Health Plan Payment and Reimbursement

The price of precision medicine: 3 ways for health plans to manage genetic-testing costs

August 1, 2019 12:52 pm
  • Spending on genetic testing is expected to grow significantly, and health plans should establish processes for managing costs.
  • Installing genetic experts who can consult with clinical leaders will help a health plan keep up with emerging genetic tests and bolster medical necessity policies.
  • Other key steps include rigorously assessing genetic-testing claims trends and strengthening laboratory-control processes.

Genetic testing is coming to primary care, but at a high price — and for health plans, managing the associated expenses is no small difficulty.

Spending on genetic testing is expected to grow from $7.5 billion in 2017 to $17.6 billion by 2025, but not all genetic tests are supported by documented scientific evidence. When health plans lack strong processes to support genetic-testing coverage, they struggle to control costs.

How can health plans more effectively manage genetic-testing costs? Here are three actions to consider.

1. Establish robust processes for updating genetic-testing policies

One of the biggest challenges health plans face is determining when to cover genetic tests ordered by members’ physicians. Plans also encounter difficulties in keeping up with the volume of new tests entering the market. As a result, coverage policies for some genetic tests, such as single- and multigene tests for cancer treatment, vary among commercial payers. This approach creates confusion for members and clinicians and ultimately impacts access to testing.

For health plans, a practical approach is to utilize genetic expertise, whether in-house or in partnership with genetic consultants, to develop genetic-testing policies that are grounded in evidence. The addition of medical geneticists to collaborate with medical directors not only can help health plans keep up with emerging discoveries, but also can support fair and effective enforcement of medical necessity policies. Plans may also wish to require that members undergo genetic counseling before receiving genetic testing or treatment, to avoid unnecessary testing.

2. Analyze genetic-testing claim trends to identify potential errors or misuse

One analysis found several genetic tests that were billed by a laboratory but did not apply to the patient’s actual or potential diagnosis, had no clinical value or were repeated multiple times for the same person. It also uncovered cases where heavy volumes of claims were received for newly released tests with high levels of payment. Meanwhile, the lack of CPT codes that have a one-to-one match with specific genetic tests complicates the ability of health plans to adjudicate and pay genetic-testing claims.

One strategy for genetic-testing claims-trend analysis is to zero in on the health plan’s top areas of genetic-testing spend — typically prenatal testing, hereditary cancer and oncology treatment — and look for trends that could point to overbilling. Examples include:

  • Billing for multiple units of service
  • Inappropriate coding
  • Instances where tests do not meet the plan’s medical necessity guidelines but are not automatically rejected

Health plan leaders can use this information to establish controls that prevent instances of incorrect billing or overbilling, leveraging tools such as machine learning to accurately and efficiently apply the payer’s rules to genetic-testing claims.

3. Look for ways to strengthen laboratory-control processes

In one case, a children’s hospital used laboratory genetic counselors to review genetic-test orders, leading to the modification of 32% of tests and a cost savings of nearly $1 million.

Reducing the number of laboratory providers with which the plan contracts, based on an analysis of genetic-testing claims trends, can also help decrease genetic-testing costs. Health plans should determine:

  • Which labs follow best practices for genetic testing
  • How lab prices for the same test differ
  • How a consolidated list of in-network labs could impact quality, cost and member satisfaction

Plans should use this data to identify preferred-network labs and steer members to those. Applying the same approach to pathology — a top-five cost area — also can significantly cut expenses.

Designing a data-based approach

The amount of information that can be captured through precision medicine is growing each day, presenting new opportunities to improve care. However, ensuring that genetic tests are clinically appropriate and billed correctly is a challenge that health plans must address to stay ahead of the curve. Investment in genetic expertise and claims analysis can help health plans more effectively manage the costs associated with genetic innovation.


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