2017 Medicare Lab Payments: The 9 Changes that May Affect Your Reimbursements

As the clock ticks down to 2018 and the new Protecting Access to Medicare Act of 2014 (PAMA) system for lab payments, the Centers for Medicare and Medicaid Services (CMS) issued final Medicare payment rules for 2017, the final year under the current system. Although there were few surprises in either the 2017 Clinical Laboratory Fee Schedule (CLFS) or Hospital Outpatient Prospective Payment System (OPPS) final rules, some providers fared better than others:

• The winners: Labs that provide specialty molecular tests that dodged the deep cuts proposed in the preliminary CLFS;

• The losers: Pathology and other outpatient facilities that bill under OPPS services and meet the criteria for an off-campus hospital "provider-based department."

Here is a look at the nine key changes for 2017 that lab and pathology managers need to be aware of.

1. Molecular Assays Avoid Cuts and Get Rate Hikes
Suspense leading up to promulgation of the new CLFS focused on how much Medicare would pay for the 16 CPT codes for the esoteric molecular tests that CMS added to the Schedule this year. The discounted interim gapfill prices CMS proposed in June sparked protest from the industry. "The proposed rates are inconsistent with rates established by commercial payers and PAMA," contended The Coalition for 21st Century Medicine.

CMS apparently had a change of heart, either restoring or actually increasing the regional prices for seven of the 16 tests that had been slated for deep cuts. Companies benefiting from the change included:

• CareDx, which instead of a 77 percent cut got a 47 percent increase on its AlloMap test to identify heart transplant recipients at low risk of rejection (CPT 81595);

• Biodesix, which got a 57 percent hike on its Veristrat lung cancer aggressiveness test (81538);

• Genomic Health, which got a 51 percent hike on its Oncotype DX colon cancer recurrence test (81525);

• BioTheranostics, which got a 23 percent hike on its metastatic tumor origins diagnostic test (81540);

• Invitae, which avoided a 33 percent cut on its hereditary breast cancer panel (81432);

• CardioDx, which instead of a 28 percent cut got a modest 1.4 percent increase on its coronary artery disease risk test Corus CAD (81493); and

• Veracyte, which instead of a 22 percent cut got a 12 percent increase on its thyroid nodule assessment assay Affirma (81545).

2017 Medicare Rate for New Molecular Diagnostic Tests
(Tests for which discounts were proposed but not adopted are shown in boldface)

CPT Code	Test	Final National Limitation Rate	Proposed National Limitation Rate	2017 Price
81412	9-Gene Ashkenazi Jewish Screen	$597.91	$597.91	$597.91
81432	Hereditary Breast Cancer Panel, 14 Genes	$925.00	$622.53	$925.00
81433	Hereditary Breast Cancer, Duplications/Deletions Panel	$159.48	$159.48	$159.48
81434	Hereditary Retinal Disorder Screen	$597.91	$597.91	$597.91
81437	Hereditary Neuroendocrine Tumor	$597.91	$597.91	$597.91
81438	Hereditary Neuroendocrine Tumor, Duplications/ Deletions	$597.31	$597.31	$152.21
81442	Noonan Gene Screen	$597.91	$597.91	$597.91
81490	Vectra Screen	$586.50	$586.50	$597.91
81493	Corus CAD	$1,035.10	$741.01	$1,050
81525	Oncotype DX	$2,062.10	$848.86	$3,104
81538	Veristrat	$1,341.87	$283	$2,112
81540	bioTheranostics	$2,355.46	$1,522.17	$2,900
81545	Affirma	$2,864.45	$2,240.16	$3,200
81595	AlloMap	$1,920.98	$732.00	$2,821
0009M	VisibiliT	$132.86	$132.86	$598
0010M	4K Score	$260	$260	$260

CMS also increased pricing for fetal aneuploidy trisomy risk testing (CPT 0009M) from $132.86 to $598.

2. New Pricing Formula for Differential Drug Testing G Codes
In 2016, CMS issued HCPCS G codes for four definitive drug tests capable of identifying individual drugs and distinguish between structural isomer: G0480, G0481, G0482 and G0483. Payment for such tests was based on a crosswalking formula under which:

• Proposal 1: Change the crosswalk formula to allow four tests to be priced at the full crosswalk price; and

• Proposal 2: Create a new G code to recognize labs that perform a less sophisticated version of differential drug tests.

In the final CLFS, CMS opted for Proposal 1. Allowing the four tests to be priced at the full crosswalk price should adequately recognize the resources required to perform these procedures, CMS explains.

New Formula for Crosswalking Price of G Code Differential Drug Tests

3. Revamped G Codes for Definitive Drug Testing
The final CLFS includes modified descriptors of the G codes for differential drug tests so that they identify the type of test involved more clearly (underlined text represents changes from 2016 descriptor).

• G0480: (Drug test(s), definitive, utilizing (1) drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (e.g., IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (e.g., alcohol dehydrogenase)), (2) stable isotope or other universally recognized internal standards in all samples (e.g., to control for matrix effects, interferences and variations in signal strength), and (3) method or drug-specific calibration and matrix-matched quality control material (e.g., to control for instrument variations and mass spectral drift); qualitative or quantitative, all sources, includes specimen validity testing, per day; 1-7 drug class(es), including metabolite(s) if performed);

• G0481: (Drug test(s), definitive, utilizing (1) drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (e.g., IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (e.g., alcohol dehydrogenase)), (2) stable isotope or other universally recognized internal standards in all samples (e.g., to control for matrix effects, interferences and variations in signal strength), and (3) method or drug-specific calibration and matrix-matched quality control material (e.g., to control for instrument variations and mass spectral drift); qualitative or quantitative, all sources, includes specimen validity testing, per day; 8-14 drug class(es), including metabolite(s) if performed);

• G0482: (Drug test(s), definitive, utilizing (1) drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (e.g., IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (e.g., alcohol dehydrogenase)), (2) stable isotope or other universally recognized internal standards in all samples (e.g., to control for matrix effects, interferences and variations in signal strength), and (3) method or drug-specific calibration and matrix-matched quality control material (e.g., to control for instrument variations and mass spectral drift); qualitative or quantitative, all sources, includes specimen validity testing, per day; 15-21 drug class(es), including metabolite(s) if performed);

• G0483: (Drug test(s), definitive, utilizing (1) drug identification methods able to identify individual drugs and distinguish between structural isomers (but not necessarily stereoisomers), including, but not limited to GC/MS (any type, single or tandem) and LC/MS (any type, single or tandem and excluding immunoassays (e.g., IA, EIA, ELISA, EMIT, FPIA) and enzymatic methods (eg, alcohol dehydrogenase)), (2) stable isotope or other universally recognized internal standards in all samples (e.g., to control for matrix effects, interferences and variations in signal strength), and (3) method or drug-specific calibration and matrix-matched quality control material (e.g., to control for instrument variations and mass spectral drift); qualitative or quantitative, all sources, includes specimen validity testing, per day; 22 or more drug class(es), including metabolite(s) if performed)

4. CMS Crosswalks 14 Codes
The final significant change in the 2017 CLFS is the crosswalking of 14 existing CPT codes. (See the Table on the G2 website for a summary of all the codes that were crosswalked.)

3 Takeaways for 2017 CLFS
Here are the three key things to know about the newly finalized CLFS:

1. Proposed deep cuts in molecular diagnostic tests were not implemented—in several cases, CMS actually granted significant price increases

2. The pricing formula for the four differential drug test G codes has been changed to allow for billing at the full crosswalk price of CPT 82542

3. CMS crosswalked 14 G and CPT codes into existing CPT codes to eliminate duplication

5. New OPPS Payment Rates
The remaining noteworthy 2017 Medicare reimbursement changes affect outpatient lab and pathology services provided to hospital outpatients. Overall OPPS rates for 2017 are going up by 1.65% based on the following factors:

• Market basket update of +2.7%;

• Productivity adjustment of -0.3%;

• Update for ACA payment cuts of -0.75%.

Overall, CMS estimates that OPPS payments will increase by 1.7% during the year.

6. Elimination of "-L1" Modifier for Unrelated Tests
Under current rules, designated lab tests from the CLFS are treated as ancillary and support services covered by the OPPS bundled rate paid to hospitals for services provided in the hospital outpatient department (HOPD). Exception: Lab tests appearing on the same claim as other hospital outpatient services are paid separately at the CLFS rate if they are "unrelated," i.e., ordered by a different practitioner for a different diagnosis. Hospitals use the "-L1" modifier to seek separate payment for "unrelated" tests.

Example: A physician does an in-office biopsy and sends the sample to the hospital lab for testing. Later that day, the same patient shows up at the ER with a lacerated elbow and receives blood testing. The hospital would add the blood test to the ED claim and use the "-L1" modifier to indicate that it was unrelated to the biopsy test.

Change: The 2017 OPPS final rule eliminates the "-L1" modifier. In addition to being confusing and hard to use, CMS determined that the modifier was no longer necessary. "We believe that, in most cases, 'unrelated' laboratory tests are not significantly different than most other packaged laboratory tests provided in the HOPD," the final rule explains.

Bottom Line: From now on, all lab tests listed on a claim with other hospital outpatient services will be bundled into the OPPS payment, even if they are ordered by a different provider for a different diagnosis.

7. Expansion of Molecular Pathology Test Exception to ADLTs
Molecular pathology tests are also exempt from OPPS bundling. Reasoning: These are relatively new tests with use patterns that differ from conventional lab tests. And they are also less tied to the primary service provided in the HOPD.

Change: The final rule expands the exemption to all advanced diagnostic lab tests (ADLT) regardless of whether they are molecular pathology lab tests. The same rationale for excluding molecular pathology lab tests from bundled payments applies to all tests that meet ADLT criteria, according to CMS.

Bottom Line: To qualify for the exemption, the test must qualify as an ADLT under section 1834A(d)(5)(A) of the ACA.

2 Other Situations when Lab Tests Are Separately Payable
As before, HOPD lab tests will be payable separately, i.e., not covered by the OPPS bundled payment, if:

1. The tests are the only services provided to a beneficiary on a claim; or

2. The tests are preventive.

8. Packaging Based on Claim Rather than Date of Service
Whether payment for an outpatient service is bundled or separate is designated at the code level by assigning a status indicator to CPT and HCPCS codes. So-called "conditional packaging" indicators are used for lab tests that can be paid either way depending on the circumstances. Some of these indicators, e.g., "Q1" + "S," "T" or "V," are used to package services with other services provided on the same date of service; other indicators, e.g., "Q2," package services on the same claim regardless of date of service.

Change: The final rule changes the rules for "Q1" and "Q2" to ensure consistency in package indicator use. "We do not believe that some conditional packaging status indicators should package based on date of service," CMS explains, "while other conditional packaging status indicators package based on services reported on the same claim."

Bottom Line: From now on, all packaging will occur at the claim level and not be based on the date of service. The change will principally affect packaging of lab tests covered by the OPPS provided during a hospital stay lasting longer than one day.

9. New Fee Schedule for Off-Campus Hospital Outpatient Departments
The most drastic change in the OPPS final rules are those affecting services provided in off-campus hospital outpatient departments that recently began billing under OPPS. From now on these services will be paid not under the OPPS but the physician fee schedule at rates of roughly 50 percent of the OPPS rates.

The good news: The de facto 50 percent rate cut does not apply to services currently paid under the OPPS based on other Medicare fee schedules. And since OPPS lab rates are based on the CLFS, the new rules will not affect labs.

The bad news: However, the new "OPPS-lite" physician fee schedule will cover pathology and other services not listed on the CLFS (or subject to an OPPS bundling exemption) provided by entities that meet the criteria for being an off-campus hospital outpatient provider-based department (PBD) that started billing under OPPS on or after Nov. 2, 2015. Exceptions: You will not be covered by the new physician fee schedule if:

• You are a dedicated emergency department;

• You began billing for OPPS services before Nov. 2, 2015 and have not impermissibly relocated or changed ownership; and/or

• You are "on the campus," i.e., within 250 yards of the hospital or a hospital remote location.

Takeaway: Things to Do about OPPS Changes—If you receive payment from Medicare for hospital outpatient lab services under the OPPS, you'll need to make the following adjustments in 2017:

1. Stop using the "L-1" modifier to claim separate payment for lab tests provided by a different provider for a different diagnosis;

2. Seek separate payment for tests that qualify as ADLTs;

3. Use the new "Q1" and "Q2" status indicators to package lab tests provided during a hospital stay lasting longer than one day;

4. Bill for outpatient pathology services at the new physician fee schedule rather than OPPS rate if: i. you qualify as an off-campus hospital outpatient department; and ii. you began OPPS billing on or after Nov. 2, 2015.