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Decline in Routine Testing Dollars Since PAMA Countered by Uptick in Payments for Molecular Assays


NEW YORK — Congress last month passed another one-year delay to laboratory reimbursement cuts called for under the Protecting Access to Medicare Act (PAMA), but the law remains very much a live concern for the lab industry.

Since its implementation almost six years ago, the law has slashed Centers for Medicare & Medicaid Services (CMS) reimbursement for many routine tests, cutting into laboratories' bottom lines. At the same time, emerging areas like molecular pathology and genetic testing have seen significant expansions, providing labs that have moved into those areas with new and growing revenue sources.

A look at CMS lab test spending levels since PAMA went into effect at the beginning of 2018 shows modest declines in spending for many commonly ordered routine tests but substantial increases in spending on a handful of newer test types.

For instance, CMS spending on CPT code 88305, surgical pathology, which was the number one lab procedure by total charges to CMS in 2022, has fallen from $745.9 million paid in 2018 to $707.2 million paid in 2022, a drop of 5 percent. Spending on CPT code 80053, comprehensive metabolic panel, the No. 3 lab test by total charges in 2022, has fallen from $367.4 million in 2018 to $277.9 million in 2022, a drop of 24 percent. Spending on CPT code 84443, the test for thyroid stimulating hormone, No. 5 by CMS charges, has fallen by 26 percent, from $306.8 million to $227.7 million, while spending on the sixth-ranked test by CMS charges, CPT code 80061, a standard lipid panel, has also dropped by 26 percent, from $309.3 million to $227.6 million.

These declines have been offset by the dramatic growth of molecular and genetic testing. In 2022, CPT code 81479, for unspecified molecular pathology procedures, was the second-ranked lab procedure by total CMS payments at $470.2 million. That was up roughly three-and-a-half times from $132.6 million in payments in 2018, when it ranked 10th. Spending on molecular infectious disease testing has risen even more dramatically. In 2018, CMS spent $49.2 million on CPT code 87798 for unspecified infectious disease detection by nucleic acid. By 2022, that had jumped more than fourfold to $221.6 million. Spending on CPT code 81455, for cancer genetic testing of 51 or more genes, has risen more than threefold, from $21.3 million in 2018 to $73.6 million in 2022.

This rise in spending reflects the increasing role of molecular technologies in lab testing. It also represents what healthcare consultant Dennis Weissman described as a "strategic decision" by labs to pursue the higher reimbursement available in this area.

"It's a measure of changing technology, and certainly reimbursement has very much been part of that equation," he said.

He cited the example of large national labs like Quest Diagnostics and Laboratory Corporation of America, both of which have in recent years prioritized the growth of their molecular and genetic testing businesses, both via internal efforts and acquisitions. Quest, for instance, has acquired genetic testing firms including Blueprint Genetics and Haystack Oncology. Labcorp has made moves including the purchase of Personal Genome Diagnostics and a collaboration with VieCure to help drive uptake of cancer genetic testing in the community health setting.

The growth of molecular and genetic testing technologies has also made them more accessible to smaller regional labs, Weissman said, leading to "a real jump during this period."

"Labs were looking at their marketplace, and it was becoming easier to do molecular testing, and certainly from a reimbursement point of view, it made sense for them to do that," he said.

Labs have become very strategic around pursuing higher reimbursement testing, said Jeffrey Jones, managing partner at lab and diagnostics consulting firm The Deerborne Group.

"Most labs have a director of reimbursement," he said. "They understand that reimbursement has to be integrated into the product development process."

"There's a balance," though, said Stephanie Denham, assistant VP of revenue cycle systems and analytics at revenue cycle management automation and services provider Xifin. "You have to be able to address the demand for the testing in your market while trying to bring on new testing that is going to move things forward and keep up with the technology and diagnostics that are available today."

"It really depends on your client base, and can you switch out testing that you have been doing of a routine variety for tests that fit under the molecular category," Weissman said. "It is all part of the inner deliberations of laboratories depending on their market, who they are serving. It's really very individualistic."

There are also challenges to billing under the nonspecific molecular and genetic testing codes that have grown so dramatically in recent years.

"It's challenging to get reimbursement under a nonspecified code because of the amount of work that has to go into payor education so that they understand what the test is and how to reimburse for it," Denham said. "A lot of new tests have been created, especially in the molecular and genetic menu. That is an ongoing challenge as we have growth in genetic testing."

"Getting reimbursed for the 81479" — for unspecified molecular pathology procedures — "has its own challenges," she added. "There is typically a lot of documentation that has to be provided, and there are things like the Z-codes from the MolDx program and other genetic test registry programs that are required for billing."

Jones noted that after the explosion of molecular and genetic testing, CMS is working to slow down spending in these areas. A 2021 report by the Medicare Payment Advisory Commission found that while total utilization of tests within CMS had remained flat following the implementation of PAMA, CMS spending on lab testing had actually gone up, largely due to increases in spending on molecular pathology and sequencing.

"You're going to see less 81479s because [CMS] is going to force you to get a [specific] CPT code," he said. "They hate miscellaneous CPT codes."

There is some indication that CMS spending on this code is slowing down. After posting more than 40 percent growth year over year in 2019, 2020, and 2021, payments under the 81479 code were up by only 15 percent in 2022 compared to 2021. Likewise with the 87798 code for molecular infectious disease testing, which grew by 101 percent and 82 percent in 2019 and 2020, respectively, but only by 16 percent and 6 percent, respectively, in 2021 and 2022. The slowdown in the 87798 code could be related to the waning of the COVID-19 pandemic as this code was commonly added on to molecular COVID-19 testing — so much so that a December 2022 report from the US Department of Health and Human Services Office of Inspector General highlighted it as a code warranting "further scrutiny" in cases of "labs with questionably high billing for additional tests alongside COVID-19 tests."

CMS payments for the cancer genetic testing code 81455, on the other hand, show no sign of slowing down, having grown by more than threefold in 2021 and by nearly fivefold in 2022.

Jones said he expects labs will see new opportunities as genetic testing moves beyond oncology.

"Ninety percent of the market is oncology," he said. "That's the tip of the spear. But right behind that you have infectious disease, you have cardiology, you have women's health, reproductive health. You'll see the miscellaneous CPT code start to ratchet up in the non-oncology disease states."

Denham said that she and her colleagues at Xifin are seeing more favorable trends in payor policy in hereditary cancer testing and noninvasive prenatal testing, which she noted might be areas that labs will look to expand into to offset reimbursement cuts in other areas.