In 2022, Optum launched its new laboratory benefit management (LBM) program to help health plans reduce unnecessary lab testing through automated payment denial. The LBM program leverages Avalon Healthcare Solutions, which has developed evidence-based lab policies with automated software tools, and the MolDX program, which identifies and establishes Medicare coverage and reimbursement for molecular diagnostic tests on behalf of CMS.
The intent of the LBM program is to assist health plans in managing utilization and cost of service. At the same time, the real-time enforcement of clinical policies is supposed to improve auto-approval rates on claims and reduce prior authorization requests for labs. Optum offers the LBM program to health plans through various pricing packages such as per-member per-month, shared savings, and full-risk.
The LBM program impacts:
The LBM program does not impact lab tests provided to hospital inpatients or in the emergency department.
According to the November 2022 Laboratory Economics article, “A Closer Look at UnitedHealth/Optum’s New LBM,” the focus of the LBM program is on the following:
Routine Lab Tests
Avalon has developed 70 different evidence-based policies to identify and automatically deny payment for inappropriate routine lab tests during claim adjudication. Health plans utilizing the LBM program will electronically send the claim to Optum-Avalon, where the rules logic is applied to the claim, and tests identified as unnecessary are auto-denied payment.
To assist with the automation process and reduce the need for prior authorizations, the LBM program will require Z-code identifiers obtained through the MolDx program on non-specific CPT codes to obtain payment.
Limits are being placed on the number of units of CPT code 88305 that will be reimbursed by specimen type. As an illustration, Optum is limiting the number of CPT 88305 units that will be reimbursed based on specimen type. For example, only six core biopsies per prostate biopsy case will be reimbursed.
CPT 84179 Z-Code Reimbursement Requirement
Under the LBM program, unspecified codes, such as 81479 (unlisted molecular pathology procedure), will be denied unless submitted with a DEX Z-Code identifier obtained through the MolDX program.
The DEX Z-Code is assigned under the MolDX Program (administered by Palmetto GBA). The MolDX Program was developed in 2011 to identify and establish coverage and reimbursement for molecular diagnostic tests under CMS. The Z-Code is a unique proprietary 5-character code assigned based on the uniqueness of the test being registered and is required by certain payors as an add-on to a non-specific CPT code for reimbursement.
There are multiple steps required to obtain a DEX Z-Code:
Step 1: Lab completes laboratory registration with NPI or CLIA number
DEX Exchange issues login information (can take up to 10 days to receive).
Step 2: Lab logs in and completes test registration
• DEX Exchange issues laboratory Z-code ID assignment (can take up to 14 days).
• If required, DEX Exchange will request a technical assessment.
Step 3: Laboratory completes the technical assessment (laboratory has 15 days to complete)
• DEX Exchange will review the information submitted (which can take several weeks).
• DEX Exchange may request additional information to complete the review.
• Once approved, DEX Exchange will assign a CPT code and reimbursement.
Step 4: Laboratory will submit lab specific Z-Code and assigned CPT code on the claim
The current turn-around time for most MolDx program technical assessment registration is 2-3 months from original submission to receiving an initial response. If additional information is needed, the 2–3-month time span starts over again and continues to reset every time a provider has to submit further clarification.
Record Growth in Utilization of CPT 81479
The LBM focus on CPT code 81479 comes as the industry experiences record growth in the utilization of that code. In the November 2022 issue of Laboratory Economics, Tanya Hendrickson, Optum's Senior Product Director, noted that more than 40,000 different tests submitted for payment use 81479. In short, any molecular testing not already identified by an established CPT/HCPCS code would also be assigned CPT code 81479.
With 81479 being the default unspecified code for molecular testing, there has been tremendous growth in its utilization over the last few years. From 2020 to 2021, CMS reported an expenditure increase of 40%, from $290M to $409M, related to 81479 billings, the largest contributor to the $2.8B in CMS’s Molecular Pathology spending in 2021. Inevitably, payors realize a need to assess methodologies and utilization patterns being billed under this code; however, staffing and expertise required to accomplish that assessment remain a challenge. This creates confusion and inconsistency in who, when, and how CPT code 81479 is reimbursed.
Patients in the United States are fortunate enough to have access to many of the most innovative molecular tests in the world, with novel diagnostic information backed by clinical studies that physicians need to design the best treatment options for them. The increased use of 81479 is partly due to the inability of insurance carriers to keep up with innovation in molecular testing.
Z-Code Opportunities and Challenges
The macro dynamics of how CPT code 81479 is utilized make it nearly impossible to benchmark trends without digging into the micro-level economics. Claims billed with CPT code 81479 are reviewed by payors on a case-by-case basis. Denials immediately follow the claim submission, and the provider or RCM company has to submit an appeal that includes a letter and documentation justifying the test's clinical utility and medical necessity. The opportunity to proactively submit documentation at the time of original claim submission is limited, if not impossible. Therefore, waiting 45-60 days to receive the denial before the next actions can be taken is inevitable.
By creating a Z-Code for this test, the MolDX program will be better able to assess how this code is utilized by test type, but it does not come without a potentially significant burden to providers. The clinical indication requirements to evaluate coverage under MolDX are unclear. As a result, the likelihood for several rounds of back-and-forth inquiry is likely. This could create a challenge with timing, particularly for the provider.
The AMA Alternative
The AMA provides a standard language and numerical coding methodology to communicate across many stakeholders, including patients, qualified healthcare providers, payors, etc. The CPT descriptive terminology and associated code numbers provide the most widely accepted medical nomenclature used to report medical procedures and services for processing claims, conducting research, evaluating healthcare utilization, and developing medical guidelines.
As an alternative, the AMA could be an effective way to standardize the most common testing into a non-generic code. That would mean that the AMA performs the assessment and establishment of new CPT codes. This may help drive consistency across payors regarding how the code and subsequent reimbursement are defined and reduce the provider’s burden of submitting appeals on every case and the payor’s burden of having to review them.
Limiting groups to an unspecified code opens the door for costly processes for collection and penalization by payors for using the only code available for said services. In this scenario, the AMA and its CPT Advisory Committee could do an evaluation of the tests and services included in 81479 and create long-term codes for those tests driving the increase in volume. In the meantime, providers will continue to have limited ability to determine the future of test development and how they contribute to companion diagnostics.
Additional Barriers to Reimbursement
The labs most impacted by the more targeted policies, specifically on the 81479, tend to be highly specialized labs that continue to offer crucial testing while already under tremendous financial pressure. The risk of these policies creating additional barriers to reimbursement is unfortunate. Meanwhile, Optum’s parent company, UnitedHealth Group, enjoys annual earnings of over $25B (nearly 10X that of Quest Diagnostics, Sonic Healthcare, and Labcorp), and continues to achieve record profits ($5.3B in Q3 2022, an increase of $1.2B from this same time last year). In the meantime, most specialty molecular labs in the US struggle to break even, with lab stocks down by 50% and operating revenue in the negatives for the last trailing twelve months1.
As payors, like Optum, adopt clinical policies to track and manage unspecified codes with more scrutiny, reimbursements and the ability to predict collections and get reimbursed will inevitably evolve. The cost savings driven by payors subsequently comes at the cost of laboratory profitability and financial stability in one format or another.
Labs billing unspecified CPT codes need an RCM partner with the technology and expertise to navigate coverage policies, authorization requirements, and appeal hurdles in support of patients needing these tests while avoiding the additional burden and cost-to-collect for the laboratory. Advocating for policies that benefit the patient, the provider, and the payor is crucial to maintaining the pathways needed for continued innovation in the laboratory space.
Partnering with a strong laboratory RCM provider offers invaluable data and expertise that supports substantive discussion on the value of specialized testing and supports the advocacy efforts needed to effect change.
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1 Per Moringstar.com