NACB - Scientific Shorts
NACB - Scientific Shorts (formerly NACB Blog)
By Patti Jones, PhD, FACB, and Jason Park, MD

Now days most laboratories are struggling with a new financial sink, the spiraling volume and exponentially spiraling costs of send out testing. A large majority of that growth can be directly attributed to new Molecular Diagnostic tests. In 2009, the molecular diagnostics industry grew 35%. Testing can be divided into several categories including: infectious, inherited genetics (eg, Cystic fibrosis), cancer genetics, and other biomarkers. Because these tests are complex and frequently have patents or proprietary algorithms, most labs cannot currently and may never be able to perform this testing in-house.  These are expensive tests.  A good example of this growth in send out testing is comparative genomic hybridization microarray (CGH array) testing. The volume in our lab went from zero five years ago to close to over five hundred in 2010.  At $1,500.00 per test, that’s money. In fiscal year 2009, our overall sendout costs were ~15% of our overall operating budget.  This high-cost, high-growth area of testing threatens to consume the operating budget.

Labs are dealing with this explosive growth in a number of ways in the effort to curtail the spiraling costs. The most simplistic approach is an approval model where all send out tests over a specified dollar amount must be individually approved. The test approvers may be pathology residents or fellows, lab managers, and/or faculty.  Another scheme is pop-up pricing notices which appear as a window when a clinician is considering ordering an electronic test order. The pop-up may contain test utilization information, or something as simple as one to four dollar signs ($ - $$$$) letting the physician know that the test they are ordering is expensive. Third party billing is another way of addressing the problem. Third party billing in this instance refers to the outside reference lab billing the patient’s insurance or the patient directly. Finally, labs may consider bringing molecular testing in-house.

Each of these strategies has drawbacks. In an approval model, the laboratory may seem to be at best a nuisance and at worst a villain that inhibits the clinician’s ability to care for the patient. The pop-up pricing notification provides a small obstacle but does not actually regulate orders. Third party billing is a strategy probably best for expensive testing that has poor reimbursement. A switch to third party billing would result in a concomitant reduction in gross laboratory revenue and testing volume. Bringing molecular testing in-house may have prohibitively high start-up costs and require special expertise for validation and regulatory compliance.

As genetic testing continues to grow in utility (as well as cost), laboratories needs to consider an overall strategy for how to provide access to having patients tested as well as having results given to clinical care providers. Educating ourselves and our clinicians of the clinical role of these tests is probably the most important foundation for any strategy. If a test is critical in the diagnosis and treatment of a patient, then the patient will get access to it--even if they need to bypass the clinician and laboratory.


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Posted by
On 3/1/2011

I am a clinical geneticist who was previously at an institution where we couldn't send out testing unless the lab directly billed insurance or the patient paid. It is very difficult that someone cannot have a diagnosis made because they are poor, but there are times when only a DNA test will give the information the family needs for the future, even when treatment is not available for the affected individual. Each of the above mentioned approaches work some and you can even "outlaw" gene panels and create algorithms that narrow testing based on likelihood of mutations in a particular gene or patient features and typical features with mutations in a particular gene. Invariably, there is an elderly patient who has a mutation in a gene where mutations result in fatality in childhood or a girl with symptoms due to mutations in a gene on the X chromosome. Once a clinician sees that, the gatekeeper becomes the bad guy again. For a geneticist, I order very few DNA tests. My personal response when anyone asks if I am sending a DNA test is "what will it change?" Does it change treatment? Does it allow some "prediction" of prognosis? Does it allow the family to stop looking for other causes for the patient's symptoms? Are there family members who will need the result for family planning at a later date when the patient is no longer available? The other question is whether I can make the diagnosis another way without increased risk to the patient. Sometimes, I can get more information from a non-DNA test than I do from a DNA test result. Total homocysteine tells me if someone's stroke is likely related to their MTHFR variant while the DNA test only indicates that the person MIGHT be at higher risk for strokes. People ordering DNA testing should know how likely they are to get definitive results (known disease mutation instead of variant of uncertain clinical significance). This information might not be readily available in testing brochures distributed by the testing lab, but you might see less testing if the ordering clinician realized how likely a non-diagnostic result is. Unlike a previous commenter, I don't think that increasing CPT reimbursement is the complete answer. Increasing reimbursement doesn't provide incentive to decrease the cost of doing a test. At the same time, it doesn't seem logical that the reimbursement for electrolytes is almost the same as reimbursement for PCR or sequencing or interpretation of a molecular test. The CMS reimbursement for 25-hydroxyvitamin D is twice the reimbursement for amino acid or organic acid analysis. Most clinicians can interpret a set of electrolytes, but I'd hate to see what happens if I report amino acid concentrations without an interpretation. Given that there are 20+ results/sample, at least 1 is outside of reference intervals in a fair number of samples. People mis-interpret DNA results when they get a printed interpretation. This would be a lot worse if the report was just the actual results of sequencing. I think there needs to be a better balance between the difficulty and complexity of a test, actual cost of doing the test and CMS reimbursement without removing incentive for decreasing the cost of doing the test. I think it would be helpful to have CPT codes for interpretations of complicated testing (not just genetic tests), but they need to be appropriately reimbursed based on the laboratorian's time needed to do the interpretation. It takes more time to review 10 KB of sequence than it does to review a test for a single point mutation, but both use the same interpretation code that is reimbursed about $7 if it's paid at all. If currently unreimbursed laboratorian activities were appropriately reimbursed, specialized labs might be paid more appropriately for testing done at their own institution which might allow them to offer reference testing for a price close to what the referring lab would be reimbursed by insurance. Of course, that reimbursement only applies if the patient is an outpatient. Apparently, inpatients shouldn't need expensive testing, but that's another issue. I'm curious to hear how others have handled this issue. Cheryl Garganta, MD, PhD, Tufts Medical Center

Posted by
On 1/31/2011

We have been working on this issue quite a bit this year. Many of our physicians are good about getting preauthorization for the testing, but we traced a number of these tests through billing and found out that we were not getting anywhere near full reimbursement (of cost) even with pre-authorization. We confirmed this with a model of reimbursement by CPT code and insurance distribution. A discussion with our insurance contract expert revealed that these are being reimbursed at negotiated CPT rates, much lower than cost. Perhaps we will be successfull in an attempt to renegotiate our contracts to carve out this testing for full reimbursement in the setting of preauthorization, but this could take many years. In the meantime, we are attempting a combination of the widely discussed strategies. This comment was approved by the NACBLOG editorial board. Please remember to add your name and affiliation!

Posted by
On 1/20/2011

This is the topic of the year (and perhaps the decade) in our laboratory...the rate of increase of costs in this area drawfs all our other expense lines. We have considered or are in the process of implementing a number of control measures, including the ones mentioned in the above core article. In the end, I think it will come down to how well we can engage clinicians to collaborate with us in our efforts to find the most clinically appropriate utilization of these tests in an era of shrinking resources. That will be harder than just saying no or resorting to third party billing, but I think it is the only sustainable solution that will really work and also protect the best interests of our patients. This comment was approved by the NACBLOG editorial board. Please remember to add your name and affiliation!

Posted by
On 1/20/2011

If third party billing is not an option it is possible to insist on prior autorization from insurance before the patient appears to be drawn. It is best to make sure the provider's office has the CPT codes and the correct amount. In other words don't just ask "Am I covered for genetic testing?" This comment was approved by the NACBLOG editorial board. Please remember to add your name and affiliation!

Posted by
On 1/19/2011

Timely article. Until the reimbursement scheme for testing is changed, molecular diagnostic testing is going to be a financial monster for hospitals, particularly community hospitals. Most molecular tests are expensive, complex ASR tests that need to be developed and validated in-house, with the result that mostly universities and large reference laboratories perform the testing. Reimbursement for these tests is poor, so that the reference laboratory needs to have revenue from some other source to cover their costs, such a grants, research dollars, or taxpayer dollars for teaching. Here is a concrete example. JAK2 mutation testing is a major diagnostic criteria for the diagnosis of myeloproliferative neoplasms, yet Medicare and Medicaid reimburse only $40 for the test, and private insurance not much more. In order to make money on the test, the reference laboratory either has to bill the hospital directly, resulting in the hospital losing money when they subsequently bill insurance for the test, or the reference laboratory bills insurance, and makes up for the poor reimbursement by other dollars coming in to their institution for research, teaching, etc. This will only change when we switch to a system where the patient (the consumer) sees the cost of the tests, and pays the first dollars out of pocket. Only in this way will the interests of the patient, physician, and laboratory be aligned. In other words, only going back to a free market system will things improve. Philip L. Perkins, MD, Pathologist, Munson Medical Center, Traverse City, MI