HOPPS Lab Test Packaging Policy Anything but Clear

A new policy on packaging of laboratory tests provided to hospital outpatients is creating confusion among laboratories as directives from the Centers for Medicare and Medicaid Services (CMS) explain the new policy using different terms. Under the new packaging policy, which went into effect Jan. 1, 2014, certain clinical laboratory tests are to be packaged (or bundled) into the payment for the primary service performed in a hospital outpatient setting. According to the final Hospital Outpatient Prospective Payment System (HOPPS) rule issued last December, the Centers for Medicare and Medicaid Services (CMS) will package laboratory tests “when they are integral, ancillary, supportive, dependent, or adjunctive to a primary service or services provided in the hospital outpatient setting.” To be packaged, the lab tests would have to be provided on the same date of service as the primary service and ordered by the same practitioner who ordered the primary service. Molecular pathology tests are exempt from this packaging policy. CMS issued instructions to contractors on Dec. 27, 2013, and followed it with an MLN Matters (MLN) shortly thereafter. The problem, says Robert Mazer, an attorney with Ober|Kaler (Baltimore) is that there are inconsistencies in the instructions regarding which laboratory services have to be packaged by the hospital and which services can be billed individually under the Clinical Laboratory Fee Schedule. In addition, neither adequately explains when a laboratory test must be billed by the hospital, particularly when the test is performed by a lab that is not part of the hospital. Instructions to Contractors According to MLN article SE1412, effective Jan. 1, 2014, packaged payment would apply to all lab tests (other than molecular pathology) billed by OPPS hospitals on a 013X type of bill (TOB; hospital outpatient). Initially, CMS said that in limited exceptions, hospitals could use the 014X TOB (hospital nonpatient) to obtain separate payment in only the following circumstances:

1. Nonpatient (referred) specimen;
2. A hospital collects specimen and furnishes only the outpatient labs on a given date of service; or
3. A hospital conducts outpatient lab tests that are clinically unrelated to other hospital outpatient services furnished the same day. “Unrelated” means the laboratory test is ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services, for a different diagnosis.

However, since the release of Change Request 8572, some hospitals expressed concern that submitting a 014X TOB could violate the Health Insurance Portability and Accountability Act. The National Uniform Billing Committee definition approved in 2005 for the 014X TOB for billing of lab services provided to nonpatients means referred specimen, where the patient is not present at the hospital. To alleviate this concern, CMS is implementing a new modifier that will be used on the 013X TOB (instead of 014X TOB) when nonreferred lab tests are eligible for separate payment under the Clinical Laboratory Fee Schedule (CLFS) for exceptions 2 and 3 listed above. The 014X will only be used for nonpatient, referred laboratory specimens (exception 1 above) and will not include this new modifier. The new modifier will be effective for claims received on or after July 1, 2014, and retroactive for dates of service on or after Jan. 1, 2014. Until July 1, 2014, providers can continue to use the 014X TOB. According to CMS, it will continue to be the hospital’s responsibility to determine when laboratory tests qualify to receive separate payment. Starting with claims received after July 1, 2014, when a hospital appends the new modifier to the laboratory service, the provider is attesting that exception 2 or 3 listed above is met. The requirement for all OPPS services to be submitted on a single 013X claim (other than recurring services) continues to apply. Potential Inconsistencies One issue that remains confusing is what tests are required to be billed by the hospital when the tests are performed by another laboratory, says Mazer. For example, is a hospital responsible for billing for a diagnostic test if a hospital patient leaves the hospital and goes elsewhere to obtain the test? And what about cases where the hospital has outsourced lab services to freestanding providers furnishing services on hospital grounds or the patient elects to receive services from a lab that is not part of the hospital? In the preamble to the final HOPPS rule, CMS stated that a freestanding entity (one that is not provider-based) may bill for services furnished to beneficiaries who do not meet the definition of a hospital outpatient at the time the service is furnished. The bundling or packaging requirement, said CMS, applies to services furnished to a “hospital outpatient” during an “encounter” as defined by the Medicare regulations. Implementing instructions, however, require hospitals to bill for diagnostic services that are ordered during or as a result of an encounter that occurred while the individual was an outpatient. The hospital is required to bill if the patient is directed to another entity for testing. Instructions are intended to be consistent with related regulations, so they should not generally be disregarded. The differences in terminology, notes Mazer, could lead to different interpretations and different results. Mazer advises hospitals to make appropriate efforts to ensure that they are billing for all tests for which Medicare will pay only the hospital and to make certain that payment is not being claimed for those services by another entity, such as a lab that may have performed outpatient reference tests. Is Packaging Optional? Another source of confusion is a note in MLN article 1412, which states:

Under the CY 2014 OPPS final rule, it is optional for OPPS hospitals to seek separate payment under the CLFS for a given outpatient lab test. To minimize administrative burden, OPPS hospitals are not required to distinguish related and unrelated outpatient lab tests and may bill “unrelated” outpatient labs on the 013X TOB prior to July 1, 2014, or on the 013X TOB without the new modifier on or after July 1, 2014, to receive packaged payment under the OPPS.

Mazer believes that the only reasonable interpretation for this statement is that hospitals have the option not to seek separate payment under the CLFS for an outpatient lab test for which such payment is available. “Hospitals are not afforded, however, the option of disregarding the packaging requirements where applicable and claim separate payment for lab tests under the CLFS,” he writes in a Payment Matters article distributed to clients. Sole Community Hospitals Sole community hospitals (SCHs) are paid under the OPPS. However, SCHs with qualified laboratories continue to be eligible for the 62 percent CLFS payment amount described in the Medicare Claims Processing Manual when they furnish outpatient lab tests that are separately payable under exception 2 and 3 listed above. The 014X TOB does not provide differential CLFS payment rates for SCHs with qualified labs and other OPPS hospitals. Thus, qualified SCHs must submit a 013X TOB with the new modifier appended to separately payable outpatient lab services in order to obtain the 62 percent CLFS payment amount provided in current manual instructions. CMS is permitting SCHs to wait until the new reporting methodology goes into effect on July 1, 2014, to submit claims for payment. Review of Claims Data CMS will be reviewing claims data for 2014 for potential unbundling of laboratory services under the new OPPS packaging policy. As stated in the OPPS final rule, CMS does not expect changes in practice patterns under the new policy. Hospitals may not establish new scheduling patterns in order to provide laboratory services on separate dates of service from other hospital services for the purpose of receiving separate payment under the CLFS, says CMS. Takeaway: Implementing instructions for Medicare’s new policy under which lab tests provided to hospital outpatients are packaged with payment for a primary service are anything but clear.