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Clinical Laboratories and Pathology Groups

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Clinical Laboratories and Pathology Groups

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Efforts to Allow FDA Oversight of Clinical Laboratory-Developed Tests Continue in New Congress

The VALID Act has been refiled and the FDA has declared its intent to issue a proposed rule to enable it to oversee LDTs

Should the federal Food and Drug Administration (FDA) have the authority to regulate laboratory-developed tests (LDT)? Advocates in favor of this outcome are working to make FDA oversight of LDTs a reality.

On March 29, HR.2369—the Verifying Accurate Leading-edge IVCT Development Act of 2023 (VALID Act)—was refiled in the US House of Representatives by Representatives Larry Bucshon, MD, (R-IN) and Diana DeGette (D-CO). The 273-page proposal would move LDT oversight to the FDA.

Prior to that, however, the FDA had already announced its intention to issue a proposed rule giving the agency regulatory oversight of LDTs.

“The FDA has continually supported the passage of the VALID Act by Congress,” attorney Charles Dunham IV, a Shareholder at Greenberg Traurig LLP in Houston, told Dark Daily. “In fact, there is speculation that the VALID Act will be attached to the Pandemic and All Hazards Preparedness Act as it moves through Congress.”

Dunham is moderating a legal panel at next week’s 2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management, which takes place April 28-26 in New Orleans. The VALID Act and other lab-related legal topics will be discussed by attorneys on the panel.

Charles Dunham IV

“The FDA may not actually proceed with promulgating rules to regulate LDTs if it is concerned it will not be successful in court if the rules are challenged, which would happen,” said attorney Charles Dunham IV (above), a Shareholder at Greenberg Traurig, LLP. Clinical laboratory leaders can learn more from Dunham during a panel discussion at next week’s 2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management in New Orleans. (Photo copyright: Greenberg Traurig LLP.)

Arguments For and Against FDA LDT Regulation of LDTs

Supporters of the VALID Act contend that putting LDTs under FDA regulation will lead to improved patient safety and less review for low-risk tests. Their argument is that LDTs should undergo the same FDA review and approval process as other medical devices.

Hospital laboratory managers and pathologists—particularly in academic medical center laboratories—have largely opposed FDA regulation of LDTs. They prefer to keep the current setup under which lab-developed tests are validated under the Clinical Laboratory Improvement Amendments of 1988 (CLIA). They argue that FDA intervention will slow down development of new tests.

In fact, it was academic medical center pathologists who led the fight against the VALID Act in the last session of Congress, as Dark Daily reported in “Congress Holds Off on Enabling FDA Regulation of Clinical Laboratory-Developed Tests.” Lawmakers eventually chose not to include the VALID Act in the 2022 year-end spending bill.

In response, an FDA official indicated during the American Clinical Laboratory Association’s (ACLA) annual meeting on March 1 that the federal agency plans to issue a proposed rule to regulate LDTs, BioWorld reported. That rulemaking has not yet emerged. It’s possible the FDA will wait and see what happens in Congress with the VALID Act.

Attorney David Gee, JD, a partner at Davis Wright Tremaine LLP in Seattle, told Dark Daily that a US Supreme Court decision last year concerning the Environmental Protection Agency (EPA) casts doubt on the FDA’s ability to regulate LDTs.

“Some legal experts have suggested that one significant new legal challenge FDA may face is the Supreme Court’s West Virginia v. EPA decision last summer that limited the ability of the EPA to cap power plant emissions by regulation due to the EPA’s lack of explicit congressional authority to do so,” said Gee, who also will appear on the Executive War College legal panel next week.

“The West Virginia v. EPA ruling provides support for those in the clinical lab industry who point to the FDA’s lack of clear statutory authority to regulate LDTs and therefore fundamentally disagree with FDA’s longstanding position that LDTs are medical devices subject to FDA’s authority to regulate,” he added.

Actions Clinical Laboratory Managers Can Take

Clinical laboratory managers who want to share their thoughts about the future of LDT regulation may want to take one or both of the following actions:

  • Contact their representatives in Congress.
  • Find out whether any trade associations they belong to have taken a position on the VALID Act.

Clinical laboratory professionals should monitor the VALID Act’s progress while also paying attention to industry groups and manufacturers that support or oppose the bill.

Doing so will provide a clearer indication of who has the most to gain or lose should the legislation be passed. Pathologists and medical laboratory managers should also remain alert for further efforts by the FDA to issue proposed rulemaking to regulate LDTs. 

Scott Wallask

Related Information:

H.R. 2369 Verifying Accurate Leading-edge IVCT Development Act of 2023

2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management

Clinical Laboratory Improvement Amendments of 1988

Congress Holds Off on Enabling FDA Regulation of Clinical Laboratory-Developed Tests

Hillebrenner Says FDA No Longer Waiting on Congress for LDT Regulation

West Virginia v. EPA Decision

Looming Government Shutdown Opens Door for Congress to Possibly Pass Clinical Laboratory Bills

Theranos Whistleblower Tyler Shultz Publicly Denounces LDT ‘Loophole’ that the Disgraced Blood-testing Company Exploited

Getting Paid for COVID-19 Test Claims: Ways for Clinical Laboratories to Make it Happen Faster While Avoiding Post-Payment Audits

Legal, regulatory, and payer experts outline steps that help medical laboratories better navigate federal and state regulatory guidelines, eliminate coding and billing missteps, and maximize reimbursements

Even as daily COVID-19 test numbers continue to decrease, many clinical laboratories have substantial numbers of COVID-19 test claims that remain unpaid. Despite federal and state law requiring that labs be paid for these tests, commercial health plans are using many strategies to avoid paying labs for COVID-19 test claims.

That means a large portion of the nation’s labs are owed tens of thousands, hundreds of thousands, even millions of dollars for unpaid SARS-CoV-2 test claims they submitted since the onset of the pandemic last year.

To help clinical laboratories recover some or all of these monies, Dark Daily recently assembled a panel of lab billing experts for a webinar, titled, “Getting Paid for COVID-19 Test Claims: Prepare for Audits, Maximize Reimbursement, and Navigate New Payer Trends.”

What Clinical Labs Can Do to Be Paid for Their COVID-19 Test Claims

These four subject-matter experts provided insider tips and insights on steps clinical laboratories can take to get paid for COVID-19 test claims. This advice can help labs, maximize collected dollars, reduce the chance of post-payment audits, and navigate emerging payer trends.

Under the Families First Coronavirus Response Act (FFCRA), as amended by the Coronavirus, Aid, Relief, and Economic Security Act (CARES), payers must reimburse clinical laboratories for “medically necessary” COVID-19 testing. That requirement was underscored when the Biden administration issued new guidance on February 26, 2021.

During the webinar, Caitlin Forsyth, an Associate Attorney at Davis Wright Tremaine LLP in Seattle who specializes in healthcare regulatory compliance, said the new guidance “impressed upon commercial health plans the requirement to cover COVID testing in a lot of different circumstances.” The guidance included information on how providers can be reimbursed for providing COVID-19 care to uninsured people.

However, labs should be aware of what may come after they receive payment.

“We applaud you if you’ve had success thus far in securing reimbursement,” Forsyth continued. “However, clinical laboratories are not necessarily home free if Medicare, Medicaid, or a health plan has paid all or most of the lab claims for COVID-19 tests. This is because the payer may at some point down the line require the laboratory to submit to a post-payment audit. As part of the audit, the government payer or health plan is likely to require a laboratory to provide supporting documentation underscoring the medical necessity of each test performed on each patient at issue.”

What Constitutes ‘Medical Necessity’ for a SARS-CoV-2 Test?

There are many tripwires that can derail COVID-19 test claims. Medical necessity standards related to testing is one example that has been a major area of concern for clinical laboratories.

Kathryn Edgerton, Esq., Counsel at Davis Wright Tremaine LLP in Los Angeles, notes that the guidance providers have received has been “somewhat inconsistent and has created confusion as to what test is covered.” This lack of clarity in Medicare’s guidance has caused many denials of payment.

Special Report from Dark Daily

This Special Report from Dark Daily is the companion to the recent Dark Daily webinar on “Getting Paid for COVID-19 Test Claims: Prepare for Audits, Maximize Reimbursement and Navigate Payer Trends.” Clinical laboratory professionals can download the report by clicking here. (Photo copyright: Dark Daily.)

The webinar panelists provided the following three tips for optimizing billing claims for COVID-19 tests (additional recommendations on decreasing the number of COVID-19 test claim denials, increasing payments, and avoiding post-payment audits are available in the webinar’s on-demand replay and its companion special report):

  • When seeking reimbursement for COVID-19 testing from non-traditional sources, such as employers, schools, or local governments, ensure valid orders support each test claim. “Even if the employer, school, or local government has agreed to pay for the tests, a medical laboratory still must comply with state laws in regard to persons authorized to order the tests, as well as comply with CLIA requirements for a valid order,” Forsyth said.
  • Serial testing is on the rise in workplaces to increase the chances of detecting asymptomatic infection. However, Forsyth says, laboratories should “push for direct reimbursement from the workplace” because coverage from Medicare, Medicaid, and health plans is uncertain. “We also expect health plans to start cracking down on tests performed as part of an employment or surveillance program, taking the position that even if there are physician orders supporting each test performed as part of the program, health plans are not required to cover tests,” she added.
  • COVID-19-only testing providers and independent laboratories should expect health plans to begin narrowing their provider networks. To avoid being pushed out, Steve Stonecypher, Managing Partner at Shipwright Healthcare Group, says laboratories should “think about what you do, how you do it, and how you can be a benefit [to the health plan]. Make the payers think of you not as a nice-to-have in their network, but as a need-to-have in their network.”

COVID-19 Testing Labs Advised to ‘Have All Your Ducks in a Row’

Stonecypher urges clinical laboratories to be vigilant in record keeping, noting that the US Department of Health and Human Services Office of Inspector General (OIG) indicated earlier this year that it will conduct audits that focus on aberrant billing for COVID-19 testing during the pandemic.

“There are flags out there already that the OIG is potentially going to look to do claim audits,” he said. “You can pretty much guarantee that the payers are going to follow. So, have all your ducks in a row. We’re talking about all the individual patient assessments, all that necessary documentation … make sure all of that is in order because payers are going to look at this as an opportunity to come back and recoup money.”

Clinical laboratory leaders who want to learn more from this critical webinar can click here or place the URL in their web browser.

Billing and finance executives, clinical laboratory leadership, compliance officers, and billing and coding administrators are especially encouraged to listen to this webinar about increasing the number of COVID-19 test claims for which the lab is reimbursed. This webinar is available to stream on-demand.

This can be one of the best low-cost, high return investments your lab team can make, particularly if it helps the lab’s coding/billing/collections team interact with health insurance plans to settle SARS-CoV-2 test claims that then bring in tens of thousands or hundreds of thousands of dollars from outstanding claims that have yet to be paid.

Andrea Downing Peck

Related Information

Getting Paid for Covid-19 Test Claims: What Every Clinical Lab Needs to Know to Maximize Collected Dollars

FAQS about Families First Coronavirus Response Act and Coronavirus Aid, Relief and Economic Security Act Implementation Part 44

Threats to Profitability Causing Clinical Laboratories, Pathology Groups to Take on Added Risk by Entering into ‘Problematic’ Business Relationships and Risky Pricing Plans

Medical laboratory leaders urged to scrutinize pricing policies, billing decisions, and structural relationships that could trigger commercial payer and regulatory action

Clinical laboratories and pathology groups face another blow to their financial health on January 1, 2018, when new Medicare Part B price cuts take effect. Faced with increasing competition and declining reimbursement rates for anatomic pathology testing, medical laboratories will begin 2018 with their profitability under threat. In addition, healthcare legal experts warn many medical laboratory leaders risk further financial hardships by establishing “problematic” business relationships or developing pricing plans that put their labs at “unreasonable risk” with commercial payers and government regulators.

Financial Pressures Lead Clinical Laboratories to Risky Deals and Policies

One such expert is, attorney Jeffrey J. Sherrin, President and Partner at O’Connell and Aronowitz in Albany, New York. He contends that financial pressures are the impetus for many laboratories’ questionable deal-making and pricing policies.

“We’re increasingly dealing with proposed structures that clinical labs are entering into or considering entering into to remain viable, but without properly assessing how those relationships may run afoul of federal or state law or provider agreements,” Sherrin noted in an interview with Dark Daily. “If that doesn’t keep the labs up at night, it keeps us up at night!”

Tougher Auditing and Billing Scrutiny

While the “overwhelming majority of lab directors, owners, and managers are honest and law abiding,” Sherrin maintains they are “stepping into a minefield” by failing to properly vet decisions regarding:

1.     Lab billing and referral arrangements that could violate federal and state anti-kickback or fee-splitting laws, or trigger violations of provider agreements with health insurers.

2.     Participation in healthcare Management Service Organizations (MSOs) that involve “billing schemes” rather than legitimate administrative services, marketing, or data-collection activities.

3.     Pricing plans and billing policies that could trigger increased scrutiny by government and commercial payers over balance-billing of patients, and waiver or partial waiver of co-pays and deductibles.

In an era of shrinking reimbursements and limited access to healthcare networks, Sherrin urges medical laboratory leaders to be aware of another new reality: tougher audits from commercial payers whose investigators “perceive that there is rampant fraud in the industry” that extends beyond toxicology/pharmacogenomics or molecular/genetic testing laboratories.

“In payers’ minds, it’s across the board,” Sherrin says. “When they see patterns of limiting or capping or waiving of patient responsibility, their normal inclination is to assume this is part and parcel of some fraudulent scheme or practice, as opposed to a proper business decision.”

Proactive Steps to Improve Medical Lab Leader Decision-Making

Seeking guidance from a healthcare attorney before establishing new business relationships, and pricing or billing policies, is one way to increase your laboratory’s odds of surviving payer action.

“Most labs adopt a pricing policy without fully vetting whether they are doing it the right way, the best way, or the way that creates as little risk as possible,” Sherrin notes. “A high percentage of labs have not approached this issue with a degree of scrutiny as to whether the marketing of their test menu, their prices, and how they bill puts them in a better or worse position. Most are making business decisions based on what they need to do competitively without having the ramifications and implications analyzed.”

To help medical laboratory and pathology group leaders prepare for the perils they face, Dark Daily’s upcoming webinar, “Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More,” will reveal how lab leaders can take proactive steps to navigate the tough lab regulations and legal issues that lay ahead.

To attend this critical educational opportunity, click here to register (or place this link into your browser:

Healthcare attorney Jeffrey W. Sherrin, President and Partner, O’Connell and Aronowitz, will be one of three featured speakers during a new Dark Daily webinar on the upcoming Medicare Part B price cuts, and the critical legal and compliance issues facing clinical laboratories and pathology groups in 2018. (Photo copyright: O’Connell and Aronowitz.)

This crucial learning event takes place on Wednesday, November 8, 2017, at 1 p.m. EST.  Sherrin will be joined by David W. Gee, JD, Partner at Davis Wright Tremaine LLP in Seattle, Wash., and Richard Cooper, JD, Chair of the National Healthcare Practice Group, McDonald Hopkins LLC, in Cleveland.

These three attorneys are among the nation’s foremost experts in issues unique to clinical laboratories, pathology groups, hospital labs, toxicology/pharmacogenomics labs, and molecular/genetic testing labs. Following our speakers’ presentations, there will be a question and answer period, during which you can submit your own specific questions to our experts.

You can’t afford to miss this opportunity. Click here to get up to speed on the most serious regulatory, compliance, and managed care contracting issues confronting all clinical laboratories today. This webinar will provide solutions to the perils facing labs now and in 2018 by helping you map a proactive and effective course of action for your clinical lab or pathology group.

—Andrea Downing Peck

Related Information:

Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More

What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018

Nation’s Most Vulnerable Clinical Laboratories Fear Financial Failure If Medicare Officials Cut Part B Lab Fees Using PAMA Market Price Data Final Rule