Updated/posted: May 2010
Validated by: (in process)

Decision Makers and Decision-Making Processes Diagram



United States (US) – Healthcare Structural Characteristics

The reimbursement system in the US is based on a mixed public/private third-party payment system whereby government, employers, and individuals share the cost of care. Premiums are paid to private insurance companies for private coverage either by individuals or employers. Government coverage provided at federal (Medicare, DoD, BIA) and state levels (Medicaid) to statutorily defined populations (elderly, poor, disabled, veterans, etc.). Many private insurers also cover Medicare and Medicaid populations financed by the government.

Population size by payer (11)

  • 200 million Americans have some form of private health coverage
  • Increasing trend towards large companies self-insuring
  • 70-80 million Americans have public coverage
  • 44.0 million (14% of the population) Medicare beneficiaries
    • ~90% of these have out-patient prescription drugs coverage
    • 36.7 million are age 65+
    • 7.3 million are disabled
    • Certain special populations covered like end stage renal disease
  • Roughly 15% of us population or ~45 million people are uninsured

Payers, whether government or private, manage costs through a system of coverage policies, resource utilization controls, and contracting. Payers (including employers) are increasingly demanding evidence-based approaches to coverage and payment for new technologies. Healthcare payment and delivery in the US is dominated by government (Medicare, Medicaid) and private payers (or managed care organizations).   Payers rely heavily on decentralized health technology assessments when making coverage determinations. Currently value is determined through analysis of clinical and economic outcomes evidence.   It is neither a uniform, nor standardized process by any means. Although there are general HTA criteria that payers adhere to, variances do exist as each payer defines their respective technology coverage processes and criteria.

Comparative effectiveness research (CER) has been identified as a key component of ongoing healthcare reform efforts, in part to develop a standard set of guidelines and criteria for evaluating novel technologies; comparing outcomes of novel technologies (and their associated coverage and payment) to established , standards of care and other relevant comparators. (6)

Diagnostic pricing is frequently benchmarked by commercial payers to the Medicare Clinical Lab Fee Schedule, though non-standard approaches (e.g.., direct payment negotiation with payers) is possible in some cases  Health technology assessment criteria and diagnostic pricing standards may change as health care reform policy evolves.



Diagnostic Test


  • Medicare is the largest single payer in the United States and plays a significant role in setting reimbursement for diagnostic (IVD?) tests. Medicare is a federal health insurance program enacted in 1965 to provide healthcare coverage for those aged 65 and older regardless of income or medical history. The program was expanded in 1972 to include those under the age of 65 with permanent disabilities or end-stage renal disease (ESRD). It was expanded again in 2001 to include those under the age of 65 with amyotrophic lateral sclerosis (ALS).  As of November 2008 over 45 million Americans covered through Medicare’s various programs with 38 million over the age of 65 and 7 million under the age of 65 with disabilities. (11)
  • Medicare coverage is split into 4 parts: A, B, C, and D (11)
    • Part A Coverage
      • Covers inpatient hospital services, skilled nursing facility, home health, and hospice care
      • Accounted for approximately 40% of Medicare benefit spending in 2008
      • Individuals are entitled to Part A if they or their spouse are eligible for Social Security payments and have made the appropriate payroll tax contributions for 10 or more years
    • Part B Coverage
      • Helps pay for physician, outpatient, home health, and preventive services, including outpatient clinical laboratory services. Accounted for 27% of benefit spending in 2008
      • Individuals are entitled to Part A services may enroll in Part B benefits, but this coverage is considered voluntary (95% of Part A participants also enroll in Part B benefits)
    • Part C Coverage
      • Advantage Plans (like HMOs and PPOs) are sometimes referred to as Medicare Part C
      • These are private commercial plans that have been approved by Medicare and provide all of beneficiaries’ Part A and Part B benefits
      •  Often times, they will also include Part D drug coverage
      • Medicare Advantage Plans normally have lower co-pay than for patients with Medicare alone
    • Part D Coverage
      • Medicare Part D is prescription drug coverage
      • Beneficiaries must be enrolled in Medicare before they can apply for coverage by Part D but every enrollee is eligible
      • In most cases, beneficiaries will pay a monthly premium for the level of Part D coverage they select and benefits are provided by private companies

Medicare can create national or local coverage policies; however, most diagnostics are paid without explicit policies. National and local coverage determinations follow as such (6):
National Coverage Determination (NCD)

  • NCD process consists of 3 steps: initiation, review and completion
  • Formal requests for an NCD can be initiated either by:
    • An outside party who identifies an item or service as a potential benefit (or to prevent potential harm) to Medicare beneficiaries
    • Or by internal agency personnel
  • Once received, the Center for Medicare Management (CMM) will make a benefit category determination
  • The item is then posted on list of pending coverage issues on the CMS website until final determination is made

Local Coverage Determination (LCD)

  • Medicare contractors develop LCDs when no NCD exists, or when further clarification of an NCD is needed
  • LCDs can be established with the intent to create payment policy or manage utilization
  • Some contractors have quotas on establishing a certain number of LCDs
  • NCDs will preempt LCDs only when a final NCD is issued and local contractors must then amend or withdraw any inconsistent LCDs.

Medicare Part A Intermediaries and Part B Carriers are being consolidated into Medicare administrative contractors (MACs). The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), authorized the Centers for Medicare & Medicaid Services (CMS) to make significant changes to Medicare fee-for-service (FFS) administration. Under this Medicare Contracting Reform, CMS combined the administration of Medicare Parts A and B (FFS benefit) into Medicare Administrative Contractors (MACs); this work is planned to be transitioned by the end of 2009.  (6)

By consolidating Part A & B, Medicare hopes to gain efficiencies and enhance the delivery of care. Positive implications of this transition will be greater consistency across Part A and B diagnostics used in both settings, and is likely to have greater recognition of value as MAC has domain over both settings. There will also be less variability with LCDs given the smaller number of MACs. (6)

Private Payers
Private payers cover all Americans receiving health insurance through their insurers or who self-pay for services. Private payers have payer specific coverage, payment and technology assessment processes.  Diagnostics are covered under the medical benefit, and reviewed by the technology assessment committee within each organization.  Although there are numerous local and regional private payers in the US, a series of large mergers in the last 15 years has lead to the creation of a smaller number of very large and influential payers operating nationally.

Medicaid is a U.S. health insurance program that provides care to qualifying people who cannot pay for their own medical expenses. Medicaid covers hospital stays, doctor visits, emergency room visits, prenatal care, prescription drugs, and other treatments. Medicaid is jointly funded by both the federal government and each individual state. Each state sets its own guidelines regarding eligibility, services and reimbursement.
Medicaid is available only to certain low-income individuals and families who fit into an eligibility group that is recognized by federal and state law. Eligibility requirements are based on income status, age, pregnancy status, disability, and citizenship status. (11) 

Key stakeholders in the IVD market in the US


Achieving reimbursement for IVDs may require two or more key stakeholder groups to work together to develop and communicate evidence characterizing the value of the test.  Coverage and payment usually result after a process of evaluation, in some cases involving a formal health technology assessment process (detailed below).   The findings from the assessment drive coverage and payment, which is payer and product specific and thus can be highly variable.
An example below demonstrates how, even within a single payer, a “covered test” can have several different payment (and resulting patient responsibility) scenarios.  These are determined by the benefit design associated with each product and the degree to which in vitro diagnostics are subject to deductibles, co-pays, co-insurance, and other utilization management tools.

Payer Diagram


Regulatory Pathway/Market Approval Process

The Food & Drug Administration (FDA) regulates in vitro diagnostics (IVD); however, IVDs in the US can come to market with or without FDA-approval. The types of regulatory approval for IVDs vary depending on the manufacturer’s claims about the test, e.g.: PMA, 510K, IVDMIA, etc. FDA-approval is not a guarantee of payment and in many cases payment exists without FDA-approval, as evidenced by certain ASRs and other self validated tests. The ASR landscape is evolving, with new regulations impacting market access and commercialization opportunities.  Evidence requirements for ASRs versus FDA approved tests are very different, with the latter coming to market with significantly more evidence than the former in most cases. This evidence can support the HTA process, by providing payers and other HTA groups with critical information to evaluate the relative value of the technology. (9)

Medicare regulates all laboratory based testing in the U.S. through the Clinical Laboratory Improvement Amendments (CLIA). The Division of Laboratory Services, within the Survey and Certification Group, under the Center for Medicaid and State Operations (CMSO) has the responsibility for implementing the CLIA Program. In total, CLIA covers approximately 200,000 laboratory entities; research programs are not included under the program. The objective of the CLIA program is to ensure quality laboratory testing. Laboratory tests are categorized as one of the following by complexity (6):

  • Waived tests.
  • Tests of moderate complexity, including the subcategory of PPM procedures.
  • Tests of high complexity



Reimbursement and Coverage/Payment Flow Map and Procurement Process

Reimbursement Diagram

Definition of terms

US payers: include Commercial health plans and Government payers.

Reimbursement: is a blanket term describing how commercial insurance plans or the government pay for the items or services provided by medical professionals and can be broken down into three major components: coding, coverage and payment. 


  • Mechanism by which providers can bill payers for services rendered and/or costs incurred.
  • Standardized system describing diseases, diagnoses, clinical procedures or medical products used for reporting, payment and statistical analysis (14)


  • Decisions by third-party payers to include a service in the package of benefits available to beneficiaries
  • Coverage decisions influence payment determinations and affect patient access to new technologies.
  • Coverage decisions typically include assessment of whether or not technologies are “reasonable and necessary” or meet respective payer medical necessity criteria.
  • Coverage can be limited to certain sub-populations of patients based on disease severity or failure of previous therapies. (14)


  • Assignment of a dollar amount to a covered procedure or technology that forms the basis of provider payment. (14)

Reimbursement Pathway Diagram



HTA Requirements and Process

Each payer has their own process and requirements for HTA in the US. There is currently no standard across organizations, though most are relatively consistent.  Most private payers have a technology assessment committee that is run by Payer Medical Directors. The committees will review technologies based on requests by clinicians, volume of claims or manufacturer requests.  Manufacturers usually have the opportunity to submit dossiers of information to support the review process, though most payers indicate that they conduct independent literature reviews and assessments. (13) 

The HTA process used for diagnostics by most payers has been modified from the process used to evaluate new therapeutics.  Evidence is reviewed, ranked, and discussed among internal and external clinical experts.  Diagnostic performance data, like sensitivity, specificity, positive predictive value, and negative predictive value are reviewed.  Other test performance issues also are considered, especially for molecular diagnostics, like clinical versus analytical sensitivity.

Additionally, payers are increasingly looking for data on the clinical utility of novel diagnostics attempting to understand (through data) how the novel diagnostic will impact clinical pathways, treatment decisions, prognosis, and ultimately outcomes.  Lack of evidence related to clinical impact can limit coverage. 

Technology Assessment Process- Product Coverage

Private and Medicaid payers decide whether to provide coverage for diagnostic tests by conducting a technology assessment based on expected volume of use, cost-impact to the organization, and concerns over data and/or clinical utility of products.  When technology assessments are performed, the review process is evidence-based, and relies predominantly on published literature and expert opinion (sought by the payer). Review of diagnostic tests involves consideration of test performance (sensitivity, specificity, negative predictive value, positive predictive value) as well as clinical impact.  Each payer, public and private, conducts their own HTA within their technology assessment committee.  The process is payer specific, decentralized, and uses various information inputs. (13) 

Payers may refer to third-party technology assessment organizations like Hayes, ECRI or BCBSTEC to inform their coverage review and technology assessment process.  These external HTA organizations most often do not develop coverage policies; instead they rate the evidence and provide evidence based reviews.  This is different from groups like NICE and IQWiG where policy recommendations are provided with the assessment.  Others have a technology assessment group internal to the payer organization and conduct the analysis using internal resources though often leverage external expertise. (7)(10) 

The table below provides a basic overview of categories of evidence typically included in technology assessments, as well as general evidence requirements. Most US payers do not explicitly require cost-effectiveness data.  While they will look review published economic studies and consider budget impact, few include a cost/QALY threshold in their decision-making process currently. Payers look at clinical data first, economic data is particularly valuable especially for higher cost or large volume technologies that need to justify their cost-impact to the organization. (13) 


Evidence Requirements

Safe & Effective

Technology has final FDA approval

Risk-benefit analysis

Benefits outweigh risks

Clinical Outcomes

Technology provides clinical benefits to the patient

Economic Outcomes

Technology is cost effective

Technology Review Process

Technology Review Process

Future Evidence-Based Requirements

Comparative effectiveness research (CER) will likely impact IVD reimbursement. CER can be defined as follows, “the conduct and synthesis of research comparing the benefits and harms of different interventions and strategies to prevent, diagnose, treat and monitor health conditions in “real world” settings. The purpose of this research is to improve health outcomes by developing and disseminating evidence-based information to patients, clinicians, and other decision-makers, responding to their expressed needs, about which interventions are most effective for which patients under specific circumstances.” (http://www.hhs.gov/recovery/programs/cer/execsummary.html)

Currently, comparative effectiveness research priorities, evidence requirements/criteria and methods of data evaluation are being debated and defined.  As of July, 2009 both the Institute of Medicine (IOM) and the Federal Coordinating Council For Comparative Effectiveness Research published comparative effectiveness research priorities. (6)

A set of white papers published in the September 22, 2009 issue of Medical Decision Making will serve as the groundwork for an Agency for Healthcare Research and Quality (AHRQ) Work Group charged with creating a new methods guide to focus on comparisons of diagnostic and prognostic tests for the Effective Health Care (EHC) Program. The new methods guide is scheduled to be released in draft form during the first part of 2010. (12)

The initial scope of CER will be to evaluate clinical effectiveness. There is currently an ongoing debate as to whether or not cost effectiveness analysis should be included as part of the initial scope. However,

cost effectiveness studies are, and will continue to be utilized by payers when making coverage and payment determinations. (6)
While full-blown comparative effectiveness research (CER) has not been institutionalized yet, payers do not evaluate technologies in a vacuum. Instead, they consider how coverage and payment of a novel diagnostic will likely impact clinical pathways, outcomes and costs.

Value-Based Pricing
Many IVD manufacturers, especially those developing complex molecular technologies are seeking ways to move away from the CLFS based pricing system to a more value-based pricing system.  This reflects the increasing data requirements and associated costs to develop innovative diagnostics.  As payers increasingly require evidence to support the clinical utility of tests, how value-based pricing and evidence requirements evolve will be central questions within the diagnostic market access space. 

Private Technology Assessment Organizations

Hayes, Inc       
This is a private organization that conducts evidence-based technology assessments for its clients. This organization’s clients tend to be small to medium size payer organizations that do not have internal assessment capabilities or would like a third party to support internal activities. Assessments can be conducted on request or as a result of environmental scanning. (10)

Similar to Hayes, Inc., ECRI provides technology assessments to various clients. ECRI uses an evidence-based approach, relying almost exclusively on published data. When conducting a review, ECRI will provide manufacturers the opportunity to comment on the analysis and to provide information upon request. (7)

Blue Cross Blue Shield Technology Evaluation Center (TEC)
This organization provides technology assessments for member BCBS organizations. It conducts these assessments based on the following criteria (4):

  1. The technology must have final approval from the appropriate governmental regulatory bodies.
  2. The scientific evidence must permit conclusions concerning the effect of the technology on health outcomes.
  3. The technology must improve the net health outcome.
  4. The technology must be as beneficial as any established alternatives.
  5. The improvement must be attainable outside the investigational settings

Agency for Healthcare Research and Quality (AHRQ)
The technology assessment program at the Agency for Healthcare Research and Quality (AHRQ) provides technology assessments for the Centers for Medicare & Medicaid Services (CMS). These technology assessments are used by CMS to inform its national coverage decisions for the Medicare program as well as provide information to Medicare carriers. Technology assessments may be done in-house by AHRQ staff, or they may be done in collaboration with one of their partner Evidence-based Practice Centers. When available, technology assessment topics are linked to corresponding information on the CMS Web site. (1)(6)

Evaluation of Genomic Applications in Practice and Prevention (EGAPP)
EGAPP is an initiative launched in 2004 to support a coordinated, systematic process for evaluating genetic tests and other genomic applications that are in transition from research to clinical and public health practice in the United States. The EGAPP Working Group was established in 2005 to support the development of a systematic process for assessing the available evidence regarding the validity and utility of rapidly emerging genetic tests for clinical practice. This independent, multidisciplinary panel prioritizes and selects tests, reviews CDC-commissioned evidence reports and other contextual factors, highlights critical knowledge gaps, and provides guidance on appropriate use of genetic tests in specific clinical scenarios. (8)







1. AHRQ website
2. AMA’s Pathology Coding Caucus (PCC)
3. American Clinical Laboratory Association
4. BlueCross BlueShield Technology Evaluation Center website
5. Clinical Laboratory Management Association (CLMA)
6. CMS website
7. ECRI Institute website
8. Evaluation of Genomic Applications in Practice and Prevention website
9. FDA website
10. Hayes inc. website
11. Kaiser Family Foundation website
12. Medical Decision Making, vol. 25 issue 5
13. National Institutes of Health: National Information Center on Health Services Research and Health Care Technology
14. US Department of Health and Human Services


Susan Garfield MSc, BA, Vice President, Bridgehead International, Wayland, MA, USA

Eric Faulkner, RTI Health Solutions, Research Triangle Park, NC, USA
Darron Segall MS, MHA, Manager, Reimbursement & Health Economics, Quidel Corporation, San Diego, CA, USA


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