No better place to be when the FDA announces a final rule on lab testing than at the Executive War College ( #EWC2024 ) in New Orleans. It’s a meeting that gets down to business, because it is about the business of laboratories. Over 1,000 attendees, and the majority of them manage labs. Great place to talk, eat gumbo and beignets, and find out what’s happening on the ground.
This year was no exception. Some key points from the meeting:
A “Trifecta” for Labs, and not a good one!
Payment pressure and new CLIA & LDT regulations formed a trifecta for the lab business, as Dark Daily Editor in Chief Robert Michel said at the meeting. And not a good one.
Payors are exerting pressure on labs in the form of increased denials of claims and new information-seeking codes, new CLIA regulations, LDT regulation (better than expected but still something to be dealt with) and new CLIA regulations. It’s going to be a wee bit tougher out there. Add consolidation of labs and vendors for what I’d say is the “quadfecta.”
“Labs had to fight for (appeal) 12% of the molecular diagnostic they earn, and its up from 7% three years ago.”
Xifin CEO Lale White presented information (from her leading RCM company) and its data. The news: generally not good. As laboratories try to enhance the benefits/value they provide to clinicians, other disruptive elements are emerging. Consumer-focused technology companies like Google, Apple, and Amazon are making patient data more accessible in unexpected ways, while Medicare Advantage plans are altering the methods of processing and paying claims.
Why Does Medicare Advantage Matter to Laboratory Business?
Worth a deeper look. But the answer is: because so many enrollees are now in Medicare Advantage, and of course Medicare-age patients are most expenses in healthcare. Relevant to labs: Medicare Advantage plans run by Managed Care Organizations deny laboratory services claims at a higher rate than old Medicare, this is a threat to the laboratory business as Advantage is now has more than half of enrollees.
Z Codes and Payors
Z codes and other specialized codes required by payors for additional information in order to pay claims was a key topic. These codes are used in many areas and have different names, but Z codes are generally for genetic tests. It is a requirement of payors for the lab to provide the answers to questions like “what’s the science behind this test,” “is the test validated,” “why this test for this disease,” “what genes were targeted?” and more.
These new codes are a concern of laboratories who feel it is a tactic of claim denial and require more work on their end. It wasn’t a completely one-sided discussion, it wasn’t just pile on the payors. For the payor-point of view, Gabriel Bien-Willner of Palmetto GBA spoke on MolDX and Identifier Codes Why and How and the Future. In his talk, a defense of Z codes as the only way payors will be able to pay, as CPT codes do not contain enough information about the specific test when, like today’s genetic tests, they are more complex than a simple run on an instrument.
Payors do want to pay, he insisted, but they need this information.
Molecular testing is highly complex, and the lack of well-defined billing codes and standardization makes it difficult to know if a given test is reasonable and necessary.
FDA Final Rule: Lighter Hand Than Expected
As reported, the final FDA rule on the regulation of lab-developed tests (LDTs) was released concurrently with the EWC event. Tim Stenzel, a former director of the FDA’s diagnostic division, was a keynote speaker at the conference. After assessing the final rule, he expressed that it alleviated many concerns from laboratories about LDT regulation. With a background as a former FDA director, Stenzel maintained a favorable view towards the FDA, believing that the agency aims to facilitate market access for tests that meet its safety and effectiveness criteria. He pointed out that the new rule includes several provisions for grandfathering and discretion, which could mean that some LDTs might not require FDA submission.
According to Dark Daily, the rule significantly reduces the regulatory burden, potentially exempting some labs from submitting their LDTs. The FDA is currently evaluating various multi-cancer detection assays, including those already deployed clinically as LDTs, and is expected to approve those that effectively identify cancers not currently covered by existing screening programs. Senzel highlighted the FDA’s strategy to reclassify most in vitro diagnostic tests from Class III to Class II, exempting over 1,000 assays from FDA scrutiny.
FDA Quality Management Regulation Changes
Also discussed at the meeting were highlights of the Quality Management System Regulation (QMSR). Launched in January, the QMSR bought FDA requirements in line with ISO 13485, making compliance easier for medical device manufacturers and test developers working internationally.”
Per Dark Daily: Launched in January, the QMSR bought FDA requirements in line with ISO 13485, making compliance easier for medical device manufacturers and test developers working internationally.st in vitro diagnostic tests, changing them from Class III to Class II, and exempting more than 1,000 assays from FDA review.
In other words, he advantage of these ISO 13485 requirements is that IVD manufacturers/test developers who already sell internationally can unify their process.
Can Anything Be Done About Molecular Test Claim Denials, Maybe?
A presentation by Diana Richard and Stephanie Denham, both AVPs at XiFin Inc., highlighted strategies for dealing with claim denials. The theme was ways laboratories can be proactive, using templates to provide more information to payors. Where appeals are successful, communicating that to payors to try to change behavior, and providing as much information if possible on the test claim – even if necessary, bringing in the provider.
Yet they also presented sobering stats. 11.7% of claims revenue for their clients for molecular testing had to be appealed to be paid. Some were paid on one appeal, others a second. Some small percentage of that required three appeals, which goes before an admin judge.
And that’s up from 7% in 2021. Given Xifin’s customer base, this is a significant survey.
Their presentation stressed proactivity, communication with payors and providing information up front. They stressed informing payors of appeal results as a way of discouraging further denials. For instance, if your lab keeps winning appeals for a particular code, it might be obvious your payor has an error in their system and should be informed. If you have to go before a judge, be choosy and use it as leverage in proactive communication if you win. And they stressed providing as much information (even from the provider if possible) to help with claims and appeals.
The IVD Market
Everything we’ve discussed affects IVD. If labs are hurting, so are the people that supply them. Even if a change, say the LDT regulations, might benefit IVD in some way, if it hurts the laboratory business, it hurts IVD as well. No way around that. Instrument purchases and supply usage is directly related to tests run.
EWC always gets a number of IVD marketers and salespeople. There should be more, if you ask me, I think this meeting is a great opportunity for IVD, but I’d say there were several dozen.
As part of the College’s increasing reachout to IVD manufacturers. I was part of a panel that discussed the IVD market. Consensus was that market is flat. There are a few categories of growth, such as continuous glucose meter sales and respiratory panels, but otherwise growth is slow to flat. COVID sales have decreased, and while there are promising new tests and panels, revenues have not yet reached the point where growth could be seen.
Savvy marketers are considering their options, advertising in trusted journals (CAPToday was one suggested), hiring SEO consultants (deemed essential now), and using videos, QR codes and social media. These are old hat for the marketing world, but for regulated device markets mastery of these arts are still somewhat new.
Overheard at The Executive War College
‘No way the FDA wants to approve tests, that’s just not true’
‘What nobody can answer is, what happens when the payor just keeps denying the claim and doesn’t talk to you?’
‘Too many payors are closing their network.’
‘The prior authorization situation has improved a bit.’
‘Even with the final rule changes, it’s still a lot of work for a laboratory!’
‘Payors are supposed to check in with the provider on every lab test, it’s their job, but they never do it. Use that in appeal process, it’s worked for me.’
‘It’s hard to put too much pressure on payors, you can’t fight with your clients.’
‘As John Wannamaker said, I know half my advertising is wasted, I just don’t know what half.’
‘Could the payors now use lack of FDA review of a LDT as a reason not to pay? Yes they could’
‘No the payors won’t do that, as long as there is a process the FDA accepts short of review’
‘It’s possible that the way they’ve structured this, not a single LDT test will have to go before the FDA.’
‘I hate more baked ham in three days than I ate all year.’
Ok the last one: that was me.
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