To create incentive for innovative diagnostics by improving the process for determining Medicare payment rates for new tests.

Summary: Improving Diagnostic Innovations Act of 2012 - Sets forth additional factors for the Secretary of Health and Human Services (HHS) to consider in determining the payment amount for new clinical diagnostic laboratory tests under gap filling procedures which are used when no comparable existing test is available.

Directs the Secretary to convene an independent advisory panel to inform and make recommendations to the Secretary regarding any new test.

Directs the Secretary to: (1) establish a process for application for the assignment of a temporary national HCPCS (Healthcare Common Procedure Coding System) code to uniquely identify a diagnostic test until a permanent national HCPCS code is available for assignment to that test, (2) analyze the process used for the gapfilling procedures used in determining payment amounts for new clinical diagnostic laboratory tests, and (3) implement improvements in the process after public notice and opportunity for comment.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Improving Diagnostic Innovations Act 
of 2012''.

SEC. 2. CREATING INCENTIVES FOR INNOVATIVE DIAGNOSTICS.

    (a) Improvements to Process for Determining Fee Schedule Amounts 
for New Tests.--
            (1) Clarifying factors for rate-setting.--
                    (A) In general.--In determining the payment amount 
                under gapfilling procedures (as described in section 
                414.508(b) of title 42, Code of Federal Regulations, or 
                any successor regulation to such section) for new 
                clinical diagnostic laboratory tests under section 
                1833(h)(8) of the Social Security Act (42 U.S.C. 
                1395l(h)(8)), the Secretary of Health and Human 
                Services (in this section referred to as the 
                ``Secretary'') shall take into account, as applicable 
                and available, the following factors with respect to 
                such a new test:
                            (i) Impact on patient care.--The impact of 
                        the new test on patient care, patient 
                        management, or patient treatment.
                            (ii) Technical characteristics.--The 
                        technical characteristics of the new test, and 
                        the resources required to develop, validate, 
                        and perform the new test.
                            (iii) Claims data.--Data from claims for 
                        which payment is made under part B of title 
                        XVIII of the Social Security Act.
                            (iv) Laboratory charges.--Amounts charged 
                        by laboratories to self-pay patients for the 
                        new test.
                            (v) Private insurance rates.--Amounts paid 
                        to laboratories for such new test under private 
                        health insurance coverage offered in the group 
                        market and the individual market.
                            (vi) Advisory panel recommendations.--The 
                        findings and recommendations of the independent 
                        advisory panel convened under paragraph (2) 
                        with respect to that new test and any comments 
                        received during the open meeting of the 
                        advisory panel.
                            (vii) Additional factors.--Such other 
                        factors as the Secretary may specify.
            (2) Input from patients, clinicians, and technical 
        experts.--
                    (A) Requirement for independent advisory panel.--
                The Secretary shall convene an independent advisory 
                panel from which the Secretary shall request 
                information and recommendations regarding any new test 
                (as referred to under subparagraph (A) of section 
                1833(h)(8) of the Social Security Act (42 U.S.C. 
                1395l(h)(8))) for which payment is made under such 
                section, including technical, clinical, and quality 
                information.
                    (B) Composition of independent advisory panel.--The 
                independent advisory panel shall be comprised of 19 
                members, including--
                            (i) 4 individuals with expertise and 
                        experience with advanced clinical diagnostic 
                        laboratory tests, including expertise in the 
                        technical characteristics of the new test;
                            (ii) 3 representatives of patients, 
                        including a patient representative for rare 
                        disorders;
                            (iii) 3 clinicians who use results of the 
                        new test in patient care;
                            (iv) 3 individuals with expertise in the 
                        requirements to develop, validate, and perform 
                        the new test;
                            (v) 2 laboratorians;
                            (vi) 2 experts in the area of 
                        pharmacoeconomics or health technology 
                        assessment; and
                            (vii) 2 individuals with expertise on the 
                        impact of new tests on quality of patient care, 
                        including genetic counselors.
                    (C) Terms.--A member of the panel shall be 
                appointed to serve a term of 6 years, except with 
                respect to the members first appointed, whose terms of 
                appointment shall be staggered evenly over 2-year 
                increments.
                    (D) Expert consultants.--The Secretary may include 
                to serve temporarily on the panel individuals who have 
                expertise pertaining to the new test involved.
                    (E) Open meetings.--The Secretary shall receive or 
                review the findings and recommendations of the 
                independent advisory panel with respect to the new 
                tests described in subparagraph (A) involved during a 
                meeting open to the public and provide opportunity for 
                public comment.
                    (F) Clarification of authority of secretary to 
                consult carriers.--Nothing in this section shall be 
                construed as affecting the authority of the Secretary 
                to consult with appropriate Medicare administrative 
                contractors.
    (b) Process for Assignment of Temporary Codes for Diagnostic 
Tests.--The Secretary shall establish a process for application for the 
assignment of a temporary national HCPCS code to uniquely identify a 
diagnostic test until a permanent national HCPCS code is available for 
assignment to that test. Assignments of a temporary national HCPCS code 
shall occur on a quarterly basis. The Secretary shall provide public 
notice through the Centers for Medicare & Medicaid Services Web site of 
applications made for such temporary national HCPCS codes. Upon 
assignment of a temporary code under this process, the Secretary shall 
treat such test as a new test for purposes of section 1833(h)(8) of the 
Social Security Act.
    (c) Development of Further Improvements in Rate-Setting 
Processes.--The Secretary shall analyze the process used for the 
gapfilling procedure used in determining payment amounts for new 
clinical diagnostic laboratory tests under section 1833(h)(8) of the 
Social Security Act. Taking into account the changes made by this 
section, the Secretary shall identify further changes to improve the 
accuracy and appropriateness of resulting rates and the openness, 
transparency, and predictability of the process. The Secretary shall 
examine what and how many entities should perform gapfilling, under 
contract or otherwise, and how to ensure that the process is informed 
by appropriate expertise and proceeds in a transparent and accountable 
manner. The Secretary shall implement improvements in the process, 
insofar as these are possible under the law through regulations, after 
public notice and opportunity for comment. For changes the Secretary 
determines would require a change in law, the Secretary shall transmit 
recommendations to the Speaker of the House and the President of the 
Senate not later than July 1, 2013.
    (d) Definitions.--For purposes of this section:
            (1) New clinical diagnostic laboratory tests.--The term 
        ``new clinical diagnostic laboratory test'' means a clinical 
        diagnostic laboratory test--
                    (A) that is assigned a new or substantially revised 
                code on or after January 1, 2013; or
                    (B) for which an application for a temporary 
                national HCPCS code is made under subsection (b) on or 
                after January 1, 2013.
            (2) Self-pay patient.--The term ``self-pay patient'' means, 
        with respect to a health care item or service, an individual 
        who pays out of pocket for such item or service and who does 
        not have health insurance coverage for such item or service.
    (e) Effective Date.--This section shall take effect on the date of 
enactment of this Act, and shall apply with respect to new clinical 
diagnostic laboratory tests.