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Originally Published IVD Technology September 2005
INDUSTRY NEWS
AdvaMed report stresses IVD reimbursement reforms
Richard Park
Patients and physicians increasingly rely on IVDs for critical information to make healthcare decisions. However, significant access barriers discourage the use of new IVDs, according to a report prepared by the Lewin Group (Falls Church, VA) for AdvaMed (Washington, DC).
In the report, the Lewin Group found that “although diagnostics comprise only a small fraction of total hospital (less than 5%) and Medicare (1.6%) costs, diagnostic information influences a much larger proportion of downstream healthcare decision-making, resulting in improved health outcomes and net cost savings in many instances.”
“With the potential to fundamentally alter clinical practice, these technologies are intended to match the right patient with the right treatment at the right time,” the report stated. The report also asserted that as technology advances, physicians and patients will be even better equipped to assess healthcare options and customize disease management strategies to optimize individual health and quality of life.
Despite such benefits, the Lewin Group concluded that Medicare payment policies for new diagnostics are “archaic, impractical and severely flawed,” failing to “reflect the relative value of diagnostics to healthcare.” The report found that Medicare often pays the same or less for a new IVD than an existing IVD, even though the new IVD may offer greater benefits to patients and physicians.
The report’s other key findings include the following: the Medicare clinical laboratory fee schedule has not been updated for inflation in 13 of the last 15 years and will not be updated again until after 2008; each dollar paid in 2004 under the fee schedule was equivalent to 75 cents in 1984 dollars, after adjusting for inflation and mandated payment reductions; and Medicare coding and payment processes are time-consuming, lack transparency, and are inconsistently applied.
As a result, physicians and laboratories have little incentive to prescribe and use newer diagnostic technologies because both incremental and breakthrough advances are underpaid. This creates patient access barriers that affect far more than the 40 million Medicare beneficiaries. Millions of Americans with Medicaid or private health insurance are affected because these plans often base their diagnostics payment levels on Medicare.
To resolve these issues, the Lewin Group recommended that Congress and the Centers for Medicare and Medicaid Services (CMS) should modernize the clinical laboratory fee schedule by doing the following: create a single national payment schedule with an open, systematic, and accountable process that would reduce wide pricing variations; correct historic pricing and coding errors; clarify processes and criteria for incorporating new tests into the fee schedule; develop and implement a value-based payment system for diagnostics that better recognizes the clinical, economic, and other benefits of improved diagnostic testing; and allow for more public stakeholder input into pricing and coding decisions.
AdvaMed officials said they plan to use the release of the report as a springboard for a variety of initiatives to address IVD reimbursement policies.
“The Lewin Group report effectively launches the AdvaMed diagnostics sector’s campaign to improve the Medicare reimbursement climate for clinical laboratory tests,” said Jeffrey D. Ezell, AdvaMed’s associate vice president, diagnostics. “AdvaMed wants the report to serve as a credible basis for beginning the debate on how to reform Medicare payment policies to ensure that patients continue to have access to new tests and IVD companies have incentives to invest in research and development.
“The report will not only guide the sector’s policy development process, but it will also be invaluable in outreach and conversations with lawmakers, CMS officials, and key stakeholder groups,” Ezell added. “During the next several months, AdvaMed and its member companies will execute a broad communications and government affairs plan to keep a steady drumbeat going about the issues raised in the report. In 2006, AdvaMed expects to begin big legislative and administrative pushes for our policy reforms.”
The Lewin report can be accessed via the AdvaMed Web site at www.advamed.org/publicdocs/thevalueofdiagnostics.pdf.
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