Update: In July we told you that at a public meeting of the Advisory panel had recommended increases to the drugs of abuse reimbursement. The matter was before them because industry groups had requested CMS reconsider its 2016 pricing. The panel voted overwhelmingly in favor of the following reimbursements for the drug testing codes:
- G0480 - $147.60 (CPT Code 82542 * 6)
- G0481 - $196.80 (CPT Code 82542 * 8)
- G0482 - $246.00 (CPT Code 82542 * 10)
- G0483 - $295.20 (CPT Code 82542 * 12)
On Friday, CMS released the 2017 reimbursment rates and as we speculated in July, are a big improvement over the 2016 rates. The new rates are:
- G0480 - $116.85 (CPT Code 82542 * 4.75)
- G0481 - $159.90 (CPT Code 82542 * 6.5)
- G0482 - $202.95 (CPT Code 82542 * 8.25)
- G0483 - $252.15 (CPT Code 82542 * 10.25)
So, the Secretary who has final decision making authority, got most of the way to the panel's recommendation and noted that the reimbursement levels established in December were probably not sufficient. Helping the Secretary with her decision, no doubt, is the vigorous national debate on substance abuse currently underway. The Medicare rates for lab reimbursement are important because private payers often mimic them in their agreements with providers.
It is important to note that data collection for lab reimbursement under the new PAMA system is currently underway. To the extent a lab was being reimbursed by commercial payers between January 1, 2016 and June 30, 2016 at the December 2016 rates or close to them, it could apply downward pressure on the rates determined under PAMA for 2018. That said, the new rates are still good news for lab companies and for AAC for which a short thesis has developed around their lab revenues. SGRY also benefits from the increased reimbursement. These rates will be effective January 1, 2017.
Original Post: We had the chance to attend a meeting yesterday of the citizen panel which advises CMS on Medicare reimbursement for clinical lab tests. The panel has reconsidered the payment rates finalized in December for definitive drug tests. The members voted overwhelmingly in support of payment rates that are 35-85 percent higher than what was finalized late last year. The decision to change reimbursement ultimately rests with the Secretary of HHS but yesterday's recommendation is a positive for LH and DGX both of which conduct a substantial number of drug tests. The recommendation is also good news for AAC which derives a portion of its revenue from drug testing of patients under treatment at its facilities.s
BACKGROUND. In September 2015, CMS released the Preliminary Determinations for the 2016 Clinical Lab Fee Schedule. In that release CMS proposed to replace the AMA CPT codes for drug testing with three "G" or temporary codes for presumptive testing and four "G" codes for definitive testing. The test codes for definitive testing were described as follows:
- G0480 - Drug test(s), definitive, utilizing drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (eg, IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (eg, alcohol dehydrogenase)); qualitative or quantitative, all sources, includes specimen validity testing, per day, 1-7 drug class(es), including metabolite(s) if performed.)
- G0481 - Drug test(s), definitive, utilizing drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (eg, IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (eg, alcohol dehydrogenase)); qualitative or quantitative, all sources, includes specimen validity testing, per day, 8-14 drug class(es), including metabolite(s) if performed.)
- G0482 - Drug test(s), definitive, utilizing drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (eg, IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (eg, alcohol dehydrogenase)); qualitative or quantitative, all sources, includes specimen validity testing, per day, 15-21 drug class(es), including metabolite(s) if performed.)
- G0483 - Drug test(s), definitive, utilizing drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (eg, IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (eg, alcohol dehydrogenase)); qualitative or quantitative, all sources, includes specimen validity testing, per day, 22 or more drug class(es), including metabolite(s) if performed.)
These test codes were finalized in December with the following reimbursement rates:
- G0480 - $79.94
- G0481 - $122.99
- G0482 - $166.03
- G0483 - $215.23
The idea behind creating tiers for the number of drugs tested was to encourage providers to test for only the number of drugs necessary and prevent CMS from over-compensating laboratory providers. In practice, however, CMS has found, in the first five months of 2016, that virtually all testing for drugs of abuse were submitted under G0483, thus permitting maximum reimbursement while falling short of CMS's goal to develop a more rational system.
Meanwhile, the lab testing industry has raised concerns about access for employers and treatment centers working to combat the current heroin and opioid addiction epidemic. The new codes represent reimbursement rates that some sources estimated as roughly half what CMS paid under the old CPT codes. Although the reimbursement rates for the G codes only apply to Medicare claims, they tend to act as a rate setting mechanism for commercial payers. Since commercial payer contracts are on varied schedules it is hard to know the extent to which the December rates have penetrated the commercial payer market.
RECONSIDERATION. In the spring of 2016, industry associations like the California Clinical Laboratory Association submitted a request for reconsideration of the definitive testing codes, G0480-83. Yesterday afternoon, the CMS Clinical Lab fee Schedule Advisory Panel heard public comment and discussed reconsideration of payment rates for these four codes. The 11 members voted overwhelmingly to accept the industry recomendation as follows:
- G0480 - $147.60 (CPT Code 82542 * 6)
- G0481 - $196.80 (CPT Code 82542 * 8)
- G0482 - $246.00 (CPT Code 82542 * 10)
- G0483 - $295.20 (CPT Code 82542 * 12)
These rates had been considered by the panel along with other, lower rates in the fall. However, the Secretary opted to use the lower rates and they were finalized in Decmeber. As was the case then, adopting the panel's recommendation from yesterday's meeting rests entirely with the Secretary of HHS. She could decline to accept this recommendation, modify it or reject it. We think, however, that she is likely to adopt something close to what garnered votes from the majority. While panel members noted the lack of cost data, the Chairman did present information from CMS suggesting that the new codes were not lowering costs as most claims were being submitted with the maximum reimbursement under G0483. Further, there was little dissent with just one or two panel members opting to vote for a rate that was different from the industry recommendation.
The current political environment also suggests the wiser course for CMS is to adopt the panel's recommendation. Addressing heroin and opioid addiction is one of the few areas of bi-partisan agreement, although not without some haggling over funding. Reducing reimbursement for a necessary part of drug treatment - the identification of drugs being abused - would seem to be well off message for the adminstration. This point was brought up several times during today's public hearing.
If the Secretary decides to concur with the panel's majority view, an increase in reimbursement is, of course, good news for LH and DGX. What is more interesting is the impact on AAC. Some months ago, a short thesis dependent on the impact of decreased lab reimbursement was circulating. To the extent that reasoning explains any of the short interest in AAC, yesterdays's vote may be an opportunity to rethink it. However, it is worth noting that, if the Secretary adopts the most recent recommendations, the new rates would be effective on January 1, 2017. Any claims billed during 2016 would be at the lower rates approved in December. Also, since the data collection period that will establish the new market oriented payment rates under PAMA runs from January 1, 2016 to June 30, 2016, it is possible that any commercial payer agreements that imposed the newer, lower G-code rates on providers could exert downward pressure on the new PAMA rates effective in 2018.
