The Company expects to bill the Medicare program directly.  Generally, it will be permitted to directly bill the Medicare beneficiary for clinical laboratory tests only when the service is considered not medically necessary and the patient has signed an Advanced Beneficiary Notice, or ABN, reflecting acknowledgment that Medicare is likely to deny payment for the service. In most situations, the Company is required to rely on physicians to obtain an ABN from the patient.  When the Company is not provided an ABN, it is generally unable to recover payment for a service for which Medicare has denied payment for lack of medical necessity.

In billing Medicare, the Company is required to accept the lowest of: its actual charge, the fee schedule amount for the state or local geographical area, or a national limitation amount, as payment in full for covered tests performed on behalf of Medicare beneficiaries.  Payment under the laboratory fee schedule has been limited by Congressional action such as freezes on the otherwise applicable annual Consumer Price Index, or CPI, update to the fee schedule amount.  The CPI update of the laboratory fee schedule for 2010 was minus 1.9%.

The Medicare statute permits CMS to adjust statutorily prescribed fees for some medical services, including clinical laboratory services, if the fees are “grossly excessive.”  Medicare regulations provide that if CMS or a carrier determines that an overall payment adjustment of less than 15% is needed to produce a realistic and equitable payment amount, then the payment amount is not considered “grossly excessive or deficient.” However, if a determination is made that a payment adjustment of 15% or more is justified, CMS could provide an adjustment of 15% or less, but not more than 15%, in any given year. The Company cannot provide any assurance that fees payable by Medicare for clinical laboratory services could not be reduced as a result of the application of this rule or that the government might not assert claims for recoupment of previously paid amounts by retroactively applying these principles.

The payment amounts under the Medicare fee schedules are important not only for reimbursement under Medicare, but also because the schedule is often used as a reference for the payment amounts set by other third-party payors.  For example, state Medicaid programs are prohibited from paying more than the Medicare fee schedule limit for laboratory services furnished to Medicaid recipients, and insurance companies and managed care organizations typically reimburse at a percentage of the Medicare fee schedule.

The Company’s reimbursement rates will also vary depending on whether it is considered an “in-network,” or participating, provider.  If it enters into a contract with an insurance company, the Company’s reimbursement will be governed by its contractual relationship, and it will typically be reimbursed on a fee-for-service basis at a discount from the patient fee schedule.  If the Company does not have a contract with an insurance company, it will be classified as “out-of-network,” or as a non-participating provider.  In such instances, it would have no contractual right to reimbursement for services.

  

 

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Reimbursement Strategy

Significance of CPT Codes

Reimbursement for medical procedures and laboratory services is based on obtaining a Current Procedural Terminology, or CPT, code from the AMA.  CPT is a listing of descriptive terms and identifying codes for reporting medical services and procedures.  The purpose of CPT is to provide a uniform and accurate description of medical, surgical and diagnostic services, thereby serving as a means for reliable nationwide communication among physicians and other healthcare providers, patients and third parties.

CPT descriptive terms and identifying codes currently serve a wide variety of important functions.  This system of terminology is the most widely accepted medical nomenclature used to report medical procedures and services under public and private health insurance programs.  CPT is also used for administrative management purposes such as claims processing and developing guidelines for medical care review.

Category I CPT Codes

Category I CPT codes describe a procedure or service identified with a five-digit CPT code and descriptor nomenclature.  The inclusion of a descriptor and its associated specific five-digit identifying code number in this category of CPT codes is generally based upon the procedure being consistent with contemporary medical practice and being performed by many physicians in clinical practice in multiple locations.

In developing new and revised regular CPT codes the Advisory Committees and the Editorial Panel require:

·

that the service/procedure has received approval from the FDA for the specific use of devices or drugs;

·

that the suggested procedure/service is a distinct service performed by many physicians/practitioners across the United States;

·

that the clinical efficacy of the service/procedure is well established and documented in U.S. peer review literature;

·

that the suggested service/procedure is neither a fragmentation of an existing procedure/service nor currently reportable by one or more existing codes; and

·

that the suggested service/procedure is not requested as a means to report extraordinary circumstances related to the performance of a procedure/service already having a specific CPT code.

Category III CPT Codes – Emerging Technology

Category III CPT codes are a temporary set of tracking codes for new and emerging technologies.  These codes are intended to facilitate data collection on and assessment of new services and procedures. The Category III codes are intended for data collection purposes in the FDA approval process or to substantiate widespread usage.  As such, the Category III codes may not conform to the usual CPT code requirements for Category I.  The Panel has established the following criteria for evaluating Category III code requests, any one of which is sufficient for consideration by the Editorial Panel:

·

a protocol for a study of procedures being performed;

·

support from the specialties who would use the procedure;

·

availability of U.S. peer-reviewed literature; and

·

descriptions of current United States trials outlining the efficacy of the procedure.

 

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In general, these codes will be assigned a numeric-alpha identifier (eg, 1234T).  These codes will be located in a separate section of CPT, following the "Category II" section.  Introductory language in this code section explains the purpose of the Category III codes.

Since Category III CPT codes are intended to be used for data collection purposes to substantiate widespread usage or in the FDA approval process, they are not intended for services/procedures that are not accepted by the Editorial Panel because the proposal was incomplete, more information is needed, or the Advisory Committee did not support the proposal.

Category III CPT codes are not referred to the AMA / Specialty RVS Update Committee, or RUC, for valuation because no relative value units, or RVUs, will be assigned.  Payment for these services/procedures is based on the policies of payors and local Medicare carriers, although most payers deny coverage for services reported under Category III codes.

 CPT Code for MASCT System NAF Collection Procedure

The NAF collection procedure of the MASCT System does not currently have a procedure-specific Category I CPT code, which is important for reimbursement by Medicare for eligible patients, and which is part of the basis by which insurance companies make reimbursement decisions.  A non-specific Category I CPT code, 19499 (unlisted procedure, breast), can be used initially by physicians and insurance carriers will often pay for such procedures with proper documentation.  Medicare does not typically reimburse for CPT 19499 procedures.

Beginning in the first quarter of 2011, the Company expects to begin the process of obtaining a Category III CPT code with which to collect clinical data to support a Category I CPT code application for the use of NAF collection as an adjunct to mammography.  It is expected it may take 12 months to obtain the Category III CPT code and up to two years to collect data to make an application to the AMA for a Category I CPT code.  The Company expects physicians will be able to use either the non-specific Category I CPT code 19499 with documentation or the MASCT System specific Category III code to obtain reimbursement.