White Paper

Coverage and Reimbursement for Molecular Diagnostics: Current Issues and Options

October 24, 2008

Executive Summary

Personalized medicine – getting the right treatment to the right patient at the right time – will be a major pillar of efforts to bring increased effectiveness and efficiency to healthcare. Today, we know far more about the molecular heterogeneity of major diseases, including cancer. It is clear that targeted and more effective medical treatments will often be unattainable unless physicians have precise molecular information about the patient’s disease. In short, is a priority that our healthcare system (both private payors and Medicare) facilitates the adoption of new molecular technologies when they are shown to be efficient and effective.

In 2000, the Institute of Medicine published a comprehensive monograph entitled “Medicare Laboratory Payment Policy, Now and in the Future.” This report described a number of substantial difficulties created by the legacy U.S. system for coding and payment of laboratory tests in an era of substantial advances for test technology. Few of these difficulties have been resolved. However, the pace of technologic change has risen and today complex gene panel tests for cancer and other sophisticated diagnostics are rapidly becoming reality. Remarkably, an increasing number of stakeholders now raise concerns that legacy administrative conventions may be on par with scientific challenges in bringing molecular diagnostics to patient care. Normally, the development of new medical technolggy proceeds through stages that are deliberately designed to yield progressive reduction of uncertainty, allowing rational investment in the next stage of research for the product. Innovation is discouraged if innovators perceive that a high and irreducible level of uncertainty is caused by payor issues (unrelated to the actual clinical value of the product) that will occur at the final stage of product development (market entry). It follows that more transparency and rationality in payor processes will encourage cost-effective innovation in molecular diagnostics.

In June 2008, the Department of Health and Human Services commissioned this white paper to overview the current status of payor systems for coverage and reimbursement of complex molecular tests, and brought together an expert panel to discuss present difficulties and possibilities for change. The workshop focused on benefit classification, billing processes, coding systems, payment systems, and coverage decision processes. The goal of the workshop was not to choose single solutions, but to articulate the most pressing issues and discuss options for system change. Participants felt that the legacy coding system was the most pressing problem in the overall reimbursement system, but other parts of the payor process offer opportunities for improvement as well.

Download the Foley Hoag Coverage and Reimbursement for Molecular Diagnostics: Current Issues and Options eBook (.pdf)