2016 Clinical Laboratory Fee Schedule: Why Quantitative Drug Testing Should Not be Reduced to a Single Code

July 6, 2015

Misters Yussuf Abdel­aleem and Jacob Slowik, partners at Joseph, Aleem and Slowik who represent a number of preeminent clinical laboratories and medical practices in the southeastern US, contacted me recently with their concerns about CMS’ proposal to use a single CPT code to reimburse clinical laboratories for confirmatory drug testing beginning in 2016.

Readers will recall Messrs. Abdel­aleem and Slowik also wrote an article earlier this year that provided strategies for health care attorneys to construct compliant client billing arrangements for laboratory services.

With their permission, I am posting their comments in their entirety. I would like to thank Messrs. Abdel­aleem and Slowik for not only providing us with this article, but also for representing the interests of patients and clinical laboratories at the upcoming CMS meeting on July 16th.

2016 Clinical Laboratory Fee Schedule: Why Quantitative Drug Testing Should Not be Reduced to a Single Code

On July 16th, the Centers for Medicare and Medicaid Services (CMS) will be hosting the Clinical Laboratory Fee Schedule Annual Public Meeting in Baltimore. The meeting is intended to provide the general public with an opportunity to make recommendations on CMS’ proposal to modify certain CPT codes relating to drug testing. Specifically, CMS is considering creating a single G­code (“GXXX2”) for confirmatory drugs tests in order to pay clinical laboratories the same amount for drug tests irrespective of the number of drugs or classes of drugs actually tested. The purpose of this article is to argue that CMS’ proposal is misguided.


In the 2015 clinical laboratory fee schedule final determinations file, CMS decided to not pay for 64 CPT codes for drugs of abuse testing (e.g., 80353 – cocaine). However, they effectively replaced these codes by creating alphanumeric G­codes (e.g., G6044 – cocaine) to replace the 2014 codes that were deleted for 2015. In effect, CMS used these temporary codes to maintain the status quo to allow additional time to study the issue.

CMS’ recent proposal to move to a single code is, in their own words, an attempt to curb “the potential for overpayment.”1 To be sure, quantitative (or sometimes referred to as “confirmatory”) drug testing can be a lucrative business for many. Indeed, as the Wall Street Journal pointed out in November of last year, high­complexity drug testing payments from Medicare soared to $612 million over six years.2 And, it is well known that independent clinical laboratories as well as “in­office” laboratories3 can often receive reimbursements as high as $1000 per specimen tested (although reimbursements from Medicare are typically much lower). But what analysts often fail to take into account is that the rise in payments for these tests is not merely due to the fact that the current fee schedule allows laboratories to receive payment for each individual substance for which they test.

The apparent burst in payments for confirmatory testing directly correlates to our nation’s drug overdose epidemic, and reflects the costs incurred by clinical laboratories to perform these types of tests. The U.S. Centers for Disease Control and Prevention (“CDC”) estimates that 15,000 people die every year in this country from overdoses involving opioid or narcotic pain relievers. More recently, U.S. health officials have raised serious concerns over the increase in heroin use and overdoses stemming from the use of prescription pain medication. A 2014 CDC study showed that between 2009 and 2012, there was a 74 percent increase in the number of people using heroin, and that about three out of four new heroin users began by using prescription pain medications.4 Indeed, some states, such as Georgia, have implemented laws requiring physicians to adopt random drug monitoring measures when certain controlled substances, such as oxycodone, are prescribed for patients suffering from non­terminal, chronic pain.5

Based on our experience in the industry, we know first­hand how expensive it is to develop and operate a clinical laboratory. Clinical laboratories often make initial capital expenditures in the seven figures. Confirmatory testing is almost exclusively performed on LC­MS equipment, which can cost approximately half a million dollars per machine. In addition, clinical laboratories providing quantitative testing can spend millions of dollars on hiring the right personnel (e.g. pathologists, data analysts, technicians), obtaining requisite licensing and accreditation, and developing (often in­house) the necessary instrument testing methodologies to operate the LC­MS equipment properly. To make matters more challenging, in today’s market many newer clinical laboratories fail to obtain in­network participation status with large private healthcare insurers and are thus often forced to eat their costs for many of the tests they render.

The Problem with CMS’ Approach

CMS’ recent approach is misguided for one principal reason: a single CPT code creates a substantial financial incentive for laboratories to test fewer drugs and thus more drugs will likely go undetected. If a laboratory is to receive the same amount for testing one analyte as it would for testing a comprehensive panel, what incentive – other than, perhaps, satisfying the wishes of the ordering physician – does it have to commit to the latter? Testing more substances is more costly for a laboratory, especially from a methodology development standpoint. Laboratories make significant investments to update their instrument methodologies in order to test ever­evolving synthetic and pharmaceutical drugs. This seeming moral hazard is even heightened in the in­office laboratory context where providers have the opportunity to refer patients within their own practice. Providers will be faced with the ethical dilemma of choosing between providing comprehensive drug monitoring regimens, on the one hand, and saving money by testing for fewer substances, on the other. It is important to emphasize that the incentive to test fewer substances would presumably exist irrespective of the amount Medicare ultimately reimburses under the single CPT code. Assuming we are correct in arguing that a single CPT code will lead to more drugs going undetected, CMS needs to seriously question whether its proposal will undermine the medical community’s efforts to adequately monitor substance abuse and diversion, particularly at a time when we are seeing significant improvements in patient outcomes with drug monitoring through comprehensive quantitative drug profiles.

Less Restrictive Alternatives

We applaud CMS’ attempt to redress the concern of overpayment for confirmatory testing. There are, however, more reasonable and less restrictive alternatives for CMS to adopt. For one, CMS should strongly consider refocusing its attention to the decision­making aspect of confirmatory testing. By this we mean CMS may be better served to adopt additional coverage policies to ensure that providers are ordering only medically necessary tests (i.e. the right number of tests are being ordered under the right circumstances based on patient presentment, history of drug abuse, and the like). This can be effectuated through the promulgation of additional national coverage and local coverage determinations. For example, Palmetto GBA, a Medicare Administrative Contractor based in the Southeast, has published a local coverage determination (LCD 35105: Controlled Substance Monitoring and Drugs of Abuse Testing) that considerably narrows the criterion necessary to establish medical necessary for quantitative testing. Along the same lines, CMS can presumably do more to incentivize laboratories to implement compliance programs that adopt test utilization monitoring to determine whether physicians are being encouraged to order medically unnecessary tests. While the Office of Inspector General (OIG) of the Department of Health and Human Services, the entity tasked with enforcing the federal anti­kickback statute (42 U.S.C. § 1320a­7b, et seq.), made mention of test utilization monitoring in its Compliance Program Guidance for Clinical Laboratories in 19986, we are aware of no further regulatory guidance or commentary on this subject matter. Finally, while not ideal, we believe the disincentive to test for more substances may be mitigated if CMS were to adopt either of the following alternatives: (1) a tiered billing approach whereby a limited number of CPT codes (e.g., 3 or 4) are used, depending on the number of analytes (or even classes of drugs) that are tested or (2) a cut­off billing approach whereby each individual test correlates to a separate code only up to a certain number of drugs, above which, a single code is used.

Quantitative drug testing, and the billing policies relating thereto, have the potential to substantially impact therapeutic regimens and patient outcomes. We will, on behalf of our clients, be voicing concerns with CMS’ proposal to adopt a single CPT code for confirmatory drug testing at the July 16th meeting. We hope our suggestions ultimately facilitate a more critical analysis of billing for confirmatory drug testing.

1 http://www.cms.gov/Medicare/Medicare­Fee­for­Service­Payment/ClinicalLabFeeSched/Downloads/Clinical­Lab­Codes­for­CY­2016.pdf

2 http://www.wsj.com/articles/doctors­cash­in­on­drug­tests­for­seniors­and­medicare­pays­the­bill­1415676782

3 Through an exception to the federal physician self­referral prohibition (42 U.S.C. 1395nn, et seq.) (commonly referred to as the “Stark Law”), “group practices” may refer patients to in­office laboratories if certain requirements are met.

4 Centers for Disease Control and Prevention. (2014). Morbidity and Mortality Weekly Report. Retrieved from http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6339a1.htm.

5 http://www.rxdrugabuse.org/pdf/Composite­Board­Rules.pdf

6 https://oig.hhs.gov/authorities/docs/cpglab.pdf