This is a companion article to the feature, “Paying for Molecular Diagnostics.”
Laboratories that create and use their own laboratory-developed tests are often on their own to develop data in support of coverage and reimbursement for those tests. Such efforts can be difficult and time-consuming, but may be justified if the tests have the potential to generate significant revenue for the lab.
Laboratories that purchase and use commercial in vitro diagnostics, on the other hand, often have access to a great deal of information that can help them better understand the reimbursement potential for a particular test. Starting with in-house information readily available to the lab, managers can also turn to test manufacturers to fill out their understanding about a test’s coverage and payment status. Following is a quick look at the sources of basic information that labs will want to know when assessing the reimbursement status of a particular test.
What Labs Know
To understand how changing reimbursement policies may affect an institution’s diagnostic testing revenues, a good place to start is with information that is already in the hands of laboratory management.
Testing Volume. For most hospitals, outpatient testing is the only directly reimbursable type of diagnostic testing performed by their laboratories. To understand how reimbursement issues may affect their institutions, it is essential for labs to have a good sense of the volume of outpatient tests they perform relative to their overall testing volume. This information will enable labs to determine what proportion of their revenues may be at risk if reimbursement rates are reduced through the Protecting Access to Medicare Act of 2014 (PAMA) or other factors.
Payor Groups. Laboratory managers should also develop a profile of the payor groups that are most likely to be covering and paying for the tests performed by the lab. Labs that perform a high proportion of testing for older populations will be more greatly affected by the coverage decisions of Medicare contractors. Labs in facilities that serve predominantly younger populations are more likely to need an understanding of reimbursement trends among private payors, which may or may not follow the lead of government payors.
What Labs Need to Ask
Laboratories don’t typically have all the information they need at their fingertips, but there are good sources of such information that can help them fill in the blanks in the reimbursement equation. By exploring a few key areas with their closest working partners, lab managers can gain a fuller understanding of the factors that may influence reimbursement rates for tests conducted by the lab.
Clinical Utility Studies. Test developers should be able to provide information about existing or ongoing clinical utility studies related to a particular diagnostic. Such information can help laboratorians determine whether clinical utility has already been established for a particular diagnostic and, in turn, whether such study data has been used to support payor coverage and payment determinations.
Payor Response. A critical factor for understanding the coverage and payment status of a particular test is knowing what government and other third-party payors think of the test. Diagnostics manufacturers typically have such information readily available, and should be able to provide laboratories with a detailed briefing about the reimbursement status of a particular test. Tests that payors have deemed medically necessary and reasonable will be reimbursed. Although it might seem reasonable to ask the manufacturer how much private insurers are paying for a test, in most cases the company will not have access to such data. Unlike Medicare, which posts its pricing online, the prices paid by private insurers are negotiated directly between the payor and the healthcare facility, and are therefore not accessible to the manufacturer.
Updates. As the reimbursement landscape is constantly shifting, labs should feel comfortable reaching out to test developers on a regular basis to find out whether any new payors have begun covering a particular test. Such communications also represent an opportunity to ask what activities the manufacturer is undertaking in support of expanded coverage and reimbursement. It’s a good sign when diagnostics manufacturers are actively engaged in discussions with payors.
Billing Advice. Most diagnostics manufacturers maintain a reimbursement or market access department staffed with experts who can offer guidance on how to bill for a particular test appropriately. Laboratories should take advantage of such resources to minimize the chances that a claim for reimbursement will be denied.