2015 & Beyond – Reimbursement Lessons For Another Year Rina Wolf, Vice President of Commercialization Strategies, Consulting & Industry Affairs, XIFIN, Inc.

www.XIFIN.com

Areas of Concern Commercial Payers FDA Toxicology PAMA Pricing & Coding GSP/ADLTs ADLT FDA Commercial Payers Audits/OIG www.XIFIN.com

Increasing Importance of Financial Management Systems For PAMA: Imperative to capture necessary information either through a billing system that properly accounts for allowables on paid claims or directly from the ERA/EOB Labs should have been reviewing 2015 data to ensure accuracy of payments prior to reporting To comply with deadlines, system must routinely have captured and retained historical payment detail & flagged payments inconsistent with contract Data points will need to be refined when final instructions released System must be able to capture at minimum: DOS Date paid Payor type Number of tests for each procedure code Amount allowed - $ paid by insurer plus patient share of cost Contractual rates, where applicable, including volume and other discounts Aggregate data in timely buckets: e.g., 7/1/15-12/31/15 Data needed to make case for value based pricing Ability to consolidate types of clinical information www.XIFIN.com

Drugs of Abuse Testing CODE # CLASSES PRICE G0477 Presumptive (optical observation) $14.84 (9.90) G0478 Presumptive (instrument assisted optical observation) $19.79 (19.79) G0479 Presumptive (instrument analyzers) $79.16 (59.37) G0480 Definitive 1-7 $80 (61.46) G0481 Definitive 8-14 $123 (78.68) G0482 Definitive 15-21 $166 (127.88) G0483 Definitive 22+ $215 (167.24) www.XIFIN.com

ADLT Pricing CMS has been struggling with the additive clinical value of the algorithmic components Initial price determinations on 9/25/15 reflected this – with proposed pricing based on crosswalks – reductions of up to -90% PAMA Advisory Panel and others, unanimously recommended gapfill CMS reversed to gapfill on 11/17/15 This will leave tests at contractor prices for 2016 – may be subject to reductions due to PAMA for 2017 but will be limited to 10% 81162 BRCA sequencing remained at crosswalk = to 90% However: Errors re Cologard ($364.98 vs $501) and BRCA ($1839.54 vs $2483.37) on 11/25/15 CLFS release www.XIFIN.com

Genomic Sequencing Procedures (GSPs) Proposed Rates HCPCS Descriptor National Limit 81435 inherited colon $795.95 81436 81445 5-50 genes $597.31 81450 >51 $647.75 www.XIFIN.com

GSP coverage National Government Services draft LCD re non-small cell lung cancer UHC posted coverage for non-small cell lung cancer: proven and medically necessary to guide systemic chemotherapy in patients with metastatic stage IV non-small cell lung cancer (NSCLC) when both of the following criteria are met: • Molecular profiling using multiplex or NGS technology is used to test only for epidermal growth factor receptor (EGFR) mutations, human epidermal growth factor receptor 2 (HER2) mutations, RET rearrangements, and anaplastic lymphoma kinase (ALK) gene arrangements; (Note: See the National Comprehensive Cancer Network (NCCN) Clinical Practice Guideline for Non-Small Cell Lung Cancer, available at: www.nccn.org, for updates regarding oncogenes used in molecular profile testing for NSCLC) • The laboratory providing molecular profiling testing services must be approved by the New York State Department of Health for performing the molecular profile test. Note: See the following Web Site for clinical laboratories holding a New York State Department of Health permit in the category of oncology molecular and cellular tumor markers: http://www.wadsworth.org/labcert/clep/CategoryPermitLinks/CategoryListing.htm (Accessed June 3, 2015) References Foundation One as good example Cigna first to post coverage for Whole Exome Sequencing (WES) Genetic counseling component Covered when targeted analytes will not provide answer or are not cost effective Compliance challenges re claims submissions – some labs still “stacking” www.XIFIN.com

FDA - NGS FDA NGS considerations - meeting 11/12-13 Role of databases Design Concept Standards Approach In Design Concept Standards, each lab is required to document a NGS' test components including sample collection (storage, shipping and processing), library preparation, sequencing/base calling (read length as well as mean and minimum coverage allowed), mapping, alignment and variant calling. In addition to documenting the NGS protocol, the lab must complete analytical and clinical validity studies.  Performance Standards Approach In Performance Standards, the FDA or a third party (such as CAP) would create NGS test standards for different clinical uses including disease diagnosis in symptomatic populations, treatment selection, non-symptomatic carrier screening, prenatal testing, etc. For example, a prenatal NGS test would have different standards (sample collection, library prep, sequencing coverage, etc.) than a carrier screening panel. The standards would not require the use of a specific sequencing platform, chemistry or software. Additionally, this approach could also set minimum analytical and clinical validity standards (e.g., the test must have a sensitivity and specificity of at least 90%) or if analytical/clinical validity studies are required. Role of databases Currently more than 2500 – criteria? Other challenges: Lack of material for proficiency testing Funding Different platforms (tests) can produce conflicting results Additional meetings scheduled for 2016 Very different approach re working with stakeholders vs LDT regulation www.XIFIN.com

FDA - LDTs FDA LDT Draft Guidance – ACLA initiated sign on letter Hybrid – initial clearance through FDA but oversight through CLIA Group led by ARUP, Mayo, LCA others Energy and commerce considering proposed legislation, hearing 11/17 Modernize CLIA - CMS indicated not interested in larger role Released documents ahead of hearing with anecdotes re 20 tests Indicated intent to finalize in 2016 Impact of election year – last attempt at guidance in 2012 did not get past OMB www.XIFIN.com

CMS Issues – Labs targeted $7.7 recouped for every $1 spent on anti-fraud activities “Guilty until proven innocent” No accountability for adhering to resolution deadlines “follow the $$” – labs held responsible for issues out of their control, ie physician error Drug Screen, G0431 - OR, WA Widespread Service Specific Probe Review Notification Monday, November 30, 2015 Noridian Part B Medical Review has analyzed national and local data in conjunction with the findings from Comprehensive Error Rate Testing (CERT) to identify atypical billing; therefore, a service specific probe review is being initiated for Oregon and Washington who have submitted HCPCS ® G0431 – Drug screen, qualitative; multiple drug classes by high complexity test method (e.g., immunoassay, enzyme assay), per patient encounter. Noridian MR will review documentation submitted to support claims suspended during this review and post findings on the website. 2 attorneys – 6 examples of unprecedented suspensions No opportunities to appeal Seem to be targeting: PGX, Florida, contracted sales forces www.XIFIN.com

OIG OIG Releases 2016 Work Plan; Report on Lab Payments Expected By Kelly A. Briganti, Editorial Director, G2 Intelligence Last week the OIG released its 2016 Work Plan that continues to name laboratories as a source of concern with regard to Medicare billing and payment. The OIG’s annual Work Plan provides a summary of new and continuing reviews that the agency is undertaking to protect the integrity of, and find opportunities to improve the efficiency of, U.S. Health and Human Services programs. This year’s Work Plan continues an item introduced in last year’s Work Plan: “Selected independent clinical laboratory billing requirements.” The agency is concerned about Medicare payments to independent clinical laboratories—specifically, it’s looking for labs that “routinely submit improper claims.” The OIG claims that audits and investigations indicate independent clinical laboratories are at risk for noncompliant Medicare billing. Once again, the OIG also promises to review Medicare payments for clinical diagnostic laboratory tests, including the top 25 clinical diagnostic laboratory tests by Medicare expenditures. This item was added in the OIG’s mid-year update to the 2015 Work Plan and is required by the Protecting Access to Medicare Act. The OIG says it has found in the past that Medicare “pays more than other insurers for certain high-volume and high-expenditure laboratory tests.” For discussion of the OIG’s most recent annual analysis of the top 25 tests, see “OIG Reports Baseline Data for Clinical Laboratory Tests.” The newest item relevant to laboratories indicates the OIG is focusing on the propriety of payments to histocompatibility laboratories, which reported $131 million in reimbursable costs on recent cost reports (covering March 31, 2013 through Sept. 30, 2014). For all three projects, the Work Plan predicts review reports will be issued in fiscal year 2016.

Leading to compliance issues re patient shares of cost Salaries not keeping pace with increasing out of pocket costs www.XIFIN.com

Commercial payor issues Documentation becoming more and more critical! Front-end requests for additional information increasing Back-end medical necessity audits increasing, recoupment requests 12-18 months after payments Appeals work, but only if the documentation supports Does more harm than good to appeal a claim for which there is no support, but providers should avail themselves of opportunities when warranted Payor consolidation – Anthem/Cigna; Aetna/Humana Narrow networks and new payment models www.XIFIN.com

The Real World – Laboratories targets Cigna Sues Embattled HDL Laboratory For $84 Million -Forbes Health Diagnostic Laboratory and Singulex to Pay $48.5M to Settle Fraud Charges Involving Kickbacks and Unnecessary Testing as Feds Sue Two More Medical Labs and Three Executives on Similar Charges Under the DOJ’s settlement agreement, HDL may need to pay as much as $100 million, according to a published report -Dark Daily Aetna Sues Troubled Laboratory for “Tens of Millions” for Fraud www.XIFIN.com

rwolf@XIFIN.com www.XIFIN.com