagnostic tools to identify specific biological markers, often genetic, and help assess which medical treatments and procedures will be best for each patient. Knowing how a patient might respond at a molecular level to a particular treatment allows physicians to determine the best course of care at given points of time, enabling appropriate therapies to be administered and delivering better care more efficiently, cost effectively and saving lives."