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Biotechnol Healthc. 2010 Fall; 7(3): 26–30.
PMCID: PMC2957737

Payers Try New Approaches To Manage Molecular Diagnostics

Some payers require prior authorization for molecular diagnostic testing and some don’t. And some payers are looking at other options.
BOB CARLSON, Senior Contributing Editor

What could be called a tsunami of new — and pricey —molecular diagnostics (MDx)1 has payers scratching their heads about how to manage utilization of these tests and the therapies that follow. Competitive pressures are forcing payers to reduce their administrative costs, which include the cost of prior authorization (PA) for molecular diagnostics even though network providers may be using these tests appropriately. As more genetic tests like the BRCA1, BRCA 2, and HER2 tests and genomic tests like the KRAS mutation and Oncotype DX assays become a mainstay of disease diagnosis, managing MDx may require an entirely new approach — which is what CareFirst BlueCross BlueShield has put into action and what United Healthcare is contemplating but won’t talk about in detail right now.

A survey of payers around the country shows that they are employing a spectrum of strategies to make sure that MDxs are ordered for the right patients and that these tests actually do make a difference in patient management. But the question of how well these strategies will work as more advanced tests reach the market has yet to be answered.

Experts in their field

“We have no prior authorization for molecular diagnostic testing,” Carolyn Langer, MD, medical director at Harvard Pilgrim Health Care, says outright. New England-based Harvard Pilgrim, which serves 1 million members, is rated the top commercial health plan in America by U.S. News & World Report.2 “We don’t actively manage patient use of these services through PA, but rather rely on payment policies and post-service claims control.”

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This fall, United Healthcare will develop a new strategy for covering MDxs,” says Lee Newcomer, MD, MHA, senior vice president, oncology.

Harvard Pilgrim monitors laboratory services just like other medical services, and Langer acknowledges that the utilization of MDxs by clinicians has been increasing year over year. But MDxs have not been singled out for special attention, nor has educating clinicians about the appropriate use of these new tests. “We assume they are the experts in their field, and that they have the training and expertise to determine which tests are appropriate for their patients and will guide them in the treatment of their patients,” says Langer, whose responsibilities include medical policies, utilization management, and quality. “We really don’t like to interject ourselves into the doctor/patient relationship.”

Langer allows that tracking whether treatment decisions are concordant with molecular test results “would be a very interesting project,” but notes that Harvard Pilgrim is not privy to test results nor to patient medical records. Besides, she adds, it’s not always possible to track MDxs through the claims system, because they don’t have specific Current Procedural Terminology (CPT) codes. “There would have to be some evidence that these tests are being ordered inappropriately, and, right now, I’m not sure that this is the highest priority area for us,” given that Harvard Pilgrim payment policies appear to be adequately controlling inappropriate MDx utilization, says Langer. She adds, however, that MDxs remain on Harvard Pilgrim’s radar screen, and that the company has not ruled out the introduction of new MDx management programs in the future.

A good thing

This kind of hands-off approach may be a relief for network providers and save Harvard Pilgrim the cost of administering a utilization management program, but the clinical pathways initiative implemented by Care-First BlueCross BlueShield may make providers just as happy and save even bigger dollars. Serving 3.4 million members in Maryland, the District of Columbia, and northern Virginia, CareFirst launched its Pay for Quality program in 2005. Instead of trying to figure out whether to implement PA for MDxs and which ones to include, Pay for Quality simply incorporates the appropriate tests in clinical pathways developed by the network providers themselves. Panels of academic and community-based oncologists develop the pathways based on latest practice guidelines from the American Society of Clinical Oncology (ASCO), National Comprehensive Cancer Network (NCCN), and American Society of Hematology (ASH). These pathways narrow the options in a given clinical scenario, which means care is standardized, overall costs are more predictable, and the likelihood of errors is reduced. There’s also a financial incentive for providers — oncologists who follow the clinical pathways in practice are paid at a higher rate than the standard fee schedule.

“Oncology care is getting more complicated and more precise, plus every few months things are updated,” says CareFirst senior medical director Daniel Winn, MD. “As a health plan, we don’t really want to micromanage all this care. We want to put the right incentives in place, keep a close eye on things, and have the physicians set the standards and manage the care.”

The BRCA, HER2, KRAS, and Oncotype DX tests are all included in the clinical pathways and, because they want their team to be seen as providing high-quality care, oncology group leaders actually do much of the oversight themselves.

“When you put it all together, it’s a good thing,” says Winn. “Patients get the right care, we’re able to keep the premiums from increasing much, and the oncologists are rewarded for doing the right thing. That’s how we’ve managed it, so we don’t really do pre-auth on these tests.”

Expanded test criteria

“Precertification does require an investment of time, so we try to limit the list of things for which we require it,” says Robert McDonough, MD, who heads clinical policy research and development and co-chairs the P&T committee at Aetna, with 18.7 million members nationwide.

The following considerations may land an MDx on the 2010 Aetna participating provider precertification list, which is available on Aetna’s web site3:

  • Complexity of the patient criteria for the test
  • Whether claims system CPT and ICD-9 codes can provide the needed patient information
  • Evidence of significant inappropriate test utilization
  • Test cost relative to the cost of precertification
  • Potential volume of claims for a test

“Especially when a test is newly introduced, we may have to make a judgment that there may be what we call the potential for ‘indication creep,’” says McDonough. Most MDxs do not currently require precertification, he adds, but BRCA and Oncotype DX are two that do, and “indication creep” beyond Aetna medical policies may be one of the reasons.

Myriad Genetics’ BRACAnalysis test, which became commercially available in 2002, identifies mutations in the BRCA1 and BRCA2 genes that increase the risk for breast and ovarian cancer. This test is indicated only in those women whose pedigree includes breast and ovarian cancer, but many physicians see the test as a screening tool for the general population.

Genomic Health’s Oncotype DX assay has been on the market since 2004, but NCCN’s guidelines for breast cancer4 include no recommendation for the use of Oncotype Dx for patients with node-positive breast cancer. The presence of micrometastases are considered node negative for purposes of staging, so NCCN guide-lines recommend the use of Oncotype Dx for patients who are node negative. Aetna’s policy is consistent with current NCCN guidelines, says McDonough.

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“The volume of MDxs is still low,” says Kenneth Schaecher, MD, SelectHealth medical director. “Consequently, we have not opted to reestablish prior authorization.”

It’s the cost of both these assays that makes it worthwhile to make sure they’re being used in accordance with Aetna medical policies. New services take the place of existing services on the precertification list when monitoring shows that existing services, including MDxs, are being used appropriately.

Inappropriate treatment after an MDx test has been done is an important issue, according to McDonough, but can be difficult to monitor. “We certainly don’t want testing just for the sake of testing, but sometimes it’s not easy information to get,” McDonough explains. “For example, it’s easier for us to look at whether a patient who has been prescribed trastuzumab (Herceptin) has had an HER2 test. It’s more difficult to determine whether someone has acted inappropriately according to the results of an Oncotype DX test, because, typically, the claim for the test doesn’t have the results, so the only way we would know the results is by communicating with Genomic Health.”

We are aligned

Oncotype DX also is on the prior auth list for Geisinger Health Plan, the insurance arm of Geisinger Health System, which serves 250,000 members in Pennsylvania. Removing prior authorization for Oncotype DX is “under consideration,” according to Bret Yarczower, MD, a pediatrician at Geisinger Health System since 1989 and a Geisinger Health Plan medical director since 2001.

“We like to see the denial rates in the low single digits before we elect to stop prior-authing something,” says Yarczower. “We retire the medical policy but reserve the right to revisit it.”

The BRCA test does not require PA; neither does HER2, but the KRAS test and the metastatic colon cancer drugs cetuximab (Erbitux) and panitumumab (Vectibix) do. PA on the diagnostic test and on the drugs is how Geisinger Health Plan makes sure the test is done before the drugs are prescribed.

Following up on what appear to be inappropriate treatment decisions after a molecular test is done is something medical management does “fairly often,” Yarczower reports. “We handle these cases very, very carefully because we know that at the end of every one of these decisions is a patient,” Yarczower emphasizes.

Overall, Yarczower sees consensus among Geisinger Health System network providers about the use of MDxs and treatment indications.

“Maybe I’m spoiled, but the oncologists I deal with are truly up on the science and on the evidence,” he says. “What you have are agreed-upon best practices. We are aligned in this matter.”

Ongoing discussion

SelectHealth, the insurance arm of Intermountain Healthcare, with 500,000 members in Utah and southern Idaho, got rid of PA in 2003, following in the footsteps of United Healthcare, which led the way in eliminating this intensely unpopular utilization management tool. Seven years later, there are many more molecular diagnostics, but the volume of these tests continues to remain low, according to SelectHealth medical director Kenneth Schaecher, MD. “Consequently, we have not yet opted to reestablish prior auth for molecular diagnostic testing, though we continue to have those discussions.”

Meanwhile, manual adjudication of post-service benefit determinations for MDxs continues, along with a program that educates providers about SelectHealth medical policies on those tests. Providers also can check for a voluntary preservice benefit determination.

Appropriate treatment subsequent to a covered MDx is “an evolving issue” at SelectHealth. “Once we’ve made a determination of coverage, we’re going to rely on the clinician to do the right thing,” says Schaecher. “That’s a decision between the clinician and the patient.”

Tipping point

“We call it a benefit advisory,” says John Watkins, RPh, MPH, BCPS, pharmacy manager for formulary development at Premera Blue Cross, which covers 1.4 million lives in Washington and Alaska. “You do not have to request permission in advance. However, if there is an edit on the test, then it’s subject to retrospective review when the claim comes in.”

Cost is one way Premera decides which MDx gets an edit in the claims system, and the cut-off is around $300, according to Watkins. The cost screen is actually a way to work around the lack of specific codes for these tests. “If it’s above that cost threshold, we’re interested in how well defined the target population is and how likely it will be used in the appropriate individuals if we do not manage it actively,” says Watkins. “We may very well adopt a wait-and-see attitude and check utilization after it’s been around a while.”

For example, Premera has not yet reviewed the evidence behind the updated NCCN guidelines for Oncotype DX. Until such a review is done, a provider would need an individual exception from a medical director before the test is covered for a node-positive patient. Approval on an individual exception basis was also how Premera managed Oncotype DX when it first hit the market. This concern also was expressed by other payers, i.e., that providers who ordered the test would ignore the results. “We wanted to be convinced that oncologists in general had confidence in the test,” Watkins recalls. “We have a panel of half a dozen community-based oncologists that we consult routinely as an advisory committee, and we waited for a tipping point in their opinion.” That tipping point came in early 2008, around the time both ASCO and NCCN first recommended Oncotype DX.

Premera also recognizes that test results may not be the only factor in following a treatment course not supported by a test result. For example, a patient may opt for chemotherapy despite a low Oncotype DX recurrence score. “We would never refuse to pay for chemotherapy just because of this test,” declares Watkins. “The flip side is true, too. My oncology docs tell me that a high recurrence score may convince a patient that was planning not to have chemo to be treated.”

Long-term approach

In the fall of 2010, United Healthcare, with 25 million members nationwide, will start developing a strategy for genetic testing that will encompass coverage decisions for MDxs, which labs will run them, how utilization will be managed, and how to educate patients and physicians about these tests. That’s how Lee Newcomer, MD, MHA, senior vice president of oncology at United Healthcare, describes the deliverables in RFPs sent to multiple vendors who are tasked with helping United “think through what our long-term approach for genetic testing is going to be,” in Newcomer’s words.

“Right now, we actually don’t have PA per se,” says Newcomer. “We ask the physician to make sure that the patient has clinical correlation, and if they don’t have that clinical correlation, we’ll ask why the test is being done.”

The sole exception today is BRCA testing. United imposed prior auth on BRCA tests in 2009 in response to a 15 percent spike in orders, presumably in response to Myriad Genetics’ BRACAnalysis Public Awareness ad campaigns. Along with a medical policy based on nationally accepted guidelines, prior auth reduced BRCA test utilization by 20 percent.

In its contract with United Healthcare, Genomic Health agreed to screen all physician orders for Oncotype DX to make sure patients met test criteria. United has the right to audit Genomic Health records and is entitled to a refund for tests performed on United patients who did not meet the criteria.

United also audits Oncotype DX test results annually and matches those results with claims for chemotherapy. A low recurrence score suggests low benefit from chemotherapy. A high percentage of patients with a low score but who still received chemotherapy allows United to open and renegotiate the contract. In 2009, the percentage of patients with a low recurrence score who still got chemo dropped from 16 to 6 percent.

Progressive plans

The CareFirst approach represents something of a paradigm shift in managing the utilization of MDxs, and United may blaze another new trail when it rolls out its new strategy for genetic testing later this year. Whatever utilization management tools ultimately emerge for molecular diagnostics, some plans seem to do well without prior auth, while others maintain prior auth. One difference may be information systems, according to Brent O’Connell, MD, MHSA, chief medical officer and managing partner with Argenta Advisors, in Woodbury, Minn.

“Some claims systems are so good, a plan can look back at any time and find out whether a physician or physician group is using the test appropriately,” says O’Connell, who was vice president and senior medical director with Highmark Blue Cross Blue Shield in Pittsburgh and chaired the Blue Cross Blue Shield Association Medical Policy Panel. “They can handle utilization on the back end, which simplifies claims processing and makes the practice of medicine easier for physicians. Progressive plans with good systems don’t need to rely on PA to control the utilization.”

In fact, an internal study5 of 30,000 covered lives commissioned by Oncotype DX developer Genomic Health found that the number of test requests was higher in plans without PA (54 percent vs. 46 percent), but the percentage of out-of-criteria or inappropriate requests was almost identical (10.9 percent with prior auth, 10.3 percent without).

What does this suggest about the value of prior auth with a test like Oncotype DX?

“It suggests there have to be other reasons why you keep doing prior auth,” says O’Connell. “Different plans have different systems and do things differently.”

Those differences can come down to the preferences (or prejudices) of individual physicians at the plan level. That’s more likely to happen in “closed plans,” where two or three plan physicians look at the data for a particular molecular diagnostic and where prior auth may be implemented simply to limit utilization. “Open plans,” on the other hand, solicit input from their network physicians, who ultimately tip the scales in determining the medical policies they will work with.

“When practicing physicians are involved, the policies are open, you know what the plan is going to do, you know why they’re going to do it,” O’Connell adds. “That makes for a very good system because there’s less friction all around.”

To support his contention that it’s variability in corporate culture and information systems that explains why some plans impose PA on a molecular diagnostic while competing plans do not, O’Connell calls on his 15 years’ experience with Highmark. “Highmark is a huge plan in Pennsylvania, and there is no preauth for Oncotype DX,” says O’Connell. “But other plans in Pennsylvania have prior auth requirements. They all share the same physicians, they all have the same utilization. One plan chooses to do it, the other does not.”

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“Progressive plans with good systems don’t need to rely on prior authorization to control utilization,” says Brent O’Connell, MD, MHSA, chief medical officer and partner at Argenta Advisors in Minnesota.

The hard fact

Competitive pressures for health plans in the emerging health care marketplace, the concurrent advance of personalized medicine, health care consumerism, the push for provider accountability, demographic trends, the new Patient Protection and Affordable Care Act, and ever more limited resources make the status quo in healthcare increasingly unsustainable. “I know plans whose administrative expenses are in the double digits, and they really have to be down in the 7, 8 percent range, or as low as they can get it,” says O’Connell.

Dumping prior auth when it’s no longer needed is one way to lower administrative expenses, especially when it comes to molecular diagnostics that can inform patient management and potentially eliminate the cost of ineffective downstream therapies.

“Unless there are utilization or fraud problems associated with a test, you owe it to physicians to get rid of preauthorization,” says O’Connell. “There has to be a valid reason why you keep a preauthorization in effect, because it costs money and it’s aggravation to the patient and the physician. Progressive plans tend to be very cognizant of those kinds of things, and they don’t put preauthorization in routinely.”

For health plans — even plans with great claims processing systems — tracking MDx utilization and subsequent therapeutic management is complicated by the lack of specific CPT codes for individual genetic and genomic tests. “Code stacking” is the workaround that keeps the reimbursement streams flowing, but it doesn’t do much for health plans.

Notes Newcomer at United Healthcare, “The hard fact of the matter is, we can’t identify them [the tests], because of the current flaws in CPT-4 coding. We’re trying to seek solutions to find codes for each test so that we can start tracking and identifying what’s going on.”

When the coding is resolved and plans finally figure out what they’re paying for molecular diagnostics, that may be a good time to put this new technology in its proper context.

“Some of these tests are costly, but the information they provide is of value in the management of patients,” says O’Connell. “If we want the best medicine, we have to adopt this kind of approach. If you shut down all expensive tests, you don’t make progress, you don’t learn, you don’t develop new treatments. There are loads of diseases that we’ve cured, because we kept working on them.”


1. Molecular diagnostic tests interrogate molecular biomarkers such as genes and proteins to identify disease states, assess disease susceptibility and prognosis, and predict response to therapy. This article focuses on four commonly ordered diagnostic tests: BRACAnalysis, HER2, KRAS mutation, and Oncotype DX
2. “U.S. News & World Report. Best Health Plans. Aug. 27, 2010. «». Accessed Aug. 26, 2010.
3. 2010 Aetna participating provider pre-certification list. «». Accessed Aug. 26, 2010.
4. NCCN (National Comprehensive Cancer Network) Clinical Practice Guidelines in Oncology: Breast Cancer. V2. 2010. «». Accessed Aug. 26, 2010.
5. Chao C, Laouri M. The impact of prior authorization process on Oncotype DX use. 2009 Sep; Genomic Health, Inc. and Quorum Consulting, Inc.

Articles from Biotechnology Healthcare are provided here courtesy of MediMedia, USA