Cracking the Code: Mastering Z-Codes for Molecular and Genetic Tests
July 28, 2023
This blog is part of a series. Read Part 2 here.
I recently had the opportunity to collaborate with Dr. Gabriel Bien-Willner, the Medical Director of Molecular Diagnostic Services (MolDX) and Chief Medical Officer, of Palmetto GBA, and Valerie Collier, Access and Reimbursement Manager with ARUP Laboratories on a webinar discussing what diagnostic organizations need to know about applying for DEX Z-Codes® to be ready for the newest commercial payor requirements for genetic test claims. The webinar was moderated by Kathryn Stough, Chair and Principal of K-H-S Solutions, LLC.
The discussion opened with Dr. Bien-Willner providing some essential background information on the DEX™ Diagnostics Exchange Registry and Z-Codes. The MolDX program and its associated DEX Registry were created to address three main challenges laboratories face related to the reimbursement of molecular and genetic tests:
- This is an esoteric field. Understanding molecular tests requires knowledge and experience that many clinicians, as well as policy writers and claim adjusters, lack.
- A lack of well-defined billing codes makes claims processing difficult. Many of the existing billing codes are not sufficient to fully understand the tests that were performed or the services rendered because they are not specific enough.
- The lack of standardization in testing makes it difficult to know if any given test is both reasonable and necessary (or has medical necessity). This is especially the case with the many laboratory-developed tests.
In response to these challenges, the MolDX program was created initially for the Centers for Medicare and Medicaid Services (CMS) to utilize expertise in molecular diagnostics to create payor controls, including:
- Identifying relevant molecular tests and creating administrative processes for dealing with those tests
- Determining coverage policies for molecular tests (with subject matter experts (SMEs) deciding on evidence and meeting Reasonable and Necessary requirements)
- Determining reimbursement for tests (when needed) and “edits”
MolDX Process Requirements
The MolDX policy for coverage and claims processing created a requirement for a Z-identifier (also called a Z-Code) to describe the test and allow the automated adjudication of claims. To be issued a Z-Code, a technical assessment (TA) of each test is required. The TA is designed to ensure reasonable and necessary compliance (for example that the test meets the analytical validity (AV), clinical validity (CV), and clinical utility (CU) requirements):
AV: How well does the test detect the mutation/compound it is seeking to detect?
CV: How well does the analyte/variant relate to the presence/risk of disease?
CU: How clinically useful is this test? Can it change management to improve patient outcomes?
The DEX Registry is a free-to-use platform for providers to register their tests with Palmetto GBA. Registration is required for MolDX providers. Providers register their entity and submit their test services. The Z-Code for the service is then created and a TA is performed.
The need to understand whether a test is reasonable and necessary is not limited to Medicare, however.
Z-Code Use by Commercial Payors
Palmetto GBA registry content and services were licensed to Optum in 2021 to bring these controls into the commercial market. Commercial plans started rolling out the use of these services in late 2021 for Medicare Advantage plans. Commercial plans are now starting to leverage the solutions for commercial business for non-Medicare services.
Lessons Learned from ARUP Laboratories
Valerie Collier then described her experiences with the Z-Code application process and specifically the technical assessment which is made up of four components:
- Background information: Test methodology, its intended use, patient population, how results are reported, and how quality control is managed and maintained
- Analytical validation: The number of samples used in the validation, test characteristics, and performance data
- Clinical validation: Data to demonstrate the accuracy of the test
- Clinical utility: Data showing the test includes the correct targets or genes to determine the presence or risk of the target disease and establishing that the test will have an important impact on patient care
Valerie provided some excellent examples of how her team worked through some of the challenges of the technical assessment process based on one of ARUP Laboratories’ latest submissions for a hereditary cancer panel.
The Impact of Z-Codes
Next, I presented some data on what laboratories can expect based on XiFin customer data and trends. First, for the impending UnitedHealthcare (UHC) Z-Code requirement, we recommend that if a laboratory is close to having its Z-Code issued, it should halt processing applicable claims until the Z-Code is issued. Otherwise, we expect that UHC will begin denying those claims on or shortly after October 1 (as a reminder, although UHC is requiring Z-Codes starting August 1, it will not enforce the requirement until October 1, 2023). Expect a few bumps in the road right around that October 1 deadline. It’s always safe to expect a few administrative problems on the payors’ side when it comes to rolling out something new.
Other things we expect labs to experience over time once Z-Codes have been secured include:
- 45% decrease in requests for additional documentation on initial submissions (note that a patient’s medical records may still be required)
- Similar or increased prior authorization (PA) requirements, as with more transparency into the details of the test being performed, it will be easier for commercial payors to establish PA requirements for genetic tests
- Increased coverage for tests with coverage and increased denial rates for tests without coverage through MolDX
- A short-term increase in denials before a long-term decrease
The table below shows a sample of XiFin customer data illustrating the historical impact of Z-Code requirements from the fourth quarter of 2021. It shows an immediate uptick in denials followed by a longer-term decrease.
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Summing things up, here’s what we see at XiFin as the opportunities and challenges associated with the expanding Z-Code requirements from commercial payors:
Opportunities
Risks
The webinar concluded with a robust question-and-answer session. There were so many good questions that we’ll be including them in a follow-up blog article.
Watch the free webinar on-demand to hear more from industry experts, including XiFin’s very own, Kyle Fetter, COO.
Contact us to learn more.