Monday, December 23, 2024

Flashback: OIG's April 2024 Report on CMS Mishandling of COVID Pricing

This year, 360Dx had an excellent review of the year in CMS policy-making, by journalist Kelsy Ketchum (here).   One topic I had not clearly recalled:  an April 2024 OIG report on how CMS may have mishandled its pricing of COVID testing.

The April OIG report is here, with coverage at the time in 360Dx here, and I also wrote a blog that flagged the OIG report, here.

The report values open communications and refers to a federal management handbook, the Green Book.  Some of the points may be applicable to other situations such as communications between stakeholders and MACs and CMS on LCDs.

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AI Corner

Here's a Chat GPT review of the 27-page April report.

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Summary of the OIG Report on CMS Rate Setting for Molecular Testing in Public Health Emergencies

Key Findings: The Office of Inspector General (OIG) report identified several shortcomings in CMS’s procedures for setting payment rates for clinical diagnostic laboratory tests (CDLTs) under the Clinical Laboratory Fee Schedule (CLFS) during public health emergencies (PHEs), particularly during the COVID-19 pandemic. These included:

  1. Under-communication:

    • CMS did not engage effectively with Medicare Administrative Contractors (MACs) or laboratory associations during rate-setting for COVID-19 tests.
    • Laboratory associations and pricing coordinators reported insufficient communication from CMS, leading to missed opportunities for critical input.

  2. Mistakes in Rate Setting:

    • Initial rates set at $51 for COVID-19 viral tests were insufficient to cover costs for all laboratories.
    • Adjustments to $100 and later $75 highlighted inconsistencies and inefficiencies in the process.

  3. Potential Underpricing of Molecular Tests:

    • The use of outdated methodologies, such as crosswalking (comparing tests to older, unrelated tests like Zika), resulted in rates that did not reflect the true costs of high-throughput COVID-19 testing.

Recommendations:

  1. Improve Stakeholder Communication:

    • Establish clearer and more inclusive communication channels between CMS, MACs, and laboratory stakeholders during PHEs.

  2. Enhance Flexibility in Rate-Setting Procedures:

    • Provide MACs greater flexibility to adjust rates during emergencies to better reflect laboratory costs and incentivize the adoption of necessary technologies.

  3. Legislative and Procedural Reforms:

    • CMS may need legislative authority to streamline rate-setting and improve responsiveness in future PHEs.

Industry Concerns:

  • The reliance on interim rate-setting policies without robust stakeholder engagement led to delays and inefficiencies.
  • Laboratory representatives emphasized the need for funding mechanisms to support investments in high-cost equipment and for localized solutions in rural areas.

Implications for the Laboratory Industry:

  • Molecular Testing Underpriced: The initial rates failed to account for increased costs associated with high-throughput technologies and emergency testing demands.
  • Missed Opportunities for Collaboration: Better communication could have expedited the adjustment of rates and enhanced nationwide testing capacity.
  • Need for Process Reform: As molecular diagnostics become more integral to public health responses, CMS must address these procedural gaps to ensure accurate pricing and broader access.

This report underscores the critical need for CMS to revise its processes to better serve laboratories and patients during emergencies, while ensuring adequate compensation for cutting-edge molecular diagnostics.

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In its review and research, can you clarify more why the OIG authors concluded that CMS had mis- or under-communicated with MACs?

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The Office of Inspector General (OIG) report concluded that CMS under-communicated with Medicare Administrative Contractors (MACs) during the public health emergency (PHE) based on several findings drawn from interviews and process reviews:

  1. Lack of Proactive Engagement:

    • The OIG found that CMS did not adequately involve MACs’ pricing coordinators before issuing critical rulings to adjust payment rates for COVID-19 tests.
    • For example, MAC pricing coordinators were not consulted before CMS issued its April 2020 ruling, which increased the payment rate for high-throughput COVID-19 testing to $100. 
      • A pricing coordinator stated that they learned about the ruling only after it was implemented through a Technical Direction Letter (TDL), bypassing their opportunity to provide input on cost structures or implementation issues.

  2. Missed Opportunities for Input:

    • MAC pricing coordinators expressed a desire to provide feedback on the rates CMS set, particularly given the variability in laboratory costs for conducting tests.
    • CMS rulings were issued independently, without a process for MACs to share concerns or provide alternative pricing methodologies.

  3. Reactive vs. Proactive Communication:

    • Laboratory associations reported that they often had to initiate contact with CMS to obtain updates or clarify rate-setting decisions, indicating a reactive approach to communication.
    • CMS did not engage in systematic dialogue with MACs or laboratory stakeholders to gather detailed cost data or understand operational challenges during the rate-setting process.

  4. Quality of Communication:

    • Stakeholders reported that the lack of communication resulted in a one-size-fits-all pricing decision. For instance:
      • The initial $51 rate was set using crosswalking to the Zika test, despite significant cost differences between Zika and COVID-19 testing.
      • The subsequent $100 rate was adequate for all labs but did not account for variances, such as efficiencies some labs had achieved that allowed them to perform testing at lower costs.

  5. Guidance Gaps:

    • The OIG noted that CMS provided insufficient guidance to MACs on adapting rate-setting policies to the emergency context. This left MACs constrained by standard methodologies (e.g., crosswalking or gapfilling) and unable to use alternative methods to better reflect the costs and incentives needed during a PHE.

  6. Green Book Principles:

    • The OIG cited principles from the Standards for Internal Control in the Federal Government (the "Green Book"), highlighting that effective communication is essential for achieving objectives. The lack of relevant and timely information exchange between CMS, MACs, and stakeholders hindered CMS’s ability to set adequate rates.

Key Takeaway

The OIG concluded that CMS under-communicated because it failed to proactively seek input from MAC pricing coordinators and laboratories during rate-setting and relied on a top-down approach that bypassed established channels for feedback. This approach resulted in delays, inefficiencies, and underpricing of critical testing during the COVID-19 PHE.

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Appendix - Green Book ?

The Green Book refers to the "Standards for Internal Control in the Federal Government," published by the Government Accountability Office (GAO). It provides a comprehensive framework for designing, implementing, and evaluating effective internal control systems within federal entities. Key highlights include:

  1. Purpose:

    • Ensures federal agencies operate efficiently, achieve objectives, comply with laws, and provide reliable reporting.
    • Acts as a critical tool for improving accountability and governance.

  2. Framework Structure:

    • Organized around five major components of internal control:
      1. Control Environment: Establishes the foundation for the internal control system with ethical values, integrity, and oversight responsibility.
      2. Risk Assessment: Identifies, analyzes, and responds to risks affecting objectives.
      3. Control Activities: Implements specific policies and procedures to achieve objectives.
      4. Information and Communication: Ensures timely and quality communication for informed decision-making.
      5. Monitoring: Assesses the performance of the internal control system and remediates deficiencies.

  3. Principles:

    • Each component is supported by 17 detailed principles, which are further broken down into attributes for specific actions and expectations.

  4. Applications:

    • Federal agencies are required to implement these standards under the Federal Managers’ Financial Integrity Act (FMFIA) and Office of Management and Budget (OMB) Circular A-123.
    • Can be adapted by non-federal entities, including state and local governments, as well as nonprofits.

  5. Documentation:

    • Management is required to document internal control responsibilities, system designs, and assessments to ensure transparency and accountability.

  6. Evaluation and Deficiencies:

    • Agencies must evaluate the design, implementation, and operating effectiveness of controls. Identified deficiencies are to be assessed for significance and corrected promptly.

In the context of your inquiry, the Green Book serves as a benchmark for assessing CMS’s internal control failings, such as under-communication and errors in rate-setting during public health emergencies. The identified gaps, like insufficient stakeholder engagement or lack of documented processes, would likely contravene the principles of Information and Communication or Monitoring outlined in the Green Book.