Medical Device Link.

Originally Published IVD Technology January/February 2006

COMMENTARY

Stephen J. Ubl

Stephen J. Ubl is the president and chief executive officer at AdvaMed (Washington, DC). He can be reached at president@advamed.org.

A lot happened back in 1984. President Ronald Reagan was reelected to his second term. Motorola introduced a brick-sized cell phone that cost $4000. The Centers for Disease Control and Prevention acknowledged that HIV causes AIDS. IBM snubbed a Microsoft Windows demonstration for IBM-compatible computers.

Last but not least, officials at the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services (CMS; Baltimore), developed and implemented the notorious Medicare Clinical Laboratory Fee Schedule (CLFS).¹ The CLFS was created during a time when healthcare providers focused on treating acute conditions rather than preventing and effectively treating chronic conditions such as diabetes and heart disease. With knowledge of the human genome and molecular biology in its infancy, few people envisioned a day when advanced diagnostics would do the following:

• Predict whether patients may fall victim to diseases long before symptoms emerge.
• Help physicians to customize treatment regimens for individual patients based on their genetic makeup.
• Enable physicians to perform sophisticated tests in minutes at a patient’s bedside with small handheld devices.

While much has changed during the past 22 years, especially the role of diagnostics in healthcare decision making, the CLFS has remained virtually static. Its original processes continue to plague diagnostics manufacturers and laboratories trying to offer new testing technologies to physicians and their patients. Current payment rates are still based on laboratory charge data compiled in the early 1980s when many new testing platforms were merely science fiction.

Getting new diagnostics coded and reimbursed in this arcane system is one of the most significant challenges facing companies in the diagnostics industry. Members of the diagnostics and laboratory industries are aware of such problems and have been working for many years on improving the reimbursement system’s timeliness and transparency. However, despite some significant accomplishments in this area, much more needs to be done, a fact that became crystal clear last summer.

Highlighting Significant Problems

Last July, The Lewin Group (Falls Church, VA) completed a comprehensive report on the diagnostics industry that was commissioned by AdvaMed (Washington, DC).² The report demonstrates how 21st century diagnostics are clashing with an outdated Medicare reimbursement system that fails to recognize the value of today’s clinical laboratory tests.

According to the report, Medicare pays substantially less for a new test that offers greater benefits to patients and the healthcare system than it does for an older test. This situation leads to chronic underreimbursement for diagnostics, which worsens with the release of each new generation of diagnostic technology because no effective processes exist for taking corrective action. An act of Congress is also necessary to make potentially lifesaving screening tests for diseases like heart disease, prostate cancer, and diabetes available to patients.

In addition, Congress has not adjusted for inflation overall Medicare payment levels for diagnostics in 11 of the past 15 years, and has frozen them until 2009. As a result, laboratory tests reimbursed under the CLFS in 1984 at $1.00 are now reimbursed at $0.75.

All of these problems pose significant barriers to developing and diffusing new diagnostics. Because Medicaid and private health insurers often follow Medicare’s lead in setting payment levels for new tests, this barrier reaches far beyond Medicare’s 40 million patients. Moreover, there are signs that these problems may be starting to take their toll on patient care and healthcare costs.

An analysis of data from the Rand Corp. (Santa Monica, CA) by The Lewin Group showed that recommended standard-of-care diagnostics were underused 51% of the time for diseases like cancer, heart disease, and diabetes. The Lewin Group also reported that “for diabetes, cardiovascular disease, colorectal cancer, and breast cancer alone, the National Council on Quality Assurance linked insufficient compliance with diagnostics-based quality measures to 56,200 avoidable adverse health events, nearly 34,000 avoidable deaths, and $899 million in avoidable healthcare costs in 2004.”²

While many factors contribute to the underuse of diagnostics, Medicare’s involvement in such underuse should not be underestimated. Leaders in Congress and the Bush administration have to recognize this problem and realize that it will prevent them from achieving their goal of ensuring that all Americans can receive high-quality, cost-effective healthcare. The practice of medicine relies on intelligent decisions made with the best possible information, which can be provided only by advanced diagnostics.

Exciting advances in genetic, molecular, and point-of-care testing are giving diagnostics an even greater role in healthcare decision making. Such advances underscore the need to ensure that Medicare, the world’s largest healthcare payer, does not erect barriers to patient access or disincentives for future innovation.

Creating a Unified Front

While The Lewin Group’s report provides a roadmap for solving many of the problems plaguing Medicare reimbursement for diagnostics, the diagnostics industry and its customers in the laboratory industry must develop unified policy solutions. Failure to do so will result in lawmakers and CMS officials thrusting their reimbursement policies upon the diagnostics and lab industries. In a political climate fraught with cost-cutting efforts, this is the last thing these industries need. Without unified reimbursement policy solutions, what would end up happening is a move toward nationwide competitive bidding of clinical laboratory services.

Due to the work done by the diagnostics industry and the Clinical Laboratory Coalition, a group comprising 10 organizations representing the lab industry, effective lines of communication have been established among the major stakeholders. All of the coalition organizations realize the importance of working together on reimbursement policy solutions to ensure that all Americans have access to quality laboratory services.

Regarding the diagnostics industry’s efforts, AdvaMed’s diagnostics sector is currently developing its vision for a reformed reimbursement system both in the short- and long-term. Medicare reimbursement experts from AdvaMed’s member companies are reviewing The Lewin Group report’s recommendations to determine which policies the industry will endorse. The importance of this process cannot be overemphasized. If successfully advocated, these reimbursement policies could affect the diagnostics industry for years to come. When the process is completed, the sector will begin reaching out to its partners in the laboratory community to see where there is common ground.

Telling the Diagnostics Story

Before healthcare policymakers can create a reimbursement system that recognizes and rewards the value of clinical laboratory testing, they need to appreciate the benefits diagnostics provide to patients and to the delivery of high-quality, cost-effective healthcare. The Lewin Group’s report will go a long way toward building that awareness. However, diagnostics companies, laboratories, and the thousands of professionals who perform critical lab services must also present and communicate this value.

AdvaMed recently sponsored public- opinion research to gauge the perceptions of consumers, physicians, and health policymakers about diagnostics. This research was designed to provide insight into how to tell the diagnostics industry’s story in ways that resonate with specific key audiences. To get the most mileage from the public-opinion research and improve the industry’s ability to tell its story, AdvaMed is sharing this information with other key patient, physician, and laboratory groups that have a stake in improving patient access to diagnostics. In the end, AdvaMed wants everyone to convey the right messages to their patients, customers, and lawmakers, and to the news media.

According to the research, patients have much more exposure to clinical laboratory tests than to any other sector of the medical technology industry, including imaging and devices. The research also showed that early diagnosis is the most resonant message for healthcare-conscious consumers. They clearly understand that early diagnosis of diseases enables physicians to treat patients sooner, more effectively, and less invasively. However, the research indicated that there is little recognition of how the information from laboratory tests ultimately helps improve patient outcomes. In addition, both the technological sophistication of today’s tests and their many applications are significantly underappreciated, even among physicians.

Such findings provide a clear call to action for the diagnostics and laboratory industries to build an identity and effectively communicate the value of their tests and services. An emotional link is needed between diagnostic technologies and the patients they serve. This link involves explaining how laboratory test results make possible smarter healthcare decisions that enable patients to get better or be healthier.

The research also showed that it is critical to erase the perception that diagnostics are low-tech commodity products. In an area where there is already little tangible connection between the patients and the technologies, using the acronym IVD confuses people who do not work in the industry and does not convey the science and technological sophistication behind today’s diagnostic lab tests. The diagnostics and laboratory industries must find a better way to describe their tests and services. They need to rebrand their industries in a way that clearly links their advances to the medical conditions they address and to the tremendous progress society is experiencing every day because of them.

The diagnostics industry cannot bring the patients, their physicians, and their lawmakers into the laboratory. However, the industry can communicate better to these audiences about how diagnostics are at the forefront of modern medicine and will drive tomorrow’s treatment advances. If the diagnostics industry can accomplish this, and ensure that public policies keep pace with its technologies, then patients and their physicians will be armed with more tools to make smarter healthcare decisions than ever thought possible in 1984.

References

1. “Medicare Payment Systems and Coding Files,” Centers for Medicare and Medicaid Services Web site (Baltimore; 2004 [cited 8 November 2005]); available from Internet: www.cms. hhs.gov/paymentsystems.

2. The Lewin Group, “The Value of Diagnostics: Innovation, Adoption and Diffusion into Health Care,” AdvaMed Web site (Washington, DC; 2005 [cited 8 November 2005]); available from Internet: www.advamed.org/publicdocs/ thevalueofdiagnostics.pdf.

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