CLN Article

Regulatory Profiles

In This Issue...

CMS Raises Specter of Back-Door Cuts to Lab Fee Schedule

In an unprecedented move, the Centers for Medicare and Medicaid Services (CMS) on July 8 announced it would seek to systematically reevaluate reimbursement for laboratory tests outside of its normal process of updating the clinical laboratory fee schedule (CLFS), cutting payment for tests when the agency deems that technological improvements have made the test less costly for labs to perform.

The surprise announcement came in the proposed rule for the 2014 Medicare Physician Fee Schedule, which until now has only dealt with payment for anatomic pathology tests interpreted by physicians. Typically, CMS sets reimbursement rates for clinical laboratory tests when they are added to the CLFS, and later updates occur only broadly for the entire fee schedule, such as for inflation.

In the proposed rule, CMS noted that the current CLFS system was unique in Medicare. "Generally, fee schedules and prospective payment systems are evaluated each year to reflect the changing mix of services provided under that system or schedule and then the system or schedule is adjusted to maintain budget neutrality," the agency wrote. "Since there is currently no process to make such adjustments for the CLFS, payment amounts are essentially locked in place and do not change when the cost of the test changes."

In its review of test reimbursement, CMS would appraise technological changes that include all tools, instruments, reagents, and techniques. Likewise, CMS will consider the number of laboratory personnel required to perform a test as one of many "inputs" that might make a test less costly to perform, and thus a candidate for a reimbursement cut. CMS proposes a review of all codes currently on the CLFS, starting with codes that have been on the CLFS the longest and then working forward over several years, with the first rate adjustments going into effect in 2015.

In addition to the unusual step of proposing sweeping changes to clinical lab test reimbursement via the physician fee schedule, CMS also proposed significant cuts to anatomic pathology testing. CMS would set a cap on the technical component of pathology services based on the hospital outpatient rate, which would result in a 25% cut to independent labs for these services, an amount the American Clinical Laboratory Association (ACLA) called "devastating."

In a statement, ACLA rebuked CMS for suggesting this new package of reimbursement cuts to labs. "Payments for lab services have been cut by over 11% since 2010 and face double that amount over the next 9 years," ACLA wrote in the statement. "Further reductions to payments to clinical labs threaten their ability to maintain access to high quality care for Medicare patients."

CMS will accept comments on the proposed rule until September 19. The rule is available on the Federal Register website.

In Wake of Supreme Court Patent Ruling, Myriad Sues Competitors

Fewer than 30 days after the U.S. Supreme Court ruled that isolated human DNA could not be patented, Myriad Genetics filed a patent infringement suit against two new rivals, Ambry Genetics and Gene by Gene, arguing that a variety of other patents that the Supreme Court ruling left intact were being violated. Ambry and Gene by Gene were two of the first companies to announce they would be offering BRCA genetic testing after Myriad lost exclusive patent rights for analyzing these genes.

Ambry vowed to defend itself and continue to offer BRCA testing. "Ambry Genetics supports the Supreme Court's decision and will vigorously defend its position," said Ambry CEO Charles Dunlop. "We have had an overwhelming response from our clients seeking an alternative laboratory to perform BRCA testing and Ambry is fully committed to supporting our clients and patients moving forward."

While the company did not release a statement about the lawsuit against Ambry and Gene by Gene, which operates under the name DNATraits in Houston, Texas, Myriad had emphasized after the Supreme Court ruling that it believed its many other patents related to BRCA testing would result in the company maintaining its competitive edge. Myriad boasts more than 500 claims in 24 different patents "conferring strong patent protection for its BRCAAnalysis® test," according to the company. Many of Myriad's unchallenged claims are method claims applying knowledge about the BRCA1 and BRCA2 genes.

Ambry's statement about the lawsuit is available on the company's website.

States Prepare for Exchanging Health Records After Disasters

As part of an effort to help make sure their residents' health information is available after a hurricane or other wide-spread disaster, four Gulf states have partnered with six states in the East and Midwest to help patients and providers access health information over the Internet when patients can't visit their regular doctors.

Working with the Department of Health and Human Services Office of the National Coordinator for Health IT, health information exchange programs in Alabama, Georgia, Louisiana, Florida, South Carolina, North Carolina, Virginia, Michigan, Wisconsin, and West Virginia will participate.

More information about the project is available online.