Healthcare Business News
Dr. James Madara,  AMA CEO

AMA, McKesson team up on genetic-test codes

By Andis Robeznieks
Posted: February 26, 2013 - 12:01 am ET

The American Medical Association and McKesson Corp. struck a licensing agreement that they say will bring order to diagnostic codes in molecular testing, an area that AMA CEO Dr. James Madara says “has grown somewhat dicey.”

Madara, CEO and executive vice president of the AMA, said the agreement will have a broad impact among physicians, patients, payers and laboratories in “de-convoluting” the field.

The agreement calls for grouping and indexing the “Z-Code Identifiers” in the McKesson Diagnostic Exchange software—used by labs and test manufacturers—to the AMA Current Procedural Terminology, or “CPT,” code set used by physicians to report healthcare services delivered and by payers to reimburse for them.

In so doing, they'll create a new reference product that maps the Z-Code Identifiers to CPT codes, according to a joint news release (PDF).

No financial terms were disclosed, but the release noted that molecular genetic tests are the fastest-growing clinical pathology lab testing sector with $6.2 billion in revenue projected for next year.

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CPT codes have been a reliable revenue source for the AMA. In its 2011 annual report (PDF), CPT coding revenue was listed “under books and products,” which included “CPT books, workshops and licensed data files.” Revenue from this source increased to $79.1 million in 2011, up 5.5% from $75 million in 2010.

Molecular diagnostic tests help determine whether a particular drug will be appropriate or useful for a patient.

While there are 3,000 tests available, Madara said, there are some 20,000 human genes and “each of the proteins encoded by those genes comes in multiple flavors.”

Madara added that “3,000 may seem like a small number in the future” as genetic testing helps move the industry from population-based remedies to individual and unique cures. For now, though, it's a number that is unwieldy, and the licensing agreement seeks to add clarity and organization.

A 2011 McKesson report, “Unlocking the Promise of Molecular Diagnostics” (PDF) notes that there are three genetic tests measuring whether patients will be receptive to the Herceptin breast cancer treatment, but some payers don't cover all of them.

Matthew Zubiller, McKesson Health Solutions vice president of decision management, said the licensing agreement will help reduce these situations by bringing more clarity to both the clinical and financial sides and reduce some of the confusion “that personalized medicine and diagnostics can bring.”

The AMA recently entered into an agreement with the National Institutes of Health in which the AMA's genetic testing CPT codes will be used by the NIH Genetic Testing Registry to create an “interoperable terminology” allowing for better communication between clinicians, hospital management, labs and payers. Madara said this is a separate but “very synergistic” agreement as many molecular diagnostic tests are developed with financial aid from the NIH.

Critics of the AMA's decision to back the Patient Protection and Affordable Care Act argue that the income the AMA receives from CPT royalties allows it to be less beholden to membership dues for revenue and to go against the will of the physicians it represents.

Zubiller, however, called the agreement with McKesson “an example of the AMA listening to its constituencies” and responding to the needs of physicians.

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