Effective Jan. 1, hospitals and their laboratories will be reimbursed in a bundled payment for certain laboratory tests performed on hospital outpatients under the Hospital Outpatient Prospective Payment System (HOPPS) rather than billing them separately and directly to Medicare as was previously allowed.
According to Centers for Medicare and Medicaid Services (CMS) Transmittal R2845CP (Change Request 8572), issued Dec. 27, 2013, beginning in January 2014, payment for most laboratory tests provided in hospital outpatient settings will be reimbursed under the HOPPS and should be reported on a 13X type of bill and billed by the hospital rather than the laboratory. There may be important implications for laboratory outreach programs in cases where the outreach laboratory is competing with other independent laboratories in its marketplace and is using the hospital laboratory as a collection site for some of the specimens for the outreach program. There may also be a reduction in reimbursements because of the bundled payments, even though CMS says it has included the cost of lab services when determining the amount of the bundled payments.
The transmittal implements provisions contained in a final rule with comment published in the
Federal Register on Dec. 10, 2013: “Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs.” The transmittal provides some specific billing information and other clarifying information. For instance, it helps clarify the criteria for determining a patient’s status as an inpatient, outpatient, or nonpatient. Under the new policy, the 14X bill type is to be used for nonpatients as before the change but now will also be used for certain other patient encounters that create exceptions to the bundling payment.
It is these exceptions to the rule that help outreach laboratories in one sense because they allow separate billing for the nonpatients served by the outreach program, but it is these exceptions that create an increased risk for hospitals and laboratories. Prior to these changes, both outpatient and nonpatient testing were reimbursed under the Clinical Laboratory Fee Schedule (CLFS). Since this change in policy, most outpatient tests will be reimbursed under the HOPPS while nonpatient and certain other tests meeting the new criteria, including molecular pathology tests, will remain separately billable and paid under the CLFS.
Criteria for Determining Patient Status
The critical decision for the purpose of ensuring proper billing under these new rules is determining which patients qualify to be separately billable and should be billed using the 14X type of bill. The criteria includes tests that are considered integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting. In an attempt to simplify and clarify what this definition means, CMS provided the following in the transmittal to describe which lab services may be billed separately:
- »Any test performed on a nonpatient of the hospital. The current definition of nonpatient says any beneficiary that is neither an inpatient nor an outpatient but has a specimen presented for testing and the beneficiary is not physically present at the hospital.
- »When the only services that a beneficiary receives are laboratory services. The patient does not receive any other outpatient services during the same encounter.
- »If the patient receives other outpatient services during the same encounter besides laboratory services, but the laboratory services are clinically unrelated to the reason for the outpatient encounter and are ordered by a different provider, bill on a 14X bill type.
Molecular pathology tests are excluded from the bundling rule and are always paid under the CLFS regardless of the patient status. These tests are recognized by their specific Current Procedural Terminology codes and are listed in the transmittal as codes in the ranges of 81200 through 81383, 81400 through 81408, and 81479. There may be reasons a hospital may want to bill these as nonpatients rather than outpatients, particularly when direct billing by the test provider of a referred test is preferred because of below-cost reimbursement by Medicare.
CMS expects hospitals and hospital laboratories to determine the proper bill type to use to ensure proper billing. The transmittal indicates that edits may not be in place initially so denials may not occur if the tests are not billed correctly. Each hospital may find different solutions to detect improper claims but it is likely that this will be a point of emphasis by government auditors in 2014.
Takeaway: Hospitals and their laboratories must monitor and track testing on their patients to ensure compliance with these policy changes and should conduct audits of claims early in 2014 to detect any improper billing and take appropriate actions, including returning any overpayments. 