Watch for limits on genetic testing as CMS looks to rein in spending

September 29, 2020

The following is a column from Vachette CEO Mick Raich:

A recent edition of Laboratory Economics (Volume 15, No. 9, September 2020) featured an article examining the Office of Inspector General’s (OIG) recent report detailing how genetic testing is driving an increase in Medicare spending on the Clinical Laboratory Fee Schedule (CLFS). 

For those who missed the study, the OIG revealed Medicare lab spending for genetic tests jumped from $473 million in 2017 to $969 million in 2018, despite the introduction of market-based pricing developed through commercial payment rates reported under the Protecting Access to Medicare Act (PAMA). While much of the spending was attributed to an increase in the number of reimbursable tests coupled with an overall increase in utilization, the OIG still said it suspects fraud played a role in the jump as well.

There are a few interesting items to note from the Laboratory Economics piece. First, the article noted denial rates of 50% for these types of claims, which is about spot on as Vachette audits the billing for many of these genetic labs. Next, the article pointed out that the OIG found there was a 7% increase in Medicare spending on clinical lab tests in 2018 even though there was a 10% decrease for most routine tests. This article made me think…didn’t we know this was coming? 

I am lucky enough to stand in front of people several times a year and spew my quasi-intelligent guess on where the lab business is going. Looking back on my slides from several years ago, I noted this exact same trend, specifically stating, “We will have great genetic testing, but the cost of the tests will limit the actual usage.” Now, we are beginning to see this play out. 

The next great question is whether Medicare will announce a change for genetic testing reimbursement in the clinical laboratory fee schedule next summer? Or, will they limit the testing for genetics? Remember, annually scheduled decreases under PAMA are currently frozen due to changes instituted due to the Public Health Emergency.

My prediction? Genetic testing will become less prevalent as Medicare limits volume on tests. Remember how they limited the number of stains over the years and placed limits on prostate biopsies? It is my thought this will be the next area of restraint. 

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