Clinical laboratories serve as a driving force in medical innovation. The growing demand for laboratory developed tests (LDTs) – clinical diagnostics that are often designed in response to unmet clinical needs – has revolutionized our approach to patient care and provides an essential foundation for future medical breakthroughs and “moonshots.”
America’s clinical laboratories serve as the foundation for early diagnosis, prevention and personalized care for millions of patients. From routine blood tests to ground-breaking genetic and molecular diagnostics, clinical laboratories play a vital role in improving patient outcomes and quality of life while delivering better value for the health system on the whole.
Prevention and early detection are not only beneficial to patient outcomes and quality of life, they also drive savings across the health system by helping to identify diseases and risk factors for diseases at an early stage. Diabetes alone, for example, is associated with $16 billion in annual spending that could have been avoided through earlier diagnosis and better disease management.
Signed into law on April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) includes the most extensive reform of the Medicare Clinical Laboratory Fee Schedule (CLFS) since it was established in 1984. Section 216 of PAMA creates a new Section 1834A of the Social Security Act, which contains many of the CLFS reforms. Starting on January 1, 2017, most rates on the CLFS will be derived from private payor rates for laboratory services. PAMA also designates certain tests as “advanced diagnostic laboratory tests” (ADLTs); includes provisions affecting coding, coverage and oversight of the CLFS; and makes some changes to CMS’s review of mis-valued codes in the Physician Fee Schedule (PFS) affecting anatomic pathology services provided by laboratories.
Laboratory Developed Tests (LDTs) are tests that hospitals, academic, and clinical laboratories develop as testing services according to their own procedures. These tests are often created in response to unmet clinical needs, and are commonly used for early and precise diagnosis, monitoring, and guiding patient treatment. LDTs are also used to diagnose and assess diseases and disorders for rare and emergent diseases, or those with small patient populations. Nearly all diagnostic tests and FDA-approved test kits begin as LDTs, and in many cases, LDTs represent the standard of care.
The ability of laboratories to develop custom diagnostic tests has been critical to the growth of personalized medicine and keeping pace with the changing face of disease to best serve patients and clinicians. Molecular and genetic diagnostics have advanced our medical knowledge through ever-increasing levels of accuracy and precision in both screening and diagnostic tests, and they better guide diagnosis, and prevention or treatment decisions. Through these innovations, clinical laboratories have played a critical role in reducing medical costs and improving the quality of patient care.
The current oversight framework has worked well to promote innovation and advance patient care. To continue these advancements into the twenty-first century, ACLA believes the appropriate time has arrived to design a new, logical framework that contemplates the future of clinical laboratory diagnostics. We support the pursuit of comprehensive statutory reform for the oversight of both LDTs and In Vitro Diagnostics (IVDs) through a transparent process with Congress, the Administration, and other stakeholders.
In pursuing reform, ACLA strongly asserts that any new framework must ensure continued innovation and robust patient access to accurate and reliable clinical laboratory diagnostic services. Core principles that will accomplish these paired goals include: 1) reform that recognizes diagnostics as distinct and not inappropriately incorporated into regulatory frameworks designed for other products or services; 2) “grandfathering” and transition policies that will not disrupt patient access to currently-available clinical laboratory services; and 3) an appropriate balance between both innovation, and assurances for accuracy and reliability through smart regulation.
Our Key Principles for Diagnostic Reform can be found here.
Clinical laboratories are reimbursed for providing services to Medicare beneficiaries using either the Physician Fee Schedule (PFS) or the Clinical Laboratory Fee Schedule (CLFS), depending on the nature of the service. In addition, clinical laboratories provide services to beneficiaries of other government programs such as Medicaid, TRICARE and the Federal Employee Health Benefit Plan (FEHBP), as well as commercial plans.
Lab reimbursement in many of these programs has been reduced in recent years, and in the case of the Medicare program, annual cuts are scheduled in current law not only as a result of sequestration, but also through annual cuts built into the Affordable Care Act.
While payments for lab services are being slashed, the costs associated with providing critical laboratory services - including labor, supplies, and transportation - continue to climb.
Although many labs have managed to navigate changes in markets and reimbursement and while still continually improving quality, continued arbitrary and severe payment reductions will result in reduced access to essential tests for critically ill patients, less innovation, more closures or consolidation of businesses, and more people out of jobs.
Coinsurance would disrupt the ability of health care practitioners to work with their patients to ascertain the best lab tests to help best diagnose new conditions, manage existing conditions, and guide therapy, which is critical for the Medicare population as they often have multiple comorbidities. Currently, since there is no cost-sharing, patients who need more lab tests due to more complicated health conditions have no greater financial risk than patients those with less complex conditions when receiving their lab results – and a patient may not know whether their condition is simple or complex when they first see a doctor. Despite this common-sense approach, some policy-makers calling for entitlement reform and deficit reduction have proposed putting into place a new 20% patient coinsurance for clinical laboratory services as an attempt to make Medicare beneficiaries more aware of health care costs. In real life, coinsurance for lab services will dis-incentivize Medicare beneficiaries from receiving timely and life-saving clinical lab tests, thus increasing health care costs through worse outcomes, and would drastically increase the cost of providing lab services through generating millions of new patient bills.
The in-office ancillary services (IOAS) loophole to the federal Ethics in Patient Referrals Act, also known as the self-referral law, has led to ongoing self-referral practices in advanced diagnostic imaging, anatomic pathology, physical therapy, and radiation therapy.
There is mounting evidence that self-referral leads to over-utilization, mistreated patients, and billions of wasted Medicare dollars. It’s time to get at the root of the problem and close this self-referral loophole.
Reforming the IOAS exception will ensure that Medicare patients receive the highest quality and safest health care most appropriate to their needs. It will also ensure Medicare policy incentives are properly aligned, saving the system billions of dollars. As a member of the AIM Coalition, ACLA supports proposed reforms to close this loophole and in doing so, serve the best interests of beneficiaries, providers, and our nation’s healthcare system.
Developing a comprehensive approach to diagnostic reform – one that fosters innovative care delivery – is vital to our ability to tackle the most challenging and complex health needs of the country. Meaningful reforms must balance federal oversight with support for cutting-edge innovations and should account for distinct differences between laboratory developed tests (LDTs) and in vitro diagnostics (IVDs).
Impact to Patient Care
Health Information Technology (HIT) and Electronic Medical Records (EMRs) are an increasingly important component of modern healthcare sharing health care data between providers and with patients and, thus, improving the quality of health care. Patient-specific results from clinical laboratory testing services comprise a significant portion of any EMR and have an immeasurable impact on diagnostic and treatment decisions made by clinicians. The ability to exchange laboratory orders and results in a standardized way allows for enhanced clarity of the shared information, which in turn reduces errors and unnecessary delays in the laboratory testing and reporting process. Healthcare providers and patients need access to the right information at the right time for the right cost and in a manner that they can understand and use in order to inform their health-related decisions.
Benefit of Interoperability
Access to health information should not be prohibited by boundaries such as location, organization or technical platforms. The goal of interoperability for electronic data exchange is to allow health information to follow a patient where and when it is needed. Collaboration and shared laboratory information across all settings allows providers, patients and laboratories to engage more fully with each other and do so in a timely, efficient and accurate manner. Through the use of data standards and shared vocabularies, all entities can interact in a seamless way in order to unlock laboratory data, not only for the benefit of patient care, but to also significantly impact the ability to correlate and mine data received from multiple sources.
Benefit to the Healthcare Industry
Secure and standards-based electronic exchange of health information will help to lower implementation costs by reducing the resources required for development of customized interfaces and eliminate unnecessary maintenance costs.
In January of last year, TRICARE, the health care program for military service members, retirees and their families, ceased coverage of over 100 laboratory developed tests (LDTs) when these tests are ordered by physicians in the civilian provider network. These tests, which historically have been covered by TRICARE, play a critical role in the diagnosis and treatment of disease, and include tests for Fragile X syndrome, Cystic Fibrosis, Spinal Muscular Atrophy, and many common cancers. TRICARE’s lack of coverage of these tests places TRICARE out of step with other government programs and commercial health insurance. This two tiered policy has also resulted in unequal treatment of TRICARE beneficiaries, with those obtaining care on base at Military Treatment Facilities maintaining access to these tests, while beneficiaries seeking care from the civilian provider network are denied critical testing services.
Despite acknowledging the important role of LDTs in healthcare delivery, the Defense Health Agency has denied coverage of these vital services for over a year. In many cases, laboratories have continued to provide testing services for TRICARE patients, and are awaiting payment. In other cases, TRICARE beneficiaries have been forced to absorb the cost of testing.
ACLA urges the Defense Health Agency to reinstate TRICARE coverage of these critical diagnostic tests so that military families can continue to access the best possible care.