Diagnostics companies strike back at CMS lab test rule

Diagnostics companies are railing against a new rule from the Centers for Medicare & Medicaid Services (CMS) that would allow the agency to pay the same as private insurance rates for clinical diagnostic laboratory tests, further tightening the strings on reimbursement.

CMS CMO Patrick Conway

The CMS' proposed change falls under the Protecting Access to Medicare Act of 2014, which requires clinical labs to report on private insurance payment amounts and lab test volumes. Under the new rule, lab and diagnostics companies would have to report private payer data if they receive at least $50,000 in Medicare revenues from lab services and more than 50% of their Medicare revenues from lab and physician services, the CMS said in a statement.

Medicare pays about $8 billion annually for clinical diagnostic lab tests, it added. If all goes to plan, the reimbursement changes could result in $60 million in savings for the tests by 2017, and $5.14 billion after 10 years, according to the CMS' proposed rule. The rates will take effect on Jan. 1, 2017 after labs collect private payer data and report it back to the agency.

"Modernizing Medicare's payment for clinical lab tests is another example of our commitment to spending health care dollars more wisely," CMS CMO and deputy administrator Patrick Conway said in a statement. "This demonstrates CMS' dedication to collaborating with private payers to improve the delivery system."

Not everyone is as optimistic about the change. Along with its proposed rule, the CMS also released its Proposed 2016 Clinical Laboratory Fee Schedule rates, sparking ire from companies such as Veracyte ($VCYT) that claim the rates negatively impact reimbursement by pricing products unfairly. Under the CMS rule, some tests could be priced under a "crosswalk" code that compares the diagnostic to a similar, and oftentimes lower-cost, product.

Veracyte CEO Bonnie Anderson

But lower-priced tests can "differ significantly, both in technical performance and intended use," Veracyte CEO Bonnie Anderson said in a statement. Anderson pointed to the company's Afirma Gene Expression Classifier test, which pinpoint benign thyroid nodules to help patients avoid diagnostic surgeries. The current Medicare rate for Afirma GEC is $3,200 per test, but the new proposed rate would set the test at $2,151.81.

"We believe CMS's proposed rate cuts go against innovation, which is the foundation of personalized medicine. Such innovation is leading to dramatic improvements in patient care and in the case of the Afirma GEC has spared an estimated 20,000 patients from unnecessary thyroid surgery," Anderson said.

CareDx ($CDNA) is also weighing in on the change, calling the crosswalk strategy an "inaccurate means" of pricing its noninvasive AlloMap test for heart transplant patients, the company said in a statement. Under the proposed rule, reimbursement for AlloMap would fall 77% to $644.62 from $2,821.00--a potentially costly blow for the company following its failed deal with LabCorp ($LH) to develop a lupus flare test.

- here's the CMS' proposal (PDF)
- read the CMS' statement
- get Veracyte's release
- here's CareDx's statement