Medical necessity edits: Example of a limitation

Aug. 21, 2023 / By Divya Verma, RHIA

A recent Office of Inspector General (OIG) report on Medicare’s utilization of one of the highest paid molecular pathology genetic tests caught my attention. You can read a summary of the report here.

The report states that Medicare paid $888.2 million for more than 450,000 genetic tests billed under CPT® procedure code 81408 with dates of service from 2018 through 2021, contributing to the second highest total Part B payments and the highest Medicare payment amount ($2,000). These high payments suggest that some providers may have used this CPT code for rare diseases that manifest in childhood and are unlikely to be tested for in the Medicare population, which poses a risk of improper Medicare payments.

The genetic lab test CPT code 81408 is an interesting example of one of the limitations of medical necessity edits that Medicare Administrative Contractors (MACs) put in place to automatically pay or deny a service based on coverage rules, primarily based on limiting procedures to specific diagnoses, as defined in the Local Coverage Articles (LCAs).

CPT code 81408 represents a Tier 2 molecular pathology procedure, Level 9, and lists several types of tests used to diagnose genetic diseases arising in childhood (e.g., osteogenesis imperfecta, Stargardt disease, Usher syndrome), as well as acquired conditions arising with aging (e.g., age-related macular degeneration (AMD), ataxia telangiectasia, Parkinson’s disease). Moreover, the code description provides only examples of such conditions, so there is no finite list. With many uses, limiting this CPT to a diagnosis list and implementing automated medical necessity edits is challenging.

The OIG report further states – “… five of the seven MACs had Local Coverage Article guidance that prohibited or limited the use of CPT code 81408, and two MACs’ Local Coverage Articles did not limit its use.” Upon searching the Medicare Coverage Database (MCD), I found that two MACs list this CPT code as non-covered in their LCA– Billing and Coding: Genetic Testing for Cardiovascular Disease (A58797) by the MAC First Coast Service Options, Inc., and Article – Billing and Coding: Genetic Testing for Cardiovascular Disease (A58795) by the MAC Novitas Solutions, Inc. The other five MACs have not stated it as non-covered or restricted it to specific diagnoses.

Herein lies the difficult situation. Having analyzed these perpetually evolving molecular diagnostic test-related policies, I understand why such broad definition CPTs representing many types of tests cannot have automated medical necessity edits. Some types of tests and diagnoses described by this CPT might be reasonable and necessary, whereas others might not – causing unnecessary denials or inappropriate payments. The lack of a specific CPT code is a significant challenge that payers and providers face when managing many of these genetic tests.

Since 2013, there has been an influx of policies related to molecular diagnostic tests as the new, more granular and gene-specific CPT codes are released every quarter because of rapid advancement in the field. These tests can cost up to $12,000 per the latest 2023 Q1 Clinical Lab Fee Schedule file at 23CLABQ1. The Centers for Medicare & Medicaid Services (CMS) assigns the responsibility to its MACs to educate providers on accurate coding and proper submission of claims and to pay for medically reasonable and necessary services. The MACs have hundreds of LCAs in place to automatically pay for or deny these genetic tests. MACs also frequently update them to keep up with the latest approved indications and tests.

Based on their findings, OIG has recommended that MACs review related claims for Medicare compliance and recover any improper payments. I will be curious to see if any services were performed for the medically unnecessary genetic diseases manifesting in childhood for the Medicare population – the basis of this audit. Currently, there are no diagnosis limitations in any local coverage articles for CPT 81408, but keep an eye on the future articles listing payable diagnoses for this CPT (and 236 more CPT codes), issued by FCSO and Novitas, respectively, both of which currently non cover the CPT 81408–  Billing and Coding: Genetic Testing for Oncology (A59123) and Billing and Coding: Genetic Testing for Oncology (A59125). 

With the lack of specificity for some CPT codes, it is challenging and time-consuming for providers to check that these services are covered and for payers to process claims automatically. Providers should use broad definition codes cautiously and have a pre-claim submission review to check that they are used appropriately as per coding conventions and medical necessity, and be able to support both with robust medical documentation. For such a high cost service, it would also help to establish specific CPTs with limited uses.

Divya Verma, RHIA, is a medical policy analyst for the medical necessity and compliance division within 3M Health Information Systems.

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[NOTE: This article is not meant to evaluate the agencies mentioned. Links and data are as of August 14, 2023, and are subject to change.]