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OIG Report Suggests Improvements to CMS Test Pricing Process During Public Health Emergencies

NEW YORK – The US Department of Health and Human Services Office of Inspector General issued a report last week detailing improvements the Centers for Medicare and Medicaid Services could make to its test rate-setting process during public health emergencies.

Examining CMS's test pricing process during the COVID-19 pandemic, the OIG found that a lack of communication with lab associations and Medicare administrative contractors (MACs) along with a lack of flexibility in the MAC interim pricing process led to initial COVID-19 test prices that were too low, which, the report said, potentially contributed to inadequate test availability in the early days of the pandemic.

The OIG report noted that during the pandemic, CMS followed its typical procedure of allowing MACs to set rates for new COVID-19 tests through its interim MAC rate-setting policy, which is designed to establishing initial test pricing prior to the completion of CMS's lengthier public consultation rate-setting process.

For this interim price setting, the MACs crosswalked pricing from a preexisting test for Zika virus, which had similar methodology to the new COVID-19 tests and had also been used under a US Food and Drug Administration Emergency Use Authorization. Using this process, the MACs established in March 2020 a COVID-19 test price of $51.

However, although the Zika and COVID-19 tests used similar methods, the Zika test pricing was not set during a pandemic and did not have high-throughput test options. Therefore, in April 2020, CMS issued a ruling creating new high-throughput COVID-19 testing codes priced at $100 per test with the goal of incentivizing labs to invest in the equipment and training required to conduct high-throughput COVID-19 testing.

OIG noted, however, that this price increase did not account for the fact that laboratories could reduce their costs by increasing the amount of time that lapsed between collection of the specimen and processing of the high-throughput test and that a lag between sample collection and test processing could impact the clinical utility of the tests. To address this issue, CMS issued another ruling in January 2021 setting new rates that priced high-throughput COVID-19 testing at $75 per test and allowed a $25 add-on payment for high-throughput tests completed within two days of specimen collection. Additionally, labs claiming the add-on payment were required to have completed a majority of all their high-throughput COVID-19 tests in two or fewer days during the prior calendar month.

According to the OIG report, these issues with COVID-19 pricing were anticipated by some at the time. A MAC pricing coordinator told OIG that they wished to give input on pricing to CMS prior to the upward revision in April 2021. They added that "CMS rulings are binding on all MACs, and CMS does not have a process for the MACs to voice disagreement."

Laboratory associations, meanwhile, told OIG that "in some instances they had to initiate contact with CMS officials to obtain information" regarding COVID-19 pricing policies.

Analyzing these events, OIG said it believed CMS "may have missed opportunities to obtain important information from laboratory associations and the MACs’ pricing coordinators when it made decisions about the new CDLT rates that could have improved its response to the COVID-19 pandemic."

It recommended that CMS establish new procedures to improve communication among all stakeholders involved in setting new test prices during a public health emergency. It also recommended that the agency provide MACs with the flexibility to set and adjust payment rates to cover lab costs when responding to a public health emergency, though it noted that this latter recommendation may require legislative action.

The OIG report also touched on several issues outside the scope of the audit. It noted a suggestion by a laboratory association that grants could be provided to labs for purchasing equipment like high-throughput testing platforms during public health emergencies. Additionally, a lab association suggested that in the case of rural areas, patients might have been better served by routing testing to local labs using standard equipment as opposed to sending tests out to more distant labs using high-throughput technology. Another stakeholder recommended the use of a uniform lab test result reporting system across states and other jurisdictions.