From Our Print Archives

Verification, Validation for MDX

Strategies for comm­ercially available and laboratory-developed assays are explored.

Vol. 19 • Issue 6 • Page 44

For a growing number of laboratories of every style and size, molecular diagnostics (MDx) is an increasingly common part of the repertoire of tests. Labs are much more comfortable with molecular testing and are embracing expanding test menus to keep testing in-house, no longer shying away from what was once considered highly complex technology best suited for esoteric reference labs.

Test platforms are regularly seeing advancements and enhancements and new applications are found just as frequently, making molecular testing accessible for almost every lab. Technology and cost need no longer be prohibitive factors. Some systems are close to fully automated; benchtop platforms ideal for the physician office lab or a near-patient location in the ICU are available. Bringing these MDx assays into the lab may be a simpler process than you think: For commercially available, FDA-approved molecular assays, labs need only verify the performance characteristics before making a test available for physicians to order.

The verification process for FDA-approved assays is simple, says Gregory J. Tsongalis, PhD, associate professor, director of Molecular Pathology, and co-director of the Translational Research Program and Pharmacogenomics Program at Dartmouth Hitchcock Medical Center in Lebanon, NH. The manufacturer and FDA have done the hard part. "We only have to show that the assay works as well as the manufacturer claims it will in the package insert," Dr. Tsongalis says. Lab managers are familiar with the verification process, as requirements are the same as those used for other areas of the lab.

Per CLIA '88 Section 493.1253, verification of an assay must include analytical sensitivity and specificity, reportable ranges, plus precision and accuracy studies. Especially for those facilities with a specialized patient population, you must also verify that the manufacturer's reference intervals (normal values) are appropriate. Verify hands-on time, complexity and turnaround time to have the best idea of how the test will perform.

The LDT Difference

But just as commercially available MDx platforms and assays become increasingly accessible, another trend is being embraced by some labs, and for these, validation is performed in the lab-a much more strenuous and time-consuming process, Dr. Tsongalis explains. Laboratory-developed tests (LDTs) are assays created in-house and growing in popularity. These tests are typically developed because there is no commercially available assay in the marketplace to meet a particular clinical need.

Dr. Tsongalis says his lab has researched, created, validated and verified many LDTs based on demand from the ordering physicians. He explains that physicians may come to him having heard of a recently discovered gene or mutation and think that a test would be useful for their patient population. In most of those cases, if resources allow, the lab will move forward with developing an assay.

If these tests are valuable for physicians, why are they not commercially available? "Manufacturers just can't create these tests and get them through for FDA approval fast enough, and sometimes it's not financially feasible for vendors to do so. If it's a test that might only be performed 10,000 times in a given year, it's probably not worth it to spend millions to get it through the FDA," Dr. Tsongalis explains.

Mary Lowery Nordberg, PhD, associate professor, Departments of Pathology and Pediatrics and director of Molecular Pathology at Feist-Weiller Cancer Center, Louisiana State University Health Sciences Center, Shreveport, adds another important point leading to an uptick in the number of LDTs: Licensure issues with some of the available kits means some test kits can't be performed in-house. "You're almost forced to create an LDT, unless you want to do a send-out," she adds.

Patient populations can differ drastically, making certain tests a priority for some facilities. Rather than waiting and hoping for someone to market an FDA-approved test, labs with enough manpower may choose to take matters into their own hands.

LDT Validation

While creating an LDT is often a worthwhile venture for labs with the appropriate resources, a thorough assessment of patient population and clinical need must be the first step when considering developing an assay. Involve all stakeholders to ensure valuable lab time isn't wasted on a test that might not be utilized. Get a clear picture of likely test volumes you'll see when the assay is in place.

Extensive research and reviewing the literature will help determine the analytic method and define a range of acceptable performance characteristics. A pilot study utilizing mock samples and actual patient specimens can help refine those characteristics. Include specificity, sensitivity, reproducibility, linearity, accuracy, precision and reportable ranges. The pilot study should be as realistic as possible, using the supplies you plan to use and all controls. Take step-by-step notes during the test runs; this will help create a training and procedure manual and ensure that performance characteristics are adequately defined.

Collect data to analyze for determining test ordering guidelines, information for specimen collection, estimated turnaround time and reporting and billing guidelines. Documentation of the validation steps is necessary to declare the assay ready for physicians to order. Labs that modify uses or methods of an FDA-approved system must perform both validation and verification studies to determine and meet performance specifications.

Kelly J. Graham is associate editor.

MDX in Oncology

Cancer genetic signatures have utility to facilitate anti-cancer treatment in a variety of applications.

By Barbara Zehnbauer, PhD, FACMG

Application of molecular biology methods to the identification of nucleic acid (DNA or RNA) changes that specifically define neoplastic disease or cancer has been in practice for several decades. Cancer is a disease initiated by acquired genetic mutations that change the normal limitations on cellular growth patterns to those of a dysregulated tumor cell in a process of cellular transformation or tumorigenesis. The genes which harbor these abnormalities are frequently involved in several pathways that are abnormally regulated in cancer cells-uncontrolled proliferation or growth, DNA instability, invasiveness and metastasis. The altered genetic pattern of the tumor cell is clonally transmitted to the descendents of that initial cell as a tumor-specific biomarker detected by molecular diagnostic (MDx) methods.

Detection of tumor-specific mutations or expression patterns is the most frequent type of MDx testing. Cancer genetic signatures have utility to facilitate anti-cancer treatment in a variety of applications, including biomarkers with diagnostic or prognostic value, gene targets for small molecule drugs, indicators to monitor residual disease and predictors of pharmacogenetic response to chemotherapeutics. These applications are explored in this review.


Tumor-specific genetic changes distinguish cancer cells as different from normal cells. Genes that are normally present acquire mutations that produce loss of expression or gain of function and result in abnormal cell characteristics. Some of these tumor mutations occur in distinct cell lineages leading to diagnostic criteria of tumor categories and subtypes that include definitive molecular genetic signatures, particularly those used for classification of leukemias and lymphomas.1More specific diagnoses enable selection of more effective therapies.

A key example is the BCR-ABL1 fusion gene, which results from the t(9;22) (q34;q11) chromosomal translocation (aka the Philadelphia chromosome), implicated in the pathogenesis of chronic myelogenous leukemia (CML)2and is identified in at least 95% of these patients. CML accounts for 15-20% of all cases of leukemia (1-2 cases per 100,000 people per year) with a typical onset at greater than 50 years of age. The BCR-ABL1 fusion gene produces a hybrid tyrosine kinase essential to the transforming activity of the leukemic cell. This molecular genetic variation is the diagnostic hallmark of CML and also serves as a prognostic indicator of poor outcome in the small subset of cases of acute lymphocytic or myeloid leukemias (ALL and AML), which also harbor BCR-ABL1.

Molecular genetic changes are also characteristic of carcinomas and sarcomas but with less specificity for defining tumor subtypes. Reverse transcriptase polymerase chain reaction (RT-PCR) is most frequently implemented to detect the tumor-specific BCR-ABL1 fusion message at both diagnosis and after therapy to detect residual cancer cells.


Genetic markers have also been recognized as prognostic indicators of likelihood of response to treatment or ­disease ­progression, or as predictors of outcome or tumor recurrence. This is insight derived from treating populations of cancer patients with similar disease phenotypes and similar molecular genetic findings. Different outcomes of disease-free survival or overall survival may correlate with altered molecular genetic tumor profiles identifying changes that herald a more or less favorable clinical outcome. For example, the BCR-ABL1 fusion gene is a diagnostic biomarker for CML but is an indicator of poor response to treatment and poor prognosis when present in the leukemia cells of patients with ALL or AML.3

Monitoring Treatment Response

The tumor-specific molecular genetic signature may also track the efficacy of the anti-cancer treatment by monitoring the levels of residual cancer cells throughout the course of treatment. Monitoring response to treatment is accomplished via quantitative molecular methods such as real-time PCR to sensitively measure the level of specific biomarker gene expression as an indicator of tumor cell levels. Amplification and detection of the target are combined in a single tube using a sequence-specific fluorescent oligonucleotide probe molecule to hybridize to the PCR product and detect the accumulation of DNA molecules at each amplification cycle. A high level of biomarker expression, present at initial diagnosis or disease relapse, supports PCR product accumulation in relatively few cycles with very precise quantification during the early, exponential phase of the PCR (<20 cycles).4

Treatment Selection, Targeted Therapies

Studies from many clinical centers have validated the utility of cancer genetic signatures to stratify patients to the most effective treatment regimens based on historic outcome-based studies. These therapies have ranged from chemotherapy and stem cell transplantation to immunotherapy and small molecule drugs.

Molecular diagnostic assays are used to identify the mutations that indicate the effective selection of drugs to treat susceptible tumors. Examples include point mutations or small deletions in the EGFR gene of non-small cell lung cancers that predict a patient's sensitivity to therapeutic monoclonal antibodies erlotinib and gefitinib;5KRAS gene point mutations in colon cancers that predict lack of response to EGFR inhibitors panitumumab and cetuximab;6,7and breast cancers with HER2 gene overexpression (by increased number of gene copies) to indicate selection of trastuzumab to block epidermal growth factor (EGF) binding and cancer cell proliferation.8

Most recently, anti-cancer therapies have been developed that specifically target the tumor-specific gene products within cancer cells, bypassing normal cells of the same lineage. Only cancers that bear the genetic mutations will respond to these targeted therapies, requiring specific, sensitive and timely molecular diagnostic tools to aid the oncologist in characterizing the cancers of patients who may be candidates for these genetically designed drugs. The best examples of these small molecule drugs are imatinib mesylate9,10and the second generation tyrosine kinase inhibitors (TKI), dasatinib11 and nilotinib,12which directly target the BCR-ABL1 fusion protein tyrosine kinase. They are approved for the treatment of early stage CML as both highly effective and well-tolerated by patients.12,13By competing with adenosine triphosphate (ATP) for binding to the tyrosine kinase, imatinib renders the BCR-ABL1 fusion protein unable to activate downstream effector tyrosine kinase molecules that drive white blood cell proliferation.14,15It does not affect the activity of the normal ABL1 tyrosine kinase in the same cells.

However, imatinib-based therapy has three drawbacks: Patients with advanced phase CML or ALL have limited response, drug resistance is observed in approximately 40% of treated patients due to emergence of cells with mutations in the BCR-ABL1 kinase domain that prevent imatinib binding required for inhibition, and the relative insensitivity of leukemic stem cells to the TKI provides a source of leukemic relapse.16-18A nucleotide change that creates an amino acid substitution of isoleucine for threonine at codon position 315 (Thr 315 Ile or T315I) is the most frequently observed BCR-ABL1 mutation located within the ATP binding polypeptide loop, which confers a lack of response to these TKIs.12This ­mutation may be detected by direct DNA sequencing of the BCR-ABL1 RT- PCR product.

Molecular diagnostic detection of the BCR-ABL1 abnormal gene equips an oncologist with a specific diagnosis, provides the knowledge to select a therapy targeted specifically to the cancer cells, allows him to monitor the levels of gene expression and, therefore, the levels of cancer cells following therapy as well as investigate the molecular basis of resistance to therapy.


There is not yet sufficient understanding of the biology of all tumors to develop gene targeted therapeutics for every cancer; most anti-cancer treatment must include some chemotherapy or radiation therapy. While molecular diagnostic characterization of tumor-specific genetic changes can aid in predicting drug response, molecular diagnostic detection of variations in genes that metabolize chemotherapeutic agents are also used to maximize the most effective dose and ­minimize the risk of toxicity from the treatment. ­Thiopurine ­methyltransferase (TPMT) gene point mutations that produce reduced metabolism of 6-mercaptopurine, for example, can result in life-threatening myelosuppression in patients with ALL; ­genotype-guided dose reduction effectively modifies this risk of toxicity.19As well, promoter mutations that increase the expression of thymidylate synthase (TYMS) can reduce its inhibition by 5-fluorouracil, thereby reducing the effectiveness of 5-fluorouracil (5-FU) as an anti-cancer treatment;20alternative treatments may be required.

Common genetic variations in the cytochrome P450 2D6 gene alter the metabolism of tamoxifen to the more active form endoxifen, a breast cancer therapeutic. Women with two functional copies of CYP2D6 will receive more therapeutic, anti-cancer benefit from tamoxifen than women with reduced CYP2D6 metabolism. Genotyping for the pharmacogenetic variations of CYP2D6 associated with poor drug metabolism can be accomplished by a variety of methods, most commonly a DNA microarray with the ability to detect the many different variant alleles, including single nucleotide changes, gene deletion and gene duplication.21

Most chemotherapeutic dosing is determined by a patient's body mass (mg/kg/m2), age and physical condition to determine a maximum tolerated dose. With consideration of the patient's inherent genetic ability to metabolize and respond to these drugs, oncologists will have opportunities to tailor a personalized medical treatment and produce better outcomes for disease-free survival.


While MDx testing for oncology may also be called molecular pathology, these methods do not replace traditional ­pathology studies of tumor size, stage, cell morphology, lymph node involvement or special studies of protein expression detected by immunohistochemical techniques. Imaging studies are also essential for measuring and recording tumor size and distribution throughout the body. Key aspects affecting the accuracy of molecular diagnosis of cancer cells are the specificity of the gene mutation for the tumor type, the concentration of tumor cells in the specimen submitted for analysis, the stability of the nucleic acid in the specimen and the limits of detection of the analytic methods used.

Barbara Zehnbauer, PhD, FACMG, is chief, Laboratory Research and Evaluation Branch, Division of Laboratory Science and Standards, Centers for Disease Control and Prevention.

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Lab Testing to Support Individualized Medicine

Pharmaco­genomic and genetic testing offer the possibility for more personalized care.

By Jill Hoffman

"Personalized" or "individualized" medicine uses information about individual patients to optimize preventative and therapeutic care.1The clinical laboratory is uniquely poised to do just this with its evolving molecular technologies.


These days, the field of pharmacogenomics has become almost synonymous with personalized medicine. Pharmacogenomics is defined as the convergence of pharmacogenetics (the hereditary basis for inter-individual differences in drug response) and genomics to mean the influence of DNA sequence variation on a drug's effects on an individual. It is an emerging field, but one with high value, advocates say, as research has begun to show benefits for guiding therapy, and the FDA has started putting labels recommending genetic testing be seriously considered on certain drugs.

An abstract on a prospective community-based trial published March 18 in the Journal of the American College of Cardiology found genetic testing guiding early warfarin (known by the brand name Coumadin® dosing appears to reduce hospitalizations. Patients genotyped for the warfarin metabolism gene CYP2C9 and vitamin K blood clotting activator gene VKORC1 had a relative 28% fewer hospitalizations for bleeding and thromboembolism than historical controls (P=0.029). Giving physicians genotype results with dosing interpretation also appeared to reduce hospitalizations by an adjusted 31% compared with historical controls (P<0.001). The sooner patients were genotyped after starting warfarin, the better the outcomes.

Some clinicians have voiced concern about the study, which was not controlled or prospective, stating that findings may have been influenced by physicians who were more responsive because they were being monitored.

"However, it appears to me that there's enough data in the literature to support a link between the application of a genotype and the adjustment of the dosing to the strong possibility that it is going to affect reductions in adverse effects, so I would say that although the study is not ­

definitive, it certainly goes a long way toward indicating that the preliminary data does seem to show that the use of this information is valuable," says Roland Valdes Jr., PhD, professor and senior vice chairman of the Department of Pathology and Laboratory Medicine, professor of Biochemistry and Molecular Biology, Distinguished University Scholar, director of Clinical Chemistry and Toxicology, Department of Pathology, University of Louisville, KY.

Dr. Valdes is also a founder of PGXL Laboratories, a CLIA-certified laboratory focused on pharmacogenomic testing. The lab is awaiting completion of a clinical trial for PerMIT:Warfarin a Web-based tool enabling warfarin to be tailored to patients over the course of treatment via ­pharmacogenetic modeling. The tool calculates an ideal warfarin dose range and assists with loading/transition dosing for interpretation of international normalized ratio (INR) results. Dr. Valdes expects the product to be on the market Q1 2011.

Gualberto Ruaño, MD, PhD, director of Genetics Research, Hartford (CT) Hospital, and president and CEO, Genomas Inc., says his lab has published studies on non-genotyped patients who were over- or underdosed with warfarin as much as 60 days. "There is no ethical reason that could sustain using warfarin without genotyping, particularly in patients that have cardiovascular problems, maybe are older and therefore vulnerable," he says.

Another new development in the field: The American Association for Clinical Chemistry's National Academy of Clinical Biochemistry in 2010 published guidelines on pharmacogenomic application in clinical lab practice.2Dr. Valdes, who chaired the committee drafting the document, says the guidelines will address a major reason why pharmacogenomics has not been widely adopted-a lack of physician education on the testing. Other reasons include a dearth of large-scale studies and third-party payors who don't recognize the value of the tests. "Those are the main problems, and we're slowly getting at all of them," he says.

Other Genetic Tests

Warfarin is one type of testing supporting personalized medicine. Other genetic tests in the areas of oncology, cardiovascular medicine and even psychiatry help elucidate if a patient has a higher susceptibility for a given disease or should be considered for therapy with a specific compound.

According to a Feb. 19 Wall Street Journal article,3several drugs have been found not to work well in patients with certain genes (e.g., the chemotherapy drugs Erbitux and Vectabix for colorectal patients with a mutated form of the KRAS gene, the anti-clotting drug ­clopidogrel bisulfate-known by the brand name PLAVIX®in people with a certain version of the CYP2C19 gene, the tamoxifen breast cancer drug in patients with one version of the CYP2D6 gene and Carbatrol for epilepsy patients [the FDA recommends that Asians be tested for the B*1502 gene]). Dr. Valdes adds that the FDA recently issued a black box warning for Plavix indicating that genetic testing can determine for whom the drug is efficacious.

Beyond the more common gene tests are those for Factor V Leiden and Factor II single-point mutations leading to increased risk of thrombosis and for the 5-HTTLPR serotonin transporter, which is associated with delayed or adverse antidepressant response.

Yet other technologies aiming to further personalized medicine are the Veridex CellSearch®Circulating Tumor Cell (CTC) Test, a blood test assessing circulating tumor cells to determine prognosis for patients with metastatic breast, colorectal or prostate cancer, and ProOnc TumorSourceDxfrom Prometheus Laboratories, a micro-RNA-based tumor test to evaluate cancers of unknown primary and better guide therapy.

"Initially when pharmacogenetics was brought into vogue, we were mainly looking at metabolism of drugs," Dr. Valdes says. "Now the key thing is the combination of the metabolism of the drugs and the receptor for the drugs. When you combine those pieces of information, you get a very powerful prognosticator."

Jill Hoffman is senior associate editor.


1. Wikipedia: "Personalized Medicine." Available at:

2. AACC Laboratory National Academy of Clinical Biochemistry Board of Directors. Medicine Practice Guidelines Guidelines and Recommendations for Laboratory Analysis and Application of Pharmacogenetics to Clinical Practice. Available at: (accessed April 13, 2010).

3. Winstein KJ. "DNA Tests May Predict Blood-Thinner Dosage," The Wall Street Journal (February 18, 2009). Available at: (accessed April 27, 2010).

MDx Reimbursement Strategies

Awareness of evolving payor and regulatory issues can help minimize roadblocks to new testing modalities.

By Rina Wolf

As we progress in this era of personalized and evidence-based medicine, genetic testing and molecular diagnostics (MDx) will play key roles in determining the right treatment for the right patient at the right time. Despite the growth of the laboratory diagnostics segment and the plethora of labs attempting to occupy this space, several reimbursement and commercialization hurdles continue to present significant issues.

In a recent survey, only 13% of physician respondents had ordered or recommended a genetic test in the previous six months.1 ost physicians not utilizing these tests stated that they were not yet comfortable with how they should be incorporated into their practice protocols. Misperceptions still abound regarding what can be accomplished through genetic testing, and the laboratory industry must lead the way in providing a clearer picture. This clarity starts with the acknowledgement that there are many disease states where genetic testing has provided value in terms of improved clinical outcomes and commercial potential.

Today we know that only 50% of patients respond to any given drug while adverse drug events continue to rise.2Initiatives like comparative effectiveness may help us understand how the genetic makeup of a patient can help physicians select the most appropriate treatments. MDx testing that is specific to the patient and circumstances can ensure that a protocol of diagnosis, prevention and prediction will lead to appropriate therapies.

Considerations for Commercialization, Reimbursement

MDx testing modalities can be expensive. Development is both costly and fraught with regulatory roadblocks, and financing is required to support research and development activities. Venture capitalists and other investors need assurances of proof of association between the test and a specific gene, gene set or disease state. Additional evaluation criteria include a well thought out commercialization process, deep understanding of the market and commercial considerations as part of a well-developed business plan and strategy. Major commercialization steps to consider include:

Establishing clinical utility. From the payor's perspective, clinical utility is the overriding consideration, including how the test is used in the clinical setting, reasons for ordering the test for a specific patient and if the results lead to a ­positive change in patient management. If the test has not been made commercially available or used in sufficient volume to gather meaningful data, answering these questions is nearly impossible. This is further compounded by a focus on outcomes that may not be a relevant criterion for a clinical lab test. A test result is a tool that can help a physician create a patient management plan that will lead to a successful outcome, rather than an outcome in itself. Regardless of whether the new testing modality's efficacy is proven through health center collaboration, field tests or other means, the lab must find the path that makes the most sense financially and reaches the goal in the shortest time possible.

Price and cost of goods. Study of other laboratory players in the field is essential and may reveal similar but less expensive tests. Evaluate alternative tests to determine if they provide less definitive and actionable answers. A lab's price for a test may appear to put them in an excellent competitive position, but the costs of the test in the long run can be much greater than anticipated. This can be due to reimbursement complexities, a lack of sufficient coverage policies, a high percentage of appeals, or simply the labor costs of billing and accounts receivable management.

Billing capabilities. Early-stage companies often outsource their billing due to minimal experience in building and managing a billing department. Outsourcing can have the dual disadvantages of loss of internal control and greater expense on a percentage-of-revenue basis. For some labs, it is ideal to start out with an outsourced model, then bring in pieces of the billing function as they are ready, thereby providing the best of both worlds. Although the number of tests performed, adoption rate and pricing are important, how the laboratory gets paid will ultimately determine the success of the business. Labs choosing a billing partner to help navigate this area must find one with experience in the specialty as well as the newest automated billing technologies. Other areas of experience should include management of patient advocacy programs, financial assistance programs and full appeal support.

Billing policies and rules. In MDx, some billing policies and rules are driven by regulatory and payor requirements while others are driven by an internal business philosophy, regardless of in-house versus outsourced billing. The entire rule set governing the management of the billing plan must be structured so that government or regulatory agencies can easily investigate any concerns. In this age of ever-changing regulatory and coverage requirements at the private payor, state and federal level, MDx laboratories must be on constant vigil to quickly adapt without undo costs or delay. This is especially true for those labs working in the Medicare and Medicaid markets. Having a billing partner that continually captures these changes is of tremendous assistance in assuring that your lab is never at compliance risk.

The Road to Coverage

Once commercialization and reimbursement issues have been considered, the next hurdle is ensuring coverage. For a lab to get coverage, the molecular diagnostic test must be aligned with the indicated uses and objectives. A good evaluation should be unbiased to cost and based on the scientific and clinical utility evidence. When the decision is made to cover a test either on an individual, patient-specific basis or via a coverage policy, cost may then become the next consideration. Tech assessment groups such as Blue Cross Blue Shield TEC are among the most recognized benchmarks for coverage readiness assessment. Unfortunately, the published criteria from these groups for evaluating any new modality can be difficult to meet for most clinical labs. Those labs with proprietary tests face an even higher hurdle.

In addition, the number of tests that can be reviewed in a single year by TEC and other assessment groups is limited. Labs must be prepared for this stage with peer-reviewed publications in place and proof that the test is the "standard of care." Clinical utility also is important to reimbursement. Consequently, the lack of demonstrated utilization can make establishing a diagnostic as the standard of care difficult. This is where support from appropriate physicians in a payors own provider network and/or inclusion in relevant medical society guidelines can be invaluable.

Randomized clinical trials (RCT) are the gold standard in proving the clinical utility required for reimbursement, but may not be applicable to the testing modality. Additionally, the time it takes to perform an RCT could make the lab's test obsolete due to newer versions. This becomes financially untenable for many entrepreneurial independent labs. Recent meetings at the FDA and MEDCAC are showing acknowledgement for appropriateness of alternatives to RCTs as well as support for proposals on ways to validate new technologies. Only when a decision is made that a test should be considered a covered service does the decision then go to the contracting department where costs and charges are evaluated. This leads to what is an actuarial exercise for the payor.

Options for Reimbursement

Two main approaches to getting reimbursed for molecular diagnostic tests can be utilized; each has advantages and disadvantages. The first is code stacking, which utilizes existing CPT codes that are directly representative of each particular step in the new test. With this method a lab can add up the correlating clinical laboratory fee schedule amounts assigned to those codes to hopefully reach a sum that makes the test commercially viable.

Many payor systems lack the sophistication necessary to uncover that a test billed with a stacked code is really a new test and it is likely, at least in the short term, that payment will be made based on the dollar values assigned to each of the billed codes in the payor's system.

Unfortunately, code stacking may not bring the laboratory test to a total reimbursement level that facilitates a viable business model. Increased utilization will also eventually raise flags with the payor that something new is happening that requires greater scrutiny and reevaluation. Alternatively, the process of pursuing a new CPT code can take as long as two years and may still result in an insufficient dollar amount for commercial viability. There are a number of initiatives being proposed to increase the transparency of exactly what a test being billed with a stacked code really is. Changes to coding these tests may be seen as early as 2012.

The other approach is to bill using a miscellaneous code or a Not Otherwise Classified (NOC) code. These typically end in "99" and have no pricing associated with them on the Centers for Medicare and Medicaid Services (CMS) clinical lab fee schedule. The advantage of this option is that you can assign a price that is commensurate with the value of what the test offers. To successfully use this option, you must be able to demonstrate that the methodologies used to perform the test are not covered in whole or in part by established CPT codes.

The disadvantage of using a NOC is that every claim raises a red flag with the payor because they have to be manually processed. There is little opportunity for electronic billing until the lab enters the ­

contractual stage and the payor sets up a code to identify the test in their system. As a consequence, getting reimbursed can be a very long process, often requiring negotiation with every payor for every claim. It is not uncommon to get a remittance advisory or an explanation of benefits (EOB) from a payor that might list five or six different encounters, with each of them paid at a different level.

For Medicare claims, unlisted services are usually covered and priced by the local Medicare Administrative Contractor (MAC). The MAC uses a "gap fill" methodology when there is nothing close in the methodology arena to what a lab is doing. This essentially creates a new price and fills in the gaps, so to speak. Gap fills can take into consideration various charges, resources and amounts paid by other payors already paying for the test. Private payors typically relate their fee schedules to CMS' clinical lab fee schedule.

Contract Considerations

Although coverage followed by third-party contracting may be seen by many as the end goal, sometimes a lab has more flexibility as a non-contracted provider. A lab can submit a low payment appeal if the offered price for the test is too low for financial viability. This type of appeal can often be won and is especially appropriate for a lab with a proprietary test.

Any contract between payor and lab should be win-win in terms of timeliness of claim submission, payment and pricing. Most labs that are doing proprietary testing do not have a direct patient encounter in a patient service center. The lab becomes dependent on whomever is forwarding that test to the lab to provide accurate billable information. It may take months to identify and correct a claim, so contracts should allow for a 120-day minimum timely filing deadline. Conversely, there should also be acceptable time limits for adjudicating a clean claim, typically 30-45 days. Many states require claim adjudication within 60 days, so contracts must reflect this.

As a complex sector, MDx holds additional challenges to viable business models for labs beyond the scope of this article. However, these primary considerations go a long way in minimizing the roadblocks to viable new MDx modalities for labs in this space. Innovative technologies and approaches to billing and payment processes can help automate the highly labor-intensive process barriers to clinically and financially viable test modalities. The rewards for labs, payors and patients will increase as molecular diagnostics become the cornerstone of personalized medicine.

Rina Wolf is vice president of Commercialization Strategies, Consulting & Industry Affairs at XIFIN Inc.


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