Novitas Leaves iRhythm Price at Just Half the Old Price; Investor Call Announced

Update Monday April 12.   iRhythm shares fell rapidly by -35% from about $135 to about $85 on Monday.   iRhythm issued a press release saying they may withdraw from the Medicare marketplace here.  

Share price is down from a high of $250 in January 2021, although it's not much different today than exactly 1 year ago.

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As of April 9, iRhythm had a share price of $132 and a market cap of $3.9B, both values down by half from the beginning of the year.  

The cause was a transition from longstanding Category III CPT codes, paid at several hundred dollars, to new Category I codes which CMS was unable to price in time for CY2021.   

Seeing the new CPT codes in January, the main MAC paying for this service (Novitas) dropped its price from $264 to $97, down 70%.  iRhythm issued a rapid press release on January 29 (here) which was soon followed by headlines like "iRhythm Stock Tanks" (here).

• I noted the impending problem in a December blog, and summarized headlines when the event happened in January (here, here).

In a surprise move on Saturday, April 10, Novitas posted new rates which bring the main iRhythm payment up to about $140, but that's still just  half of the 2015-2020 pricing when the service was a locally-priced, Category III code.  

See Novitas pricing page here.  

Also on Saturday, April 10, iRhythm issued a rapid press release that it would host an investor call on Monday, April 12, here.

A class action lawsuit was announced along the way, but that's a fairly common event (here).  In separate news, an investor called Hill-Rom was reportedly trying to exit a once-expected acquisition of supplier Bardy for $375M (March 1, here; also here.)

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For several years, iRhythm (and other venders using the code, which were much smaller) was by far the most successful AMA Category III code in CMS utilization.   The transition to RVU pricing is stormy in digital health (my earlier December articles, blog and blog).   More than a decade ago, CardioNet also had a stormy transition between local MAC pricing ($1200, as I recall, then abruptly cut substantially) and CMS RVU pricing (circa $700, as I recall.)  (Some Cardionet detailed historical entry points about MAC pricing here, and here; not vetted for accuracy.  But these are easily available on the internet to CMS medical directors; the first is a qui tam case against CardioNet, the second a shortseller's thesis against IRTC.)  Also available to CMS medical directors, in the past months, a consultancy called MCDA submitted several detailed documents to CMS about RVU pricing of iRhythm codes (entry point here).

The new iRhythm price at Novitas is retroactive to January 1, 2021.  The MAC is not required to, and does not, provide any justification for its price points.  Because RVUs are expected to provide roughly break-even values (this much labor, this much supplies, this much amortized capital equipment, this much malpractice), Novitas may be considering that IRTC's 2020 revenue was $265M while it stated its COGS as $70M.  Typically RVU indirect costs are less than 100% (less than COGS).  The PFS/RVU process does not include value (as in a white paper essay by Brian Blase.)

CMS Challenged by Pricing Multiple DHealth Codes, Not Just iRhythm

Similar story on retinal AI-based testing.  See an article on the winding path of valuation and value-based medicine for AI-retinopathy technology - here.   That one was from the CEO of Retina-AI-Health.  And see a detailed essay on the CMS AI reimbursement topic from Brian Blase, quite critical of CMS RVU pricing methods, here.  

Like the iRhythm code, CMS also decided to leave the main retinopathy-AI code "contractor priced" in December 2019; see rulemaking here and search for "contractor pricing for CPT code 92229."   

At that time, CMS wrote, "...AI applications are emerging, we recognize that issues involving the use of AI are complex. While we agree that the costs for AI applications should be accounted for in payment, AI applications are not well accounted for in our PE methodology."   

More on CMS and iRhythm 

For CMS December policymaking decision regarding local pricing for iRhythm, see the same link and just search for "93241."

CMS has a new (Fall 2020) office called, "Technology Coding and Pricing Group" which may be involved in the CMS decision-making for 2022, during 2021.

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Original version of this blog April 10, also posted at Linked In.

I've put a ZIP of most of the cited links (Fed Reg, Qui Tam, MCDA, Kerrisdale short thesis, Blase, etc) in the cloud here.   Copy of the April 10 Novitas page here.  See also a December 2020 Bloomberg article here,on the growing crowd of short-sellers like Kerrisdale at that time.

See an NEJM article this week on whether remote monitoring is overused.

Historically, most MACs haven't published their prices for locally priced codes.  Palmetto recently began systematically releasing prices on locally-priced molecular tests (here).

Very Brief Blog: United Healthcare to Require DEX Z-Codes for Medicare Advantage; June 2021

According to a blog by Diana Richard on the XIFIN website, dated April 7, United Healthcare (UHC) will require Medicare Advantage claims to include Z-codes, effective June 1, 2021. Read it at XIFIN - here.

There have been news stories about UHC requiring various types of registry codes for lab tests dating back to mid-2020 (see a subscription story at Dark Report here.)

This is the first major sale of DEX Z-codes to a commercial payer that I've read about, although it appears to apply only to United's Medicare Advantage contracts and not its overall book of business as a payer.  According to Kaiser, Medicare Advantage has 24M enrollees in 2020, about 40% of Medicare.  According to United, they have 6.5M Medicare Advantage patients in 2020.  That gives United about 27% of the MA beneficiaries (or about 10% of all Medicare benes, including the FFS ones.)   

Palmetto GBA (which is related via holding companies to South Carolina BCBS) took over the DEX or Z-Code assets last summer, as was announced at the time when the DEX website was rebranded.  (Here, here).   There are currently about ~14,000 entries in the online DEX test library - here.   Some locally-set prices (prices that are not on a national fee schedule) are newly available in DEX (here).

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The Z-code system was originated by McKesson circa 2010, prior to the modernization of the CPT genomic coding system.   It was spun off independent of McKesson as Change Healthcare, which in turn is now owned by United, but along the way the Z-code business silo was acquired by Palmetto.   In March 2021, AHA opposed the union of Change and United/Optum in a filing with the Department of Justice (here).

Very Brief Blog: Senate Hearing for Head of CMS, on April 15: Brooks-Lasure

 It's been over a month since Chiquita Brooks-Lasure was announced as the expected nominee for head of CMS.   Since then, Secretary of Health Becerra has had hearings, and has been confirmed.  (Entry point here.)

Senate Finance Committee has now set the Brooks-Lasure hearing for Thursday, April 15, and set up the web page for it.

Brief announcement at Inside Health Policy here.   See the shell webpage for the April 15 hearing at SFC, here.

Brief Blog: MedPAC Presents on PAMA (April 2): Posts Deck; Transcript to follow

On April 2, 2021, MedPAC gave a half-hour presentation on PAMA policy and its recommendations for potential changes.  The full report will appear in a June 2021 as a report to Congress.  

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Stakeholders have complained that in 2017, CMS used rules that selectively under-reported test payments to hospital-based outreach labs and to physician office labs.   In fairness to CMS, the agency was navigating rules from Congress about a lab's revenue sources (Part A vs Part B), and had instructions from Congress (and advice from AMA) not to overburden small physician labs with reporting.   Since then, likely in response to legal actions, CMS has broadened the basket of hospital labs required to report in the next PAMA cycle.

MedPAC used an outside contractor, RTI, to review two topics.  One, could one selectively sample labs and get equally accurate pricing?   The answer is obviously "yes," you don't have to count each one of billions of claims to pin down what the median is, within a percent or so.   And, if you sampled more hospital and physician claims, the median price which sets the next CMS fee schedule, would go up.  

• Key data showed that independent labs (and mostly big ones) contributed 90% of PAMA data, while hospital and physicians labs were 51% of the market (29%+22%).
• Hospital and physician lab payments were 45% and 53% higher, respectively, than independent lab prices.

They also considered just going straight to commercial claims databases and not bothering labs directly for data at all, but they seemed lukewarm to this idea.  

In discussion, one panelist wondered if other pricing methods like "competitive bidding" would be better.  That, of course, would be a wholly different legal and policy approach with a lot of complexities (see footnote).   A panelist noted that point of care (local) tests had values, like rapid care and avoided return visit, that may justify marginally higher costs and prices.   A MedPAC staffer noted that the MedPAC was thinking about how to handle all sorts of high priced items with new approaches, whether drugs, DME, or genomics.

From last autumn, 9/2020, see a news article about the MedPAC report process and see a letter at that time from ACLA about the MedPAC report.  Here, here.

Sources

• Web page for the meeting here.
• Deck presented, here.
• By mid-April, MedPAC should post a full transcript as well.
• Genomeweb coverage here.
• Inside Health Policy here (Subscription).
• I posted a 3 minute video about the meeting at YouTube - here.
• I discussed some of the background issues in a blog in March, here.

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There's an academic article in 2014 about the 2007/2008 effort to push the lab fee schedule into a competitive bidding framework - Kautter & Pope, here (fee).  The lab competitive bidding originated in the Medicare Modernization Act of 2003.  After various legal battles, the competitive bidding effort was tanked by a judge in April 2008 - here, here.

I've seen the hospital/independent lab difference personally, when one year I had a PSA from a hospital system lab and BCBS paid let's say circa $80 for it and another year they paid "Labcorp-Quest" if I recall circa $25.

Very Brief Blog: CMS Updates COVID Patient FAQ Sheet

CMS has updated its 17 page data sheet on characteristics of COVID patients in Medicare.

See PDF here:

https://www.cms.gov/files/document/medicare-covid-19-data-snapshot-fact-sheet.pdf

Webpage for project, here:

https://www.cms.gov/research-statistics-data-systems/preliminary-medicare-covid-19-data-snapshot

See the March 24 press release here.  Data runs through January 2021.

https://www.cms.gov/newsroom/press-releases/cms-updates-medicare-covid-19-data-snapshot

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So far, 700,000 Medicare patients have been severe enough to hospitalize, of which 18% expired (126,000):

For inpatients, about half had less than 8 day stay, about half, longer than that.  1 in 3 admitted patients, 30% ,were 11 days or longer.  As shown above, only 36% were discharged to home.

Extensive race/ethnicity data is included.

Prior blog here:

http://www.discoveriesinhealthpolicy.com/2020/12/very-brief-blog-cms-covid-data-shows.html

Very Brief Blog: Quick Tour of CMS Online Hospital Data

From time to time I need to research CMS data files on hospital performance, and it's usually a bit of a trick to find it again.  A brief outline here.

• First, CMS has a simple consumer facing website for quickly looking up data at a local hospital or two.  It's called Hospital Compare - here and here.
• If you want to navigate big Excel files, you'll go the professional site, data.cms.gov.   This gives you categorical entry points like doctors, home health, hospitals, etc.  Find it here.
• I clicked on the Hospital data website and I went to the bottom of the page to show 50 (rather than 5) sources once.  Here.

For example, if you're interested in hospital acquired infection (HAI) data, scroll down till you find "Healthcare Associated Infections - Hospital" as a title.  This gives you a 175,000 line Excel dataset.

https://data.cms.gov/provider-data/sites/default/files/resources/05819383a875a1ebce5ed5f28755558b_1607630718/Healthcare_Associated_Infections-Hospital.csv

The 32 megabyte 175,000 line Excel looks like this:

For example, for Southeast Alabama Medical Center in Dothan, AL, their MRSA data is no different than national and their CDIFF data is "better than national."

For more info on "hospital acquired conditions" (HAC) rules and metrics or specifically a subset which are "hospital acquired infections" (HAI), some websites are here:

https://qualitynet.cms.gov/inpatient/hac/resources

https://qualitynet.cms.gov/inpatient/hac

https://qualitynet.cms.gov/inpatient/measures/hai

(For example, an inpatient hospital acquired skin ulcer or hip fracture would be HAC's that are not HAI's.)

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If you enter the website a certain way, it allows you to go to a "beta" new version of cms.data.gov, but when I tried that, it terrified me and it seemed like data categories and files would become much harder to find that the current hierarchy.   The system they have now is kind of boring and tedious, but the new system "beta" seemed like a confusing form of modernization.

Very Brief Blog: Spring PLA Codes Due April 8; New Final PLA Codes Released April 2

For anyone planning to get in a Spring Quarter PLA code, the deadline is Thursday, April 8.  See AMA here.

For those who submitted PLA codes in early January 2021, AMA released the results on April 2, 2021.  Find the PDF of code names here.

Codes 0248U through 0254U were released - a fairly small crop (7 codes).   3 of the 7 are from one applicant.

These include:

• 0248U, "3D Predict Glioma" cell culture test from Kiyatec;
• 0249U, Theralink 32 phosphoprotein test in breast cancer;
• 0250U, PGDx elio(TM) 505 gene tumor test, I assume the same as the FDA-cleared test in spring 2020;
• 0251U, Hepcidin ELISAm "IntrinsicDx;"
• 0252U, Products of conception aneuploidy test, Igenomix;
• 0253U, ERA endometrial receptivity test, Igenomix;
• 0254U, SMART-PGT-A preimplanation cytogenomics test, Igenomix.

Conference Bonanza: McDermott, AI & Dig Path, ISPOR Short Courses, More

Flurry of conferences going by...

McDermott Plus; Diagnostics Forum (April 6)

McDermott Plus Consulting holds its sixth annual Diagnostics Forum, Tuesday, April 6, 12-330 ET.  

Website here, four-page PDF agenda here.  There are a wide range of top speakers both from industry and government; CMS speakers including Tamara Syrek-Jensen, head of coverage at CMS, and Dr Gabriel Bien-Wilner, senior medical director for MolDx.  If I'm reading it right, this virtual meeting may be complimentary.

Cambridge Healthtech - AI and Digital Pathology (Sept 30-Oct 1)

This conference will run September 30-October 1, "a comprehensive program for all aspects of digital pathology and AI."   See the website here.  Early bird registration as low as $399 academic, $899 commercial.

ISPOR - Numerous 4 Hour Short Courses (Monthly)

ISPOR, the international society for pharmacoeconomics and outcomes research, has a bonanza of short courses which are virtually available.  Typically, they are two, two-hour sessions, giving you a lot more depth than an hour's overview but not requiring a full day invested.  

For short courses, here.  March 31-April 1 was Value Assessment of Medical Devices; April 28-29 is Intro to Patient Reported Outcomes (PROs); May 24-25 is Tools for Real World Analysis, and so on.  I sampled one and registration (as a member) was $255.

For all ISPOR events, here.

Just Past: Medtech, Diagnostics, Value & Access (Just Past)

While this European-focused conference on value and market access just went by, March 30-31, you might find the speakers and topics of interest.  See more conferences from this sponsor here.

https://www.evidencelifescience.com/meddevma21-agenda

Very Brief Blog: Telemedicine and Perfect Competition, Podcast and A Few Links

 Everyone knows that there has been an explosion in telemedicine over the past year and there is much speculation on how it will continue and in what form.  (E.g. for one entry point see Paul Sonnier's essay in The Hill in early March.)

There's an interesting essay on economic and industry-structure repercussions which appeared last fall in Medical Economics under the title, "Will Telemedicine Create Perfect Competition?"  It's by economist Adam Block and health policy expert Michael Adelberg, who heads the health strategy practice at Faegre Drinker.  (Bios here and here).  

The article is newly complemented by a podcast at Health Assurance, a new podcast series.  See the 30-minute podcast here.   

(See index of interesting podcasts. The December 6 podcast authors have a 2020 book, Taneja, Klasko, Maney:  Unhealthcare.   Good podcasts also with Caroline Savello of COLOR, Toyin Ajayi of CityBlock, and Jenny Schneider of Livongo.)

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Perfect Competition?

Perfect competition is an abstraction in economics where there is no friction between buyers and sellers and the exchange of goods, and profits rapid fall to minimal levels as prices approach marginal cost.  The absence of perfect competition gives profits, which formally are called economic rents or monopoly (oligopoly) power. 

Businesses tend to want to avoid perfect competition; creating barriers to entry of all types, whether brand loyalty, difficult credentialing rules, etc.  

There's a book that was influential on me a decade ago, In Defense of Monopoly (U Mich, McKenzie, Lee).  Without foreseeable profits, there won't be future cash flow to pay for today's risk and investments, and innovation is badly impaired.   It's hard to invest for innovation (and risk) if your product will also and quickly be sold at the marginal cost of production.   

But there are also a lot of natural ways for prices to exceed marginal cost.  Let's say a dry cleaned shirt costs $5, and in my city there's enough business for a dry cleaner every 2 miles.  Let's say it costs $1 for me to drive 2 miles.  My dry cleaner can charge $5.99 for a shirt (with 99 cents profit) before it makes sense for me to drive 2 miles to get a shirt cleaned for $5.00.   It's these inherent frictions that we may rarely think about, that give even a near-commodity business some return on investment.   Take them away, and the economics go into alternate paradigms we aren't used to.  This in turn affects industry structure and vertical integration (see. e.g. Coase's work on "the nature of the firm.")

For the Record: Links to Becerra Hearings, Documents, Auto Transcripts

Early in the Trump administration, there were hearings for the initial Secretary of Health, Tom Price, and for the CMS administrator, Seema Verma.  The Price hearings weren't particular informative of future policy but I found the Verma hearings extremely interesting and worthy of study, at the time (here, here.) 

We've now had the HHS Secretary Becerra confirmation hearings - I don't know how telling they will prove to be, but I provide links below.  In the near future, we'll have hearings for proposed CMS Administrator  Chiquita Brooks-LaSure (here) and I'll provide links when they occur.

For Your File; Some Resources for Becerra Hearings

Becerra had hearings at the Senate Finance Committee, and at the Senate HELP Committee (Health, Education, Labor, Pensions).

See the HELP webpage here - February 23, 2021.

https://www.help.senate.gov/hearings/nomination-of-xavier-becerra-to-serve-as-secretary-of-health-and-human-services

There is a 3h 20m video streaming here.  There is a link to a simple two-page opening statement here.

See the SFC webpage here - February 24, 2021.

https://www.finance.senate.gov/hearings/hearing-to-consider-the-nomination-of-xavier-becerra-of-california-to-be-secretary-of-health-and-human-services

There is a 3h 18m video streaming here.  

There are more document links.

• Sen. Wyden's 2-page opening statement here.
• Sen. Crapo's 3-page opening statement here.
• Becerra's 2-page opening statement here.
• Of more interest, a 95-page PDF of "questions for the record," here.

Auto Transcripts For the File

I did not see easily available transcripts on the hearings.   I made auto transcripts which are not ideal but which do provide a written record of the content with about 98% accuracy.

I've put all the PDFs and the Word document auto transcripts in a cloud zip file HERE.  

Note that SFC video stops, for me, around minute 30, and so the resulting auto-recording and auto-transcription is in two parts, Part 1 and Part 2, as will be clear in the Zip file.  

Regarding auto-transcripts, the best service I know is otter.ai.   Regarding rapid online human transcripts, my favorite is Rev.com.

Very Brief Blog: Prior Auth Saga Continues; Open Information Webpages at United Healthcare

The saga of prior authorization continues - a colleague pointed out that United Healthcare has a number of open-access webpages that describe its evolving rules for providers.

See UHC "Genetic and molecular lab testing updates" - here:

https://www.uhcprovider.com/en/resource-library/news/2021-network-bulletin-featured-articles/0421-genetic-molecular-lab-testing.html?cid=em-providernews-apr21nb-apr21

See UHC "Genetic and molecular lab testing Notification/Prior authorization" - here:

https://www.uhcprovider.com/en/prior-auth-advance-notification/genetic-molecular-lab.html

Very Brief Blog: Comment til April 23 on CAP Recommendations for Immuno-Oncology PD-L1 Tests

We've read about multiple efforts (!) to harmonize PDL1 testing and reporting, and we've read much about other biomarkers such as tumor mutational burden (in the news this week; here, here).   '

The College of American Pathologists (CAP) has a webpage dedicated to upcoming and recently finished CAP guidelines - here.  

One of the newest is an in-progress guideline for PD-L1 testing - here.  The PD-L1 webpage states, "The primary goal of this guideline is to develop evidence-based recommendations for the testing of immunotherapy/immunomodulatory biomarkers including PD-L1 and TMB in patients with non-small cell lung cancer (NSCLC)."   

The webpage provides you with 8 "key pre analytical questions" and creates an open comment period on proposed guideline conclusions which is open to April 23.   There's a link to a 7-page bibliography, and a link to a PDF of 6 proposed summary recommendations.  You can click on a comment box which collects basic information on the commenter (e.g. profession, such as pathologist) and allows step by step comment on each of the recommendations.

Comments are open until April 23.

At the work in progress webpage here, ten topics are listed: MSI testing, glioma evaluation, monoclonal gammopathies workup, HPV lesion terminology (ano genital), PDL1, whole slide imaging, IHC validation (in general), amyloidosis protocols, HPV testing rules for H&N cancer, TKI testing in lung cancer.  

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Read about Friends of Cancer Research efforts to harmonize mismatch repair reporting (here) and TMB reporting (here).

Very Brief Blog: NYT Exposes Elite Hospitals Charging $3000 to Payors for Single COVID Tests

 In brief, a New York Times story today describes elite Manhattan hospitals - like Lenox Hill - charging $3000 for single COVID tests.   They note that Congress requires COVID tests to be covered without a fee to the patient, but assert there is price gouging by some suppliers.

https://www.nytimes.com/2021/03/30/upshot/covid-test-fees-lenox-hill.html?action=click&module=Top%20Stories&pgtype=Homepage

Very Brief Blog: JAMA: After Vaccination, Strong Real-Life Neutralizing Antibodies for COVID Variants

An interesting short open-access article in JAMA this week by Edara et al:

https://jamanetwork.com/journals/jama/fullarticle/2777898

There are two types of COVID antibody tests, simpler tests for the presence of anti-COVID antibodies, and more complex tests that actually use cell culture to detect whether there are toxic "neutralizing antibodies."   In this report, the authors set up not one, but four types of cell culture systems for neutralizing antibodies, against four major variants.   

Two findings.  One, vaccinated persons (Moderna version) produced stronger neutralizing antibodies than either new or recent COVID patients.   Second, the antibodies performed well regardless which of the four viruses was used in the cell culture system.  Click to enlarge.

Note that in the left panel, a few hospital patients 10 days into their illness still had minimal detectable neutralizing antibodies (their dots sit at bottom in each column.)   Note also that the convalescing patients (middle panel) were several months post infection, and expected to have gradually falling antibodies, whereas the Moderna patients (right panel) were exactly 2 weeks after their second injection, which might be the natural "peak antibody" timepoint.

AMA Releases Agenda, Proposals for May CPT Meeting; Permission to Comment Available to April 15

As AMA prepares for its May 2021 CPT meeting, it has released the agenda of code proposals.  Interested stakeholders can obtain a copy of the application packets by requested by April 15, and then, responding by April 22.  AMA screens the requests to comment for being a validly involved stakeholder (e.g. not a journalist, not just curious, etc).   For example, a competitor company is a valid stakeholder.

See the code proposal list here:

https://www.ama-assn.org/system/files/2021-03/cpt-panel-may-2021-agenda.pdf

There are circa 54 total agenda topics.  It looks like 17 are for Category III codes.  The codes range from Tab 6, Revise Non Face to Face Inter-Professional Consultation (99451), to Tab 60, a proposal to create a code for cytogenomic (genomic wide) analysis by the low-pass sequencing method (styled as an addition to the 81228/81229 cytogenomics code family).   This technique has been reported to have less adverse racial bias that some other methods (here).

My vote for most interesting/unusual/unexpected application is Tab 8, "Climate related health counseling."  On the digital front, see Tab 15 (CT post processing with artificial intelligence for low dose CT), and the pair Tab 46 (validated digital online therapy program) and Tab 47 (remote cognitive digital behavioral therapy.)

It might be a bit scary for owners of Cat III codes that there are ~17 new applications for these codes, but I only counted 1 application to elevate a Cat III to a Cat I code and 17 applications for simple deletion of Cat III codes.  

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Lab test items had an earlier comment cycle in the beginning of March (entry point here) to allow the comments be available for pre-May subgroups for lab tests (Molecular Pathology Advisory Group MPAG, Pathology Coding Caucus PCC.)