January 2012 Clinical Laboratory News: Regulatory Profiles

Regulatory Profiles

 

CMS Targets Improper Payments for 2012

The Centers for Medicare and Medicaid Services (CMS) launched renewed efforts this year aimed at cutting back overpayments and improper payments to Medicare providers. The programs are part of the agency’s plan to deliver on President Obama’s goals to cut improper payments by $50 billion before the end of 2012, including cutting the Medicare fee-for-service error rate in half.

One effort will increase the reach of Recovery Audit Contractors (RAC), firms hired to audit provider billing practices for errors. RACs get to keep 10% of over- or underpayments they discover. For 2012, a new pilot program will allow RACs to review claims before they are even paid to ensure that the provider complied with all Medicare payment rules. The RACs will conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments, and will focus on seven states both with high populations of fraud- and error-prone providers and with high claims volumes of short inpatient hospital stays. According to CMS, this program will help lower the error rate by preventing improper payments instead of the traditional ‘pay and chase’ RAC schemes of looking for improper payments after they have been made.

More information on the RAC program is available from the CMS website.

New Molecular Codes Delayed Until 2013

The new molecular diagnostics coding scheme developed by the American Medical Association (AMA) will not be implemented until at least 2013. The Centers for Medicare and Medicaid Services already announced the codes would not be included on the lab fee schedule for 2012; however, some observers speculated that some or all of the codes could be included on the physician fee schedule. Because molecular tests do not have single, analyte-specific codes, labs must bill a list, or ‘stack,’ of codes that describes each separate step or methodology performed. Under the new AMA coding scheme released last year, tests that make up the majority of the volume of molecular diagnostics are covered by single analyte-specific codes.

The 2012 physician fee schedule final rule is available from the Federal Register website.

Senators Look into Lab Discounts to Insurers

Senate Judiciary Committee Ranking Member Chuck Grassley (R-Iowa) and Senate Finance Committee Chairman Max Baucus (D-Mont.) are asking the leaders of three major health insurance companies and two leading clinical lab testing companies for information about a practice in which insurers receive discounted pricing from labs in exchange for referrals, including testing for Medicare beneficiaries.

The senators expressed concern that Laboratory Corporation of America and Quest Diagnostics, along with insurers Cigna and UnitedHealthcare, have been involved in what are referred to as pull-through arrangements. Basically, the lab offers an insurer discounted or below-cost pricing in exchange for the insurer directing their in-network physicians to refer business to the lab. The Department of Health and Human Services Office of Inspector General has warned in the past that these discount arrangements are “particularly suspect” as they relate to the Federal Anti-Kickback law.

Grassley and Baucus want copies of lab service agreements, correspondence, and other documents related to possible pull-through agreements.

A copy of the letters requesting the information is available on Senator Grassley’s website.

Supercommittee Failure Leaves Unanswered Questions

Having missed their deadline to reach agreement on $1.2 trillion in spending cuts, the failed supercommittee created by the Budget Control Act (BCA) left even more uncertainty about how Congress will trim the nation’s budget deficit. The painful cuts to labs considered at one point might yet have life in them, lab observers are warning. Since the 2011 summer debt ceiling crisis that spawned the BCA, lab advocates have continued to worry that Congress will establish a laboratory co-payment, further bundle Medicare payments, or directly cut the lab fee schedule.

At the same time, Congress has a full year before the BCA forces automatic 2% spending cuts to Medicare providers, or about $917 billion over 10 years. This final January 2, 2013 deadline will come after a new Congress is in Washington, and potentially a new president as well. The possibility remains that this new Congress could repeal the BCA and come up with a new plan that does not cut popular programs such as defense and Medicare.

An analysis of the Budget Control Act is available from the Congressional Budget Office website.

Diagnostic Patents Head to Supreme Court

Two major cases involving patents on diagnostic testing now await decisions from the U.S. Supreme Court. In one, Mayo Collaborative Services—Mayo Clinic’s reference lab arm—and other parties are challenging the patents of Prometheus Laboratories. Prometheus’s patents concern therapeutic monitoring of a variety of autoimmune diseases with a quantitative assay for thiopurine metabolites.

The disagreement in this case centers not on the assay itself, but on whether Prometheus should be able to patent the correlation between the observed level of thiopurine metabolites and the health of a patient. Mayo Collaborative Services argued before the court that this patent should be invalid because the correlation between a certain level of a drug and the therapeutic effect on the patient is a natural phenomenon—not really an invention. The court is expected to return a decision sometime in 2012.

On the same day that the court heard these arguments, the American Civil Liberties Union (ACLU) and the Public Patent Foundation requested that the high court decide on whether companies can patent human genes. In 2009, ACLU brought the lawsuit against Myriad Genetics and it’s patents on BRCA1 and BRCA2 genes, used to assess a woman’s risk of developing hereditary breast cancer.

ACLU’s request for Supreme Court review follows a federal appeals court ruling in favor of Myriad in July 2011. That ruling overturned a lower court decision that agreed with the ACLU and declared the patents invalid. The Supreme Court has not yet announced whether or when it will hear this case.

 

 

 

 

 

Page Access: