Abstract
Genomic Health is the subject of a Department of Justice investigation of its compliance with new Medicare billing regulations.
Genomic Health has disclosed that it is the subject of a U.S. Department of Justice investigation into its compliance with changes that took effect in January to Medicare’s Date of Service billing regulation.
In its Form 10-Q report for the first quarter, filed with the U.S. Securities and Exchange Commission, Genomic Health said it received a civil investigative demand from the Justice Department in connection with the topic, and has responded by submitting specific documents.
“An adverse outcome could include the Company being required to pay treble damages, and incur attorneys’ fees, penalties, and other adverse actions that could materially and adversely affect the Company’s business, financial conditions, and results of operations,” Genomic Health acknowledges in the May 9 filing. “The Company is unable to predict the outcome and is unable to make a meaningful estimate of the amount or range of loss, if any, that could result from any unfavorable outcome.
In a statement to Clinical OMICs, Genomic Health says it would not comment further on the Justice Department investigation since it was ongoing, but defended its actions and insisted it has done nothing illegal or inappropriate.
“While it’s not indicative of the outcome, we stand by our belief that the Company’s billing practices have always been appropriate and compliant with Medicare billing regulations, including the Medicare Date of Service Rule, which is the focus of this investigation. We are committed to providing the government with the information needed to demonstrate the Company’s compliance,” Genomic Health states.
Based in Redwood City, CA, Genomic Health specializes in developing cancer diagnostic tests, with the goal of delivering personalized diagnoses. The company was established in 2000 by Randy Scott after a close friend was diagnosed with cancer. Genomic Health has grown since then to develop a portfolio of tests under the Oncotype DX brand for breast, prostate, and colon cancers—with plans to expand its offerings with additional liquid- and tissue-based tests, including Oncotype DX AR-V7 Nucleus Detect test, launched in February.
Genomic Health finished last year shrinking its annual operating loss to $6.5 million from $15.4 million in 2016, while total revenues rose 4% to $340.8 million, fueled largely by a 3% increase in U.S. product revenue, which rose last year to $287.4 million.
Nearly all of that revenue (90.3%) came from Oncotype DX Breast Recurrence Score, which according to Genomic Health generated $259.7 million in 2017, up 1% from $257 million in 2016. However, revenues for the company’s Oncotype DX Genomic Prostate Score zoomed 66% year-over-year, from $10.8 million in 2016 to $17.9 million last year. Also in 2017, the company ranked number-two on Clinical OMICs’ list of 20 Molecular Diagnostics Companies to Watch.
Switching to Direct Billing
Under Medicare billing regulations, payment for Genomic Health’s Onco-type DX tests performed on Medicare beneficiaries who were hospital patients at the time the tumor samples were obtained, and whose tests were ordered less than 14 days from discharge, must be bundled into the payment that the hospital receives for the services provided.
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Effective January 1, test providers like Genomic Health can now bill Medicare directly for tests performed on beneficiaries who were hospital out-patients at the time the tumor samples were obtained, under new regulations promulgated by the Centers for Medicare and Medicaid Services (CMS).
But the change does not apply to tests on Medicare beneficiaries who were hospital inpatients at the time the tumor tissue or blood samples were obtained. Payments for such inpatient services have to be bundled into a single diagnostic-related grouping payment made to the hospital for all services provided.
“These billing rules may lead to confusion regarding whether Medicare provides adequate reimbursement for our tests, and could discourage providers from ordering our tests for Medicare patients. In addition, compared to our breast cancer tests, a greater proportion of eligible patients for our colon and prostate tests are covered by Medicare,” Genomic Health states in its Form 10-Q. “We cannot assure you that Medicare will continue these billing rules in their current form, that Medicare will not seek to expand the scope of its payment bundling rules in the future, or that other payors will not adopt similar billing rules. In addition, changes in Medicare billing rules and processes could result in delays in receiving payments and any such delays could affect our results of operations.
According to the company, orders initially submitted within the Medicare Date of Service rule period and subject to the rule have historically represented less than 3% of total Oncotype DX test volume.
“Following the recent changes to the rule that went into effect on January 1, 2018, we anticipate that the percentage of orders impacted will shrink to less than 1% of total business for Oncotype DX,” Genomic Health adds.
Genomic Health is among value-based labs that have chafed under the revised regulation, since it has prevented them from leveraging hospitals to collect samples and still being able to bill separately for their tests, said Charles Mathews, principal with ClearView Healthcare Partners, a global strategy consulting firm serving the life sciences sector.
“Instead they would have to set up separate blood draw sites outside of the hospital, which is very difficult for tissue-based tests, or hospitals would wait 14 days to send out tests so they wouldn’t have to deal with payment,” Mathews observes.
‘Awkward Conversations’
“Initially there were a number of awkward conversations between hospitals and MACs (Medicare Administrative Contractors) about payment for testing that the hospitals didn’t actually perform. It was always a big disconnect from Medicare’s stated requirements around direct billing,” Mathews says. “In some ways it was two trends, bundled payment and direct billing crashing together. After a while, hospitals and providers were made aware of the rule and they got used to it.”
The issue threatened to dampen provider adoption of some tests, he notes, citing AlloMap, a non-invasive blood test for heart transplant patients: “But it didn’t completely kill adoption, because of the aforementioned work arounds.”
Mathews adds that the elimination of the 14-day rule should be a benefit for providers, as it allows them not to worry about timing and order the tests they want.
“It could become a problem if historically the hospitals paid for testing out of their client billing budgets and now their patients are getting bills from reference labs but eventually that will get sorted out,” Mathews says. “The hassle is actually for third party labs like Labcorp, because now they have to track down sample collection information for billing purposes.”
Genomic Health referred Clinical OMICs to a position statement on the Medicare Date of Service rule from the Coalition for 21st Century Medicine (C21), an advocacy group representing more than two dozen member diagnostic technology companies, clinical laboratories, researchers, physicians, venture capitalists, and patient advocacy groups.
“C21 believes the regulatory revisions finalized by the agency to its laboratory date of service policy will remove regulatory barriers to patient access to much needed precision diagnostic tests,” the coalition states in a November 20 letter.
‘Significant Clarity’
At least one consultancy says its diagnostics developer clients are pleased with the new Medicare Date of Service rule.
“From what we are hearing from our clients, the Medicare Date of Service regulation is providing significant clarity for diagnostics companies,” says Adam Crowther, senior associate with Boston Healthcare Associates, a global consulting firm that provides market access and value optimization strategies to healthcare technology and service innovators. “Previously, independent labs were required to bill hospitals for various types of molecular pathology testing, with hospitals then billing Medicare directly. Under the new regulations, independent labs can now bill Medicare directly for a variety of tests, removing a layer of administrative burden for both hospitals and labs.”
It is important, Crowther added, for both emerging and established diagnostics innovators to have a good overall understanding of not only coding, coverage, and payment, but also billing requirements. In some instances, providers have held off from ordering tests given uncertainty around receiving separate payment.
“However, for certain molecular pathology testing, there is now additional clarity on how billing will proceed under the new regulations. This is especially so with CMS having clarified which CPT codes are eligible for separate payment, providing a clearer pathway to receiving reimbursement for these services,” Crowther says.
When confusion has arisen about the adequacy of Medicare reimbursement for tests, Crowther says, “in general, the confusion often arises in not understanding the appropriate billing steps to not only secure adequate payment, but also to avoid unnecessary billing for patients, which is always a major concern for physicians.”