Friday, March 23, 2018

Very Brief Blog: CMS Releases Instructions and Calendar for "ADLT" Lab Tests

The PAMA legislation of 2014 created a new category of test, Advanced Diagnostic Laboratory Tests, with special initial and annual payment rules.   Test must be sole source tests, either of the MAAA type (Type A) or the FDA-approved sole-source type (Type B) (42 CFR 414.502).

Somewhat belatedly, on March 23, 2018, CMS released application forms, quarterly calendars, and additional guidance for becoming a MAAA.   Find the CMS webpage HERE.

CMS provides a 17 page application form and a 30 page guidance document.  Half the guidance document is about price reporting (applicable periods, TINs, special cases, etc.)

CMS is planning to enforce a rule (not found in the original law) that the test must provide "new clinical diagnostic information not available from any other test or combination of tests."  The applicant writes this justification itself, and it's not obvious how CMS staff would search the market for tests not named by the applicant (this might take a lot of content knowledge about the industry, available tests, and clinical care pathways), but they will use the Advisory Panel on Clinical Diagnostic Laboratory Tests to assist them (guidance document, page 8).  They don't mention an appeal process yet.
  • The "originality clause."  I never thought this whole "originality clause business" was applicable, since it's not in statute, and even more, the statute explicitly contemplates ADLTs that are 510(k) tests, thus, have a close predicate and often the same intended use.
    • CMS seems to box itself off unnecessarily from value-based purchasing.  For example, if a test replicates a prior ADLT MAAA, but is performed twice as fast at half the cost, it might not be able to be an ADLT because it didn't have a unique clinical purpose.
    • It's unclear exactly how CMS will apply these originality concepts (e.g. for competing breast or prostate cancer MAAAs) or if a test would cease to be an ADLT in the future if a too-close competitor appeared.   
    • If you upgrade your test (from a 50 gene to a 51 gene MAAA) to your reboot the ADLT periods?  If you're an LDT, how do you define and revise your "claim?"  Isn't partly it up to you?
    • Would the FMI F1 test be "original" enough?   Both the FDA approval and the CMS coverage focuses laserlike on its CDx tests, but exactly those are generally available from "one or more other tests on the market."  OK, this is a trick question, because this is a PMA/510k category ADLT ("criterion B ADLT").   
    • It makes the point that for MAAA tests (criterion A) that are also PMA/510k tests (criterion B) it may be better to apply for ADLT under "Type B ADLT" because it avoids review under the originality clause.
  • The "Licensing clause?"  What Licensing clause?  In final PAMA rulemaking, CMS said that a university that licensed-out IP for a test could not be the test developer, but also, that  a lab that licensed-in IP for the test could not have been the sole developer, either, and neither could be an allowable "successor laboratory."   Since almost all tests license some IP from somewhere, this seemed tortuous.   
  • Gratefully, CMS has chosen to simple drop any reference to this perplexing avenue of the original rulemaking.  See 81 FR 41060, column 1, June 23, 2016.
CMS will process applications quickly, e.g. accepted during January, reviewed during February, applicant notified during March, and code and payment active April 1.

Tests must show they have been "covered by Medicare Part B."  This is probably a good thing, because it means early policy benefits won't expire while the newly launched test is just awaiting coverage.

CMS webpage here.

Once tests have coverage, they can apply for ADLT.  ADLT law gives them "market list price" payment for 9 months, then payment at an annually surveyed market median price.   (This latter survey median price is similar to the triennial survey price for regular lab tests).   

Often lab tests (like other health services) have list prices that float substantially above actual prices, e.g. $4000 list, but real world discounted $2200 average price from payers.   

If the gap between the initial "list" payments and the later "average" payment is large (130%), CMS can recoup the difference.  It's not hard for CMS to do this, it's common; MAC just sets up a debit against future payments.   Labs would be incented (in their first nine months) to accept high payments but appeal low payments to ensure only high payments are logged for CMS price setting review.  This pushes the lower priced claims like a bolus into the next fiscal period, but the first fiscal period is weighted most heavily due to the clawback rule.  Want to see in real numbers?   I show an example where a lab gets $21M instead of $13M (net of clawbacks) in years 1 and 2 together, here.


See also Medlearn Article SE1619, 2017, which provides general guidance on CLFS PAMA reporting.