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Palmetto, Medicare’s Biggest Carrier, Proposes to End Code Stacking for Molecular Clinical Laboratory Tests

Palmetto wants to implement two proposed local coverage determinations (LCDs) on February 27, 2012

Medicare’s biggest local carrier is ready to tackle the problems created when clinical pathology laboratories use code stacks to submit claims for genetic tests  and molecular diagnostics assays. Medical laboratories in eight states served by this Medicare carrier are worried about its two draft proposals that could cut off reimbursement for large numbers of molecular diagnostic tests (MDTs) and laboratory-developed tests (LDTs), starting February 27, 2012.

The Medicare carrier is Palmetto GBA, of Columbia, South Carolina. On September 23, it shook up the clinical laboratory industry and pathology profession nationwide when it announced, in a “draft proposal” for a local coverage determination (LCD), that it would not allow labs to submit claims for most MDTs. As noted above, the proposed effective date is February 27, 2012.

Palmetto Identifies Coverage Criteria for Molecular Diagnostics Tests

In Palmetto’s draft LCD, it states that, to be considered for reimbursement, specific molecular diagnostic tests must be explicitly covered by:

  1. a national coverage determination (NCD);
  2. a local coverage determination (LCD); or,
  3. a Palmetto coverage article;

As most pathologists and clinical laboratory managers know, Medicare carriers use coverage determinations and coverage articles to explain reimbursement decisions to physicians and other providers treating Medicare patients.

Pathologists and clinical laboratory managers have until December 5, 2012, to submit public comments on the two proposed local coverage determinations that Palmetto GBA unveiled recently. If implemented as drafted, Palmetto would cease accepting claims for many molecular diagnostic tests and laboratory-developed tests that lack specific coverage guidelines. (by Palmetto GBA)

Pathologists and clinical laboratory managers have until December 5, 2012, to submit public comments on the two proposed local coverage determinations that Palmetto GBA unveiled recently. If implemented as drafted, Palmetto would cease accepting claims for many molecular diagnostic tests and laboratory-developed tests that lack specific coverage guidelines. (by Palmetto GBA)

In addition to the proposed LCD for molecular diagnostics tests, Palmetto also issued a second draft proposal the same day that would affect Laboratory-Developed Tests (LDT).

Palmetto GBA is a Medicare Authorized Contractor (MAC) that serves Jurisdiction 1 (J1) and Jurisdiction 11 (J11). Two draft proposed local coverage determinations (one on molecular diagnostic tests (MDTs) and one on lab-developed tests (LDTs), and a molecular diagnostics pPalmetto GBA is a Medicare Authorized Contractor (MAC) that serves Jurisdiction 1 (J1) and Jurisdiction 11 (J11). Two draft proposed local coverage determinations (one on molecular diagnostic tests (MDTs) and one on lab-developed tests (LDTs), and a molecular diagnostics program (MolDx) have been proposed only for J1. If implemented, they would affect labs serving Medicare patients in California, Nevada, and Hawaii.

After January 1, Palmetto GBA will introduce these proposals in J11, meaning they will affect labs serving Medicare patients in South Carolina, North Carolina, Virginia, and West Virginia.

In the MDT draft proposal, Palmetto defined a molecular diagnostics test as a single test (which often has multiple components) and that delivers one result and involves nucleic acids (DNA/RNA), proteins, enzymes, and/or other metabolite detection. Palmetto said this definition applies to all tests that:

  • Are non-FDA cleared laboratory-developed tests (LDTs)
  • Are performed or marketed by a sole source, hospital, or reference laboratory, or
  • Have not received a specific AMA CPT code, or
  • Have not obtained an NCD or LCD coverage determination from Palmetto.

If this proposal is approved, it could affect a large number of the molecular diagnostic tests in use today, observed Rina Wolf, Vice President of Commercialization Strategies, Consulting & Industry Affairs, for Xifin, Inc., a company in San Diego, California, that helps labs improve revenue and collections. In an exclusive interview with The Dark Report in its latest issue, Wolf provides detailed information about how the proposed LCD rules could reshape the way clinical laboratories submit claims to Palmetto and other Medicare carriers.

Palmetto’s second LCD draft deals with laboratory-developed tests. It would also have an effective date of February 27, 2012. Similar to the LCD on molecular tests, this proposed LCD would not allow labs to submit claims for all non-standardized organ or disease-oriented laboratory developed test (LDTs) that meet the following criteria:

  • Are not FDA cleared
  • Are performed or marketed by a sole source, hospital, or reference laboratory
  • Have not received a specific AMA CPT code
  • Have not obtained an NCD or LCD coverage determination from Palmetto
  • Require multiple CPT codes in order to submit a claim for a single assay/test.

Like the MDT proposal, this second draft proposal could also affect virtually all non-standardized organ or disease-oriented LDTs. In addition, Palmetto wrote that medical laboratory tests reported with multiple codes (called code stacking) and single or multiple units of service to represent a single test panel are considered investigational and therefore would not be considered a covered service.

Of most concern to medical laboratories is the fact that, because Palmetto said it would consider these MDTs and LDTs to be “non covered,” clinical laboratories would be unable to submit claims for these tests. If a medical laboratory cannot submit a claim for a specific MDT and LDT, then there is no claim to be denied.

Therefore, the denial cannot be appealed by the clinical laboratory. Such a scenario would leave medical laboratories with no recourse were the Medicare carrier to refuse claims for MDTs and LDT that don’t meet the defined criteria.

A secondary concern among clinical laboratories is Palmetto’s statement that some test panels submitted previously could be subject to overpayment collection if Palmetto considers them to be investigational. In other words, Palmetto may seek to recoup past payments for these tests from labs.

These proposals are a somewhat unpleasant surprise to medical laboratories and pathology groups because they have developed and used MDTs and LDTs for many years and Medicare carriers have reimbursed claims for these assays. While many of these tests are expensive and their use is proliferating, they also help improve patient care in ways that were impossible previously.

Clinical Laboratory Managers Can Submit Comments to Palmetto

Palmetto will accept public comments on its two draft proposals through December 5, 2011. Pathologists and clinical laboratory managers can write to Palmetto to explain how these proposals would adversely affect labs and all healthcare provides who rely on the results of MDTs and LDTs when caring for patients. (The Palmetto contact information is presented below.)

Privately, Palmetto officials have said that if they receive enough comments that require these draft proposals to be rewritten, then Palmetto may delay implementation. For more details and insights about these two draft local coverage determinations, see the full interview with Rina Wolf in The Dark Report’s latest issue, dated November 7, 2011.

Upcoming Dark Daily e-briefings and issues of The Dark Report will provide updated information on Palmetto’s plans to revamp how pathology groups and clinical laboratories submit claims for molecular diagnostics tests and laboratory-developed tests. Palmetto officials are releasing additional details about their intentions in various public meetings.

—Joseph Burns

To send public comments to Palmetto for the two proposed local coverage determinations, use this address:

Nita Collins
J1B.Policy@Palmettogba.com

Related Information:

Seeking Reimbursement Transparency, Palmetto May Deny Coverage for ‘Investigational’ Molecular Tests

Molecular Diagnostic Tests (DL32288)

Non-Standardized Organ or Disease-Oriented Panels (DL32286)

Molecular CPT codes topple old ‘stacking’ codes

The Dark Report current issue 

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