Eliminating the Hidden Costs of Genetic Testing Claims

More than 75,000 genetic tests and testing products are on the market, with more than

10 new tests released each day. Many health plans are addressing rapid genetic testing

growth with utilization management (UM) programs, such as prior authorization.

These programs are effective in reducing inappropriate testing by helping ensure

ordering providers make evidence-based testing decisions. But, only some tests are

practical to manage this way. Additionally, even when preauthorization is obtained,

the way the laboratory bills the test may still be out of policy. Thus,

a key area of inappropriate genetic test cost is often overlooked:

overbilling, and subsequent overpayment, for genetic tests.

InformedDNA’s research shows 30 percent of genetic

testing requests are coded inaccurately. Miscoding has

a significant downstream impact on the expense payers

incur for genetic tests. Other factors that contribute to

higher-than-necessary costs for genetic testing include:

30% of genetic testing requests

are coded inaccurately

Lack of medical necessity: Genetic test claims are often paid even though

the health plan’s policy considers the test medically unnecessary, or experimental,

investigational, or unproven (EIU).

Volume overbilling: Panel testing – the practice of bundling and billing for tests

for multiple genes, even when only a single gene or a small subset of genes is clinically

indicated – drives substantial genetic testing overpayment. Even for single test/single

gene billing, volume is an issue. Often, many units of a particular code are billed on a

single claim, when the actual test performed typically would require only one.

Pricing variation: The amount billed and allowed for a specific test is often

widely variable not just across plans but even within a single health plan.

How does this happen? The first culprit is poor test identification on claims. A

couple hundred codes are just not sufficient to identify the available 75,000+ tests

– not to mention the varied offerings from different labs for similar tests. A health

plan can’t properly apply policy to claims, determine instances of volume overbilling,

or calculate appropriate allowed amounts if the test itself can’t be identified. Would

you pay for a surgical procedure or imaging study without knowing what procedure

or study was actually performed?

Another driver of genetic test claims overpayment: claims systems and filtering

technologies are not built to address the unique elements of genetic test claims.

Even for the tests that can be identified, many payers’ claims systems do not

incorporate the deep genetics expertise to catch inappropriate procedure/diagnosis

code combinations (PxDx), unnecessary panel testing, widely variant allowed

amounts and other types of excess billing. The result: significant unnecessary

payments that could be avoided with effective test identification and payment rules,

incorporated into payer claims environments.2

Unnecessary payments could be avoided with test identification and payment rules

The amount billed is often widely variable in a single health plan

The Business Case for a Claims Editing ApproachInformedDNA’s many years’ experience with payers nationwide points to substantial

additional savings opportunities, even when the plan maintains an effective genetic

test UM program. Consider the following opportunities we’ve identified when

working with payers to decrease costs related to excessive claims payment:

Lack of medical necessity. An analysis of 10 months of claims for one payer

revealed that more than 25,000 medically unnecessary tests (as determined by payer

policy) were paid by the health plan because they were not caught when the claims

were processed. The cost: $30.7 million.

Volume billing. In one health plan’s claims we identified 15% of claims for a

commonly ordered test were billed with multiple units when one unit was appropriate.

The additional unit billing resulted in greater than $5 million in inappropriate spend.

Pricing variation. The allowed amount for cystic fibrosis carrier testing within one

plan varies 10 to 20 times from lowest to highest allowed - as much as $14,000 per test.

How can payers better identify tests and reduce unnecessary claims payments? Here are four strategies to consider.

1 Build automated claims edits and payment rules into your claims processing system. Genetic testing claims are complex, and payers need

the support of automated claims edits and payment rules to prevent overbilling and

subsequent overpayment. Algorithms that can be utilized to identify specific tests

based on procedure codes, associated units, diagnosis codes, the ordering physician,

the laboratory used, and patient demographics. Rules that apply policy to these 3

$30.7M allowed by one health plan for unnecessary tests in a recent period.

$5M was allowed for inappropriate multiple unit billing.

10-20X Variance in cystic fibrosis testing allowed amount.

identified tests can then be run to catch claims that are out of policy. The genetics

expertise required for such rules is typically not available in standard claims filtering

solutions, thus this approach requires expert genetics input.

A claims edit solution can also be used to enforce the payer’s prior authorization

policy for the test performed. And, when claims edits and rules are updated

quarterly, this approach ensures timely response to a changing scientific landscape.

2 Conduct an analysis of genetic testing claims trends. Such an

analysis can pinpoint where your highest spends are by test and lab, for codes that

are typically used to bill genetic tests. It’s important to involve genetic test coding

experts in this process, in order to specifically identify the actual tests billed, based

on patterns of codes on claims from specific labs.

Consider starting with a review of genetic testing claims for areas in which the

greatest potential for savings exists, such as oncology and reproductive medicine.

In our nationwide analyses, these two areas represent about 75% of all genetic

testing. Once the actual tests have been identified, look for examples of claims

that should not have been covered because they do not comply with the plan’s

medical policy. Also, look for instances of stacked, unlisted and non-specific codes;

high variability in allowed amounts for tests; and, claims in which a high number

of units were billed.

For example, a close look at pharmacogenetics claims for one payer revealed

expenditures of $12.9 million for tests that were not medically necessary based on

plan policy. Additionally, high variability in pricing for pharmacogenetic tests, with

many tests billed for $2,000 or more, as well as abuse of stacked and unlisted codes

contributed to a 40 percent growth in this type of genetic test spending within a year.4

75% of genetic test claims are related to oncology or reproductive medicine.

$12.9M was allowed by one plan for unnecessary pharmacogenetics claims.

Genetic Test Spending Variances Across Payers

Our experience with commercial payers shows these genetic test spending trends:

It’s also important to take a deep dive into billing trends for the same test across

multiple labs to identify opportunities to improve contracted rates, especially for

upward-trending tests. For example, one analysis showed the allowed amounts for

one tumor profiling test was in a range of $250 to more than $25,000 allowed per

test due to pricing inconsistencies. This points to opportunities to work with labs in

standardizing pricing.

3 Use the results of claims analysis to strengthen lab contract negotiations. Genetic test claims analysis provides the intelligence needed to

bolster contract negotiating power, with the goals of:

• Standardizing pricing for comparable tests

• Optimizing pricing for panel testing as well as custom tests

• Setting agreed-upon cap rules for the number of units charged

• Supporting systematic lab benchmarking for insights that drive greater value

Payers also can use the analysis to identify preferred providers for genetic testing and

work to direct members to these labs.

4 Regularly monitor genetic test claims to assess progress made and pinpoint additional opportunities for improvement. A continual

focus on eliminating overbilling and overpayment is critical to ensuring the hidden

costs associated with genetic test claims don’t return. As the genetic test landscape

continues to evolve, and labs respond to enhanced claims processing by payers,

regular detailed genetic testing analysis positions plans to rapidly respond to

changing billing practices. 5

Average allowed per member per month costs: $1 to $3

Average allowed cost per test: $500 to $1,500

Utilization per 1,000 members: 10 to 30 tests annually

InformedDNA has garnered Net Promoter Scores from health plan clients in the 69-70 range - 60% higher than industry average, and comparable to

the best consumer-oriented businesses such as Amazon and Apple.

Your business is unique. Explore the right solution for your needs.Drawing on the expertise of the nation’s largest independent organization of

genetics specialists, the strategies shared in this paper are just a few examples of

how InformedDNA has helped payers overcome challenges related to genetic testing

claims costs. We know every organization’s needs are different, and our team of

seasoned, outcomes-focused professionals is here to help evaluate and address the

post-testing challenges your team faces. 844-846-3763healthplans@informeddna.com

www.InformedDNA.com

To learn more about working with InformedDNA to eliminate the hidden

costs of genetic testing claims, please contact us:

© 2018 Informed Medical Decisions, Inc.

With the nation’s largest and most experienced organization of full-time,

independent genetics specialists, InformedDNA enables health plans to stay ahead of the curve by providing

comprehensive clinical genetics expertise for pre- and post-test services. By augmenting a plan’s in-house team, we empower the plan

to promote precision medicine, optimize spending, and avoid unnecessary, unpleasant

experiences for members and providers.

This document represents the views of the author, not America’s Health Insurance Plans (AHIP). The publication, distribution or

posting of this document by AHIP does not constitute a guaranty of any product or service by AHIP.