The high standard of reimbursed diagnostic tests

The difference between the standards of the FDA and CMS

Figure from NAMSA CMS Reimbursement Webinar

Figure from NAMSA CMS Reimbursement Webinar

For a diagnostic test to get the imprimatur of FDA approval, the manufacturer has to cross a number of hurdles. Last week, the IVD consultancy NAMSA gave a web presentation called ‘The Fundamentals of US Reimbursement’ by Edward Black, and will be sharing the highlights here.

The FDA’s mandate: Safe and Effective

One area has to do with the components of the diagnostic test. How have they been manufactured, did they comply with Good Manufacturing Practices also known as GMP? The GMP process conforms to guidelines around the manufacture and sale of food and beverages, cosmetics, pharmaceutical products, dietary supplements and medical devices, including diagnostic devices. Under GMP the manufacturing lot-to-lot variability is assessed and recorded in a Quality Management System, with the main goal to prevent harm.

The Federal Code of Regulations Title 21 (called CR 21) has numbered chapters (a summary of these chapters are here, and the current electronic Code of Federal Regulations Title 21 (Food and Drugs, eCFR) can be found here.

These regulations cover proper record-keeping (section 11), Institutional Review Boards (IRBs) that cover clinical trials (section 56) and Premarket Approval for Medical Devices (section 814).

There have been several immunoassay-based, FDA-approved diagnostics for the early-detection of cancer. One notable example is the Prostate Specific Antigen test, or PSA test, approved in 1986 that until 2008 was recommended for all men as a screening test from the age of 50. However, as more data about the risks and harms of this screening test became clear, organizations recommended against its widespread usage, as it risks overdiagnosis (detecting tumors that are not life-threatening) and overtreatment.

The Center for Medicaid Services mandate: Reasonable and Necessary

Once a test is approved by the FDA, it does not mean that that test will be paid for by the healthcare system in the United States. 22% of healthcare spending is for individuals over 65 years old – Medicare;  Medicaid is for low-income populations; and there are about 1,100 private insurance companies that employers purchase for their employees.

Medicare divides the US into ten jurisdictions, and six private contractors each with their own medical policy staff determines what test is covered and what is not. There are three requirements for reimbursement of a clinical test (and this is all beyond FDA approval). The first is coverage, in that Medicare (and most private insurers) cover the test under what particular circumstances. The coverage judgement is no longer ‘Safe and Effective’ per the FDA, it is ‘Reasonable and Necessary’ for proper medical diagnosis and treatment.

The requirement for reasonable and necessary then has another component to it: the amount that Medicare will agree to pay for the test under consideration. There has to be a balance – physicians and hospitals and laboratories need to be paid enough to encourage adoption, but not too much to discourage government and private insurance coverage.

The third component needed is the issuance of a Current Procedural Terminology (CPT) or Healthcare Common Procedure Coding System (HCPCS) code for consistent claim management across the healthcare provider, billing and payment systems. For physician services (including diagnostic tests) CPT codes are used (controlled by the AMA); HCPCS codes are used for durable medical equipment and prosthetics; and ICD-10 PCS procedure codes are used by hospitals for inpatient services (controlled by the CMS).

The reasonable and necessary standard means superior

You can find online the ‘Technology Evaluation Criteria’ (PDF) for Blue Cross / Blue Shield, that states the following five criteria.

  1. The technology must have final approval from the appropriate government regulatory bodies
  2. The scientific evidence must permit conclusions concerning the effect of the technology on health outcomes
  3. The technology must improve the net health outcome. The technology’s beneficial effects on health outcomes should outweigh any harmful effects on health outcomes.
  4. The technology must be as beneficial as any established alternatives. The technology should improve the net health outcome as much or more than established alternatives.
  5. The improvement must be attainable outside investigational settings. When used under the usual conditions of medical practice, the technology should be reasonably expected to satisfy criteria #3 and #4.

If you look at #4, it has to “improve net health outcome as much or more than established alternatives.”