Friday, August 4, 2023

Very Brief Graphs: Concentration of PLA and Category III Codes

I'm preparing for a mid-August presentation on CMS data in D.C. - the annual Next Gen Dx meeting.

One topic will be the proliferation of Category III and PLA codes, with hundreds active at any given time.  But it's a winner take all environment, with a 2 or 3 codes having over half the payments, and no more than 10 having nearly all the payments.  This is based on CMS Part B data for CY2021.

  • Unexpectedly, a tie-in to a JAMA Health Forum article this week by Sexton, Makower, and colleagues, on delays to LCDs and NCDs for new devices - here
    •  See abstract & AI summary of Sexton here.


For 130 PLA codes (and a few "M" administrative MAAA codes). Spending was $230M, with $75M and $45M for the top two codes (50%).


For 260 Category III code, spending was $185M, with $122M and $20M for the top two codes (about 75%).

2/3 of all Cat IIi spending, 66%, or $122M, went to the biggest code, an ophthalmology code with 103,000 services, 0191T.  

 The top ten Cat III codes had about 95% of all Category III spending.  That means Codes #2 to #10 had about 30% of spending, leaving 5% for all the remaining 250 codes.

The monopoly (oligopoly) marketplace calculation, Herfindahl Hirschman Index HHI, is 4553 (per ChatGPT Code Interpreter).  A perfect monopoly is 10,000 (100% squared, 100 squared), and HHI numbers over 2500 is an extremely concentrated market.  So if Cat III codes were an industry, they would be monopolistic.   GPT writes, "The HHI ranges from 10,000 (in the case of a pure monopoly) to close to 0 (in the case of an almost perfectly competitive market). An HHI of less than 1,500 is considered to indicate a competitive marketplace, an HHI of 1,500 to 2,500 is considered to indicate a moderately concentrated marketplace, and an HHI of 2,500 or greater is considered to indicate a highly concentrated marketplace.  Given an HHI of 4553.67, this market can be considered highly concentrated according to these guidelines."