AdvaMed Report Promotes Value of Diagnostics

Although long considered vital to clinical decision-making, diagnostics have not received the kind of attention—and some would say respect—afforded to medical devices and pharmaceuticals. A recently released report from industry association AdvaMed (Washington, DC) seeks to change that by raising the visibility of diagnostics and documenting their importance and contribution to patient care. The Value of Diagnostics: Innovation, Adoption, and Diffusion into Healthcare , a detailed and comprehensive 331-page report, was commissioned by AdvaMed and prepared by the Lewin Group Inc. (Falls Church, VA), a healthcare policy research and management consulting firm.

The report defines and delineates in vitro diagnostics from other types of clinical tests and procedures used in diagnosis, describes the state of the diagnostics industry, examines the clinical and economic value of diagnostics, evaluates the factors that are advancing or inhibiting their adoption, advancement, and diffusion, and makes recommendations for fostering diagnostics innovation while improving patient access.

One of the more striking and widely noted findings of the report is that while diagnostics account for less than 5% of hospital costs and about 1.6% of all Medicare costs, the results of these tests typically influence and help determine as much as 60–70% of both immediate and downstream healthcare decision-making. The report asserts that diagnostics play an integral role in nationally recognized, evidence-based healthcare quality measures and clinical practice guidelines and enable earlier disease detection, use of more targeted healthcare interventions, better prognoses, and more effective and efficient care of chronic conditions.

While noting their contribution to more efficient and effective healthcare with better outcomes, the report cites a study from the Rand Corp. (Santa Monica, CA) that found diagnostics are significantly underutilized—as much as 51% of the time. Using data from the National Committee for Quality Assurance (Washington, DC), the report states that the appropriate use of diagnostics for diabetes, cardiovascular disease, colorectal cancer, and breast cancer could annually avert 56,200 avoidable adverse health events, nearly 34,000 avoidable deaths, and $899 million in avoidable healthcare costs.

In spite of the fact that diagnostics are recognized as an integral part of such quality care standards as the Health Plan Employer Data and Information Set (HEDIS) and the National Quality Measures Clearinghouse, their adoption, full utilization, and ongoing development and innovation are all adversely affected by inadequate coding, coverage, and reimbursement according to the report. Calling the reimbursement system “archaic, impractical, and severely flawed,” the report notes that Medicare reimbursement policies typically fail to differentiate new diagnostic tests from older ones, paying the same or less even though the newer test may provide a significantly greater contribution to patient care.

According to the report, the Medicare Clinical Laboratory Fee Schedule (CLFS) does not reflect the relative value of diagnostics to healthcare , and has not been updated for inflation for 13 of the last 15 years—and will not be adjusted again until after 2008. The report states that Medicare’s coding and payment processes are “time-consuming, lack transparency, and are inconsistently applied,” thereby creating a disincentive for physicians to order newer tests that may not be covered or are inadequately reimbursed. The report further notes that Medicare’s reimbursement policies on diagnostics do not only affect its 40 million beneficiaries, but are used to largely determine the policies of state-funded Medicaid plans as well as private carriers that provide healthcare insurance for millions of Americans.

In addressing what it calls inadequate coding, reimbursement coverage, and payment systems, the Lewin report calls on Congress and the Centers for Medicare and Medicaid Services (CMS; Baltimore) to:

• Create a single national payment schedule with an open, systematic, and accountable process that would reduce wide pricing variations.

• Correct historic pricing and coding errors.

• Clarify processes and criteria for incorporating new tests into the CLFS.

• Develop and implement a value-based payment system for diagnostics that better recognizes the clinical, economic, and other benefits of improved diagnostic testing.

• Allow for more public stakeholder input into pricing and coding decisions.

AdvaMed’s Ubl: Calling for Reexamination.

Commenting on the report, AdvaMed president and CEO, Stephen J. Ubl, said, “Scientific breakthroughs, such as the development of molecular diagnostic tests, are driving the movement toward personalized medicine. It is time for a fundamental reexamination of the 20-year-old Medicare payment system that was built for the science of yesterday to ensure that the predictive value being added by these tests is being recognized, and that patients have access to the best treatment roadmap science has to offer.”

Childs: Condemning current coding.

Blair Childs, AdvaMed’s executive vice president for strategic planning and implementation, said the report vividly illustrates the “enormous innovation that is taking place in the diagnostics industry—innovation that is already delivering on the promise of more efficient, more effective—and more personalized healthcare. Current coding and reimbursement policies and procedures, which were largely put in place in the 1980s, are simply not equipped to process the ongoing advances in diagnostics.”

Nordhoff: Hopeful of change.

Henry L. Nordhoff, chairman, president, and CEO of Gen-Probe Inc. (San Diego), said the report provided “compelling information and will likely emerge as a standard reference tool for the subject of diagnostics.” Nordhoff, who is also chair of AdvaMed’s diagnostics sector, reinforced the findings of the report, stating, “Coding and reimbursement have not kept pace with the realities of the science of diagnostics—or the healthcare marketplace. With the steady advance of diagnostics developments and the rapidly emerging era of molecular diagnosis and the promise of personalized medicine, we’re a totally different industry than we were when these coding and coverage policies were established. I’m hopeful that Congress and CMS will recognize these realities and implement the recommendations of the report.”

“With this report, we finally have some documentation of the value of diagnostics,” said Dee Simons, director of public health policy for Roche Diagnostics (Indianapolis) and chair of AdvaMed’s diagnostics payment task force. “Trying to fit sophisticated diagnostic tests into an antiquated coding and reimbursement system just doesn’t work. This report makes the case that diagnostics have tremendous payback value particularly when you consider their relative low cost. We’ve needed changes in the system for some time. I think this report will provide invaluable insights to the policy makers who establish the coding and reimbursement policies.”

ACLA’s Mertz: Let’s enlighten policy makers.

“This kind of report was long overdue,” said Alan Mertz, president of the American Clinical Laboratory Association (Washington, DC). “It drives home the value and importance of diagnostics testing and uses many examples that emphatically make the case that current reimbursement policies are not keeping up with the new technologies. It also makes the case that diagnostics are an essential component of an integrated healthcare delivery system. Too often, the policy makers have attempted to look at laboratory spending in a silo.”

According to the report, the 2005 worldwide diagnostics market is valued at $28.6 billion, with a U.S. share of 39.16%—down from 43% in 2003.There are around 180 U.S. manufacturers with approximately 40,000 employees. Half of the companies are small businesses with 50 employees or less, but the top nine firms controlled 78% of the business as of 2002. U.S. diagnostics firms invest approximately 35% of their sales revenue in research and development—a greater proportion than both medical device and pharmaceutical companies and far more than the general manufacturing sector.

The complete report and supporting materials are available via the AdvaMed Web site at: www.advamed.org/publicdocs/july2005hillbriefing.shtml.

Canon Communications LLC

Return to main menu.