4 Things about the OPPS Final Rule That Labs Need to Know

On Nov. 14, the Centers for Medicare and Medicaid Services (CMS) published in the Federal Register the Medicare Hospital Outpatient Prospective Payment System (OPPS) final rule for 2017. In case you do not have the time to read the hundreds of pages in the final rule, here is a summary of the four things lab and pathology managers need to know about it.

At a Glance: 2017 Payment Rates

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.

1. Elimination of "-L1" Modifier for Unrelated Tests
Current Rules: Designated lab tests from the Clinical Laboratory Fee Schedule (CLFS) are among the 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.

New Rules: The 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.

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

2. Expansion of Molecular Pathology Test Exception to ADLTs
Current Rules: Another exception to bundled payments is molecular pathology tests. Reasoning: These are relatively new tests with use patterns that differ from conventional lab tests. And because they are less tied to the primary service provided in the HOPD, they should be paid separately from the OPPS bundle.

New Rules: The final rule expands the OPPS packaging 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.

Impact: 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.

3. Packaging Based on Claim Rather than Date of Service
Current Rules: Whether payment for an outpatient service is made as part of the OPPS bundle or separately 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.

New Rules: 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."

Impact: 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.

4. Off-Campus Hospital Outpatient Department Rules: Impact on Labs
The part of the OPPS that has gotten the most attention are the provisions affecting services provided in off-campus hospital outpatient departments that recently began billing under the 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 physician fee schedule based rates for off-campus provider-based departments—that are about 50 percent of the OPPS rate for the service—will cover pathology services provided by entities that meet the criteria for being an off-campus hospital outpatient department that started billing under OPPS on or after Nov. 2, 2015.

Takeaway: Things to Do. 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.