Pathology/Lab Coding Alert

You can choose who bills the payer.

Question: When is a hospital lab an independent lab? Answer: when it performs tests for a non-hospital patient.

That answer is the key to understanding a billing conundrum that some of our readers faced and asked about. 

Look at This Scenario

A dermatology practice employs its own pathologist, but sends specimens to a local hospital lab for the pathology technical component. 

For instance, the hospital lab prepares slides for 88305 (Level IV - Surgical pathology, gross and microscopic examination, …Skin, other than cyst/tag/debridement/plastic repair…) and sends the slides back to the dermatology practice for their pathologist to interpret.

Problem: Hospital labs have gotten mixed messages about how to bill for these services. “For instance, some consultants claim that the hospital lab can bill the payer for the technical component, while others claim that the hospital lab must bill the work to the physician client and have them bill the payer for the global service,” explains Peggy Slagle, CPC, coding and compliance manager for the department of pathology/microbiology at the University of Nebraska Medical Center in Omaha. 

One hospital lab has even reported an audit flag for billing the 88305-TC (Technical component) without a pathology report that includes mention of a microscopic exam. 

Explore the Non-Inpatient, Non-Outpatient Solutions

The following four guidelines can help you decide how to handle these billing situations if your hospital lab performs the technical component of physician pathology services for beneficiaries who are not inpatients or registered outpatients of the hospital.

The guidelines were prepared with the insights and help of Dennis Padget, MBA, CPA, FHFMA, The Villages, Fla., Senior Editor in Chief, Pathology Service Coding Handbook, for American Pathology Foundation.

1. Your Hospital Lab May Bill TC to Payer 

“Medicare does not dictate who may bill for the technical component of physician pathology services for nonhospital patients in situations where the professional and technical components are rendered by two different providers,” Padget says. 

For instance, chapter 12, section 60(B) of the Medicare Claims Processing Manual states, “Payment may be made … for the TC of physician pathology services furnished by an independent laboratory, or a hospital if it is acting as an independent laboratory, to non-hospital patients.” And chapter 12 section 60(C)(1) confirms that physician pathology services may be billed as a professional component alone (modifier 26), as a technical component alone, or as a global charge, and that “depending upon circumstances and the billing entity, the [Medicare Part B] contractors may pay professional component, technical component or both.”

Do this: If your hospital lab bills the payer directly using Form CMS-1500, append modifier TC to the correct CPT® code on the claim. However, if your hospital lab performs the TC service and decides to bill the dermatology practice, in this example, then the dermatology practice can file a claim for the professional component and a separate claim for the technical component it purchased from you. Remember that the dermatology practice will bill according to Medicare’s anti-markup rule, which limits Medicare payment to the lesser of the Medicare physician fee schedule TC amount or the amount the dermatology practice paid your lab for the technical component.

Remember: “Medicare leaves the decision regarding which party bills the technical component solely up to the two providers involved in the transaction,” Padget says.

2. Bill Part A

“When a hospital laboratory provides services to nonhospital patients, longstanding Medicare guidance recognizes that the hospital is acting in the capacity of an independent laboratory,” Padget says. “Nonetheless, the hospital is to bill the Part A contractor on Form CMS-1450 showing 014X as the type of bill when filing for clinical lab tests to nonhospital patients,” he explains. “Most hospitals today also file Form CMS-1450 for the TC of physician pathology services to nonhospital patients, even though there’s a way for hospitals to register with Medicare to file CMS-1500 claims when serving nonhospital patients.”

This instruction is published in chapter 16 section 50.3.2 of the Medicare Claims Processing Manual, which states, in part: “When a hospital laboratory performs a laboratory service for a non-hospital patient, (i.e., for neither an inpatient nor an outpatient), the hospital bills its FI [Medicare Fiscal Intermediary, now Part A MAC] on the ANSI X-12 837I or on the hard copy form, CMS-1450. If a [Medicare Part B] carrier receives such claims, the carrier should deny them.”

3. Expect CLFS or OPPS pay

“Medicare pays hospitals for laboratory tests to nonhospital patients based on the clinical laboratory fee schedule amount for clinical tests or the OPPS APC fee schedule amount for physician pathology services,” Padget says. 

This instruction appears in chapter 16 section 30.3 of the Medicare Claims Processing Manual, as follows:

“Laboratory tests payable on the Clinical Diagnostic Laboratory Fee Schedule for a non-patient laboratory specimen (bill type 14X) is the lesser of the actual charge [or] the fee schedule amount …  Part B deductible and coinsurance do not apply. Laboratory tests not payable on the Clinical Diagnostic Laboratory Fee Schedule will be based on OPPS (for hospitals subject to OPPS) or the current methodology for hospitals not subject to OPPS.”

4. Pathology Report Not Required 

Regarding the auditor’s comment that the hospital lab needed a pathology report documenting a microscopic exam to bill the TC of a surgical pathology service, Padget shares these insights: 

“The technical component of physician pathology services is not considered ‘testing’ under the CLIA regulations. Therefore, a CLIA number is not required for physician pathology service technical component processing, except for purposes of Medicare billing. Due to the unique status of histology technical processing, the processing is not considered a medical service, so a formal medical record is not required. Nonetheless, the performing provider must retain sufficient records to authenticate the performance of the billed services.”