Pathology/Lab Coding Alert

Independent laboratories have a temporary reprieve. They can continue billing the technical component (TC) of physician pathology services for hospital outpatients to Part B Medicare carriers until Jan. 1, 2001, according to Health Care Financing Administration (HCFA) program memorandum AB-00-73 dated Aug. 11, 2000. Prior to issuing the memorandum, labs were scrambling to meet the Aug. 1, 2000 deadline, as part of the implementation of the outpatient prospective payment system (OPPS). The delay in the change of technical component reporting is retroactive to Aug. 1, 2000.

Its a big relief to us, reports Stan Werner, MT (ASCP), administrative director and corporate compliance officer of Peterson Clinical Laboratory in Manhattan, Kan. The change requires new systems for billing and reimbursement on the part of both laboratories and hospital, and many are just not ready, he continues. This news also gives us a temporary reprieve from our biggest concern the lower reimbursement rates for the TC services under the new ambulatory payment classifications (APC), especially at rural hospitals.

Background on New Billing Rules

Many pathology procedures represent both a technical and a professional service. The technical component of the service includes the equipment, supplies and technician labor involved in doing the procedure (e.g., preparing surgical or cytopathology slides). The professional component represents the physicians evaluation and interpretation.

Now independent laboratories providing the technical component of these services seek reimbursement directly through the Medicare Part B physician fee schedule.

But with the proposed rule published in the Federal Register, July 22, 1999, change was on the horizon for hospital inpatient billing. When the rule was finalized (Federal Register, Nov. 2, 1999), HCFA declared that it would end payments to independent laboratories under the physician fee schedule for technical component physician pathology services furnished to hospital inpatients. For these services, the independent laboratory would have to make arrangements with the hospital to receive payment. The effective date for this change is Jan. 1, 2001.

Then HCFA announced that the same restriction would be placed on hospital outpatient services for the technical component billing effective Aug. 1, 2000. HCFA explained its position in a communication with the College of American Pathologists (CAP) on June 16, 2000 (www.cap.org/html/Advocacy/capdocs/ppsemail.html).
The communication states, An independent laboratory will not be able to bill for the technical component of a pathology service under the outpatient PPS. The outpatient final rule requires that the hospital must provide directly, or under arrangements, all services furnished to hospital outpatients. This restriction was to take effect on the same date as OPPS Aug. 1, 2000. Largely through the efforts of CAP, however, the implementation of the outpatient TC policy has been delayed until Jan.1, 2001, the same date as the inpatient change. Look for the announcement and related documents at the CAP Web site www.cap.org/html/Advocacy/capdocs/pps.html.

Impact on Coding and Billing

For pathology procedures that involve both technical and professional services, unmodified CPT codes describe both portions, explains Cheryl Schad, BA, CPC, president of Schad Medical Management, a Mullica Hill, N.J., physician reimbursement and consulting firm specializing in pathology, radiology and family practice. Taken together, the professional and technical parts are referred to as the global service. If the same provider performs both parts of the service, the CPT code may be reported without modifiers, under some circumstances, says Schad.

Report the CPT code without modifiers only if the provider is billing the same payer for the global service. Because the new rule requires that the hospital bill Medicare for inpatient and outpatient TC pathology services, independent laboratories providing both portions of the service cannot bill globally starting Jan. 1, 2001.
They will bill the hospital for the technical component of the service and continue to bill Medicare Part B directly for the professional component.

When reporting only one portion of the service, the CPT code must be listed with a modifier. CPT modifier -26 (professional component) indicates that the pathologist provided only the interpretive portion of the service, says Schad. Although CPT does not have a coding convention for the technical component, HCFA requires HCPCS modifier -TC (technical component) when reporting only that part of the service to Medicare.

Outpatient example: If an independent laboratory receives a breast biopsy from a hospital outpatient, it performs the surgical pathology service 88305 (Level IV surgical pathology, gross and microscopic examination, breast, biopsy, not requiring microscopic evaluation of surgical margins). The technical portion of the service involves materials and labor for slide preparation; the professional component is the pathologists examination of the specimen and the slides. Under the new rule, the hospital bills Medicare and reimburses the independent lab that provided the service under arrangements. The hospital is paid for the 88305-TC under the new APC 0343 (the APC category that includes 88305) rate rather than the physician fee schedule in Medicare Part B. The lab bills Medicare Part B for the physician professional service, 88305-26.

Inpatient example: If a colon specimen from a hospital inpatient is submitted to an independent laboratory for diagnosis of a neoplasm, the lab performs procedure 88309 (Level VI surgical pathology, gross and microscopic examination; colon, segmental resection for tumor). Under the new rule, the lab bills Medicare for 88309-26, and the hospital bills Medicare under the appropriate diagnosis related group (DRG) for inpatients.

Non-hospital example: Services supplied by labs to non-hospital patients are not subject to the new restriction. If a lab receives a sputum sample from a physicians office patient for concentration, preparation and evaluation, the laboratory reports code 88108 (cytopathology, concentration technique, smears and interpretation [e.g., Saccomanno technique]). The lab bills Medicare directly for both the technical and professional component of this service. This rule will not change under the Jan. 1 restrictions because the restrictions impact billing only for hospital inpatients and outpatients.

Whats Coming?

Although were pleased with the delay in implementing this change, were still concerned about the long-term implications once the policy goes into effect for both inpatients and outpatients, reports Werner. Its of special interest to those of us working with rural hospitals that cant sustain their own labs and are therefore hardest hit by this policy.

The APC reimbursement rates for the TC of pathology services are lower, in many cases, than the Part B rate, continues Werner. Coupled with the lower adjusted labor rates for services provided in rural areas, these hospitals may be reimbursed for the TC services below our cost. But a hold-harmless clause for rural hospitals with 100 or fewer beds should mitigate the impact through 2003. These hospitals will receive monthly transition outpatient payments to bring their Medicare reimbursement up to what it would have been without OPPS.

Currently, there is proposed legislation in Congress to allow existing arrangements between independent labs and hospitals to be grandfathered, states Werner. In its current form, the legislation applies to arrangements in effect at the time of the first proposed rule (July 22, 1999), and allows independent laboratories to continue to bill for pathology TC for both hospital inpatients and outpatients. Otherwise, independent laboratories and hospitals affected by the change will have only an extra five months to prepare.