Pathology/Lab Coding Alert

Laboratories and pathology practices can strengthen compliance and optimize payment by using periodic audits to analyze coding habits. By scrutinizing coding at each step in the process from requisition through claims processing, practices can identify patterns that result in noncompliance or nonpayment. Audits should compare all documents for a given service, from requisition form to pathology report, to claims and remittance advice. Such a review can spotlight discrepancies that result in lost cash flow and possible charges of fraud.

Chart audits are a method to identify weaknesses in your coding policies, processes and procedures, says Dennis Padget, CPA, FHFMA, president of Padget & Associates, a Kentucky-based pathology and laboratory billing and compliance consulting firm serving more than 150 clients in 25 states. They are a good tool to ensure that you have complete and accurate information to file claims, and that claims are processed accordingly. You can then use the results of chart audits to educate your physicians and staff toward the end of enhanced compliance and payment.

The term chart audit can refer to both internal and external reviews of varying depth and breadth.

Most labs or pathology practices should have external audits periodically, ranging from quarterly to annually depending on the size and needs of the practice, Padget says. But equally important are ongoing, internal audits that, although less far-reaching, are much more frequent say, every week. The weekly audits will generally be limited to fewer elements, while the periodic external audits will be more comprehensive. Chart audits should include review of some or all of the following four elements: pathology or laboratory reports, requisition forms, claim forms and remittance advice.

Review of Pathology or Laboratory Reports

Reviewing a sample of pathology reports is the centerpiece of any chart audit, Padget says. This may involve 25 or more reports for the weekly audit, to 100 or more cases for the periodic external review, depending on the size of the practice.

Some auditors recommend reviewing a specific number of reports from each pathologist, but Padget recommends a frequent, random sampling of charts. A weekly peer review of 25 reports should ensure that the entire cross section of participants is represented, he says. In addition to a larger random sample (e.g., 100 charts) for the periodic external audits, Padget also recommends that these include review of charts for high-risk cases. For example, charts reporting two or more 88309 (level VI surgical pathology, gross and microscopic examination) services or more than four frozen sections (88331 and 88332) should be flagged for review because these are more likely to have coding errors.

The audit should also ensure that ICD-9 codes are accurately assigned and support the medical necessity of the services.

1. Procedure Coding: The first question in the chart review is, do the procedure codes accurately describe the service that was ordered and provided? Padget says. For example, the listed codes must not involve upcoding to maximize payment. As a case in point, the examination of an epidermoid inclusion cyst (706.2) should be coded 88304 (level III surgical pathology, gross and microscopic examination; skin - cyst/tag/debridement). If the report shows a code of 88305 (level IV surgical pathology, gross and microscopic examination; skin other than cyst/tag/debridement/plastic repair), which has a higher payment but does not accurately describe the specimen, it would be considered inappropriate upcoding.

Similarly, reviewing the reports for coding accuracy should identify any potential cases of unbundling of services. For example, if a patient undergoes surgery for a malignant neoplasm of the colon (153.x), and the pathologist receives a total colon resection with attached pericolonic tissue including lymph nodes, the correct procedure code would be 88309 ( colon, total resection). Coding separately for the attached lymph nodes (88307, level V surgical pathology, gross and microscopic examination; lymph nodes, regional resection) would be considered unbundling, because associated lymph nodes are generally considered a part of the resected 88309 specimen.

Reviewing the pathology reports can also identify undercoding. For example, if a sentinel lymph node biopsy (88307) is reported simply as a lymph node biopsy (88305), the error could cost the practice legitimate revenue.

The periodic review of pathology reports should turn up any such coding inaccuracies, Padget says. This information can then be used to educate pathologists about correct coding practices. That is why the weekly review is so important. A lot of mistakes can be made in a year, and the continuous review keeps practices in compliance and receiving fair payment for their services.

2. Diagnosis Coding and Medical Necessity:

Periodic audits should also ensure that the pathology or lab report includes accurate diagnosis information that supports the medical necessity of the tests ordered, as well as accurate ICD-9 codes to report the results of the tests.

Medicare has some national and many local medical review policies (LMRPs) that stipulate which diagnoses uphold medical necessity for which pathology services, explains Laurie Castillo, MA, CPC, CPC-H, CCS-P, member of the National Advisory Board of the American Academy of Professional Coders. A periodic review of a sampling of pathology reports should ensure that procedures are only carried out for conditions that justify medical necessity.

For example, coding for Pap smears is a major source of errors in the agreement between diagnosis and procedure coding. First of all, HCFA makes a distinction between diagnostic and screening Pap smears, both in terms of the code used to describe the procedure and the diagnoses that support the medical necessity of the test, Castillo says.

For a screening Pap smear, the patient should not have any signs or symptoms of disease, and beginning July 1, 2001, the patient can have the test only once every two years (or more often if the patient is high risk) for the service to be covered. A screening Pap smear must be reported with V76.2 (special screening for malignant neoplasms, cervix) for low-risk patients, or V15.89 (other specified personal history presenting hazards to health) for high-risk patients, Castillo says. The correct procedure code for a screening Pap smear is one of the HCPCS codes, e.g., P3000 or G0123. For a diagnostic Pap smear, an ICD-9 code for signs or symptoms of disease must be reported, and the procedure should be listed with the appropriate CPT code, e.g., 88142 or 88164, Castillo says. (For more on Pap smear coding, see Receive Fair Payment For Physician Interpretation of Pap Smear on page 41.)

Finally, the audit of lab reports should ascertain if the pathologists are accurately assigning ICD-9 codes based on the test results, Castillo says. Two common errors that turn up in chart reviews are due to not reporting the diagnosis to the highest degree of specificity. This can occur either by assigning a truncated code (i.e., reporting codes that require a fourth or fifth digit as only three or four digits) or by overusing unspecified codes. Medicare and many third-party payers consider truncated coding invalid and question the overuse of unspecified codes. These errors in diagnosis coding can lead to claims denials.

Review of Requisition Forms

The requisition form is the starting point of an expanded chart audit that should take place one to four times a year. Information regarding each pathology and laboratory service begins with the requisition form from the referring physician, Padget says. The information on this form should be scrutinized in the audit to ensure that it matches the information on the pathology report.

By comparing the requisition form to the pathology report, you can confirm that the test ordered was the test carried out and coded. You can also ascertain that the diagnosis supports medical necessity, and that the diagnosis given by the referring physician agrees with the diagnosis on the pathology claim when directed (e.g., Pap tests), or when a definitive pathologic diagnosis is not available. Padget explains that if the requisition form is not in agreement with the pathology claim regarding the reason for the test or which test is ordered, there is not appropriate documentation to back up the charge.

For example, if the referring physician orders a Pap smear and indicates that it is a diagnostic test, the requisition form should include an indication of history of disease or a diagnosis for signs and symptoms of disease, such as cervical dysplasia, 622.1. If the referring physician only assigns one of the V codes and orders a diagnostic Pap, there is a problem, Padget says. If the pathology claim provides an ICD-9 code that supports the diagnostic Pap smear, there must also be documentation that the referring physician was contacted and provided additional information after the requisition was submitted.
The lab must get the diagnosis information from the referring physician; it cannot assign a diagnosis just because it will result in payment, Padget says. If a new requisition form is required with the correct diagnosis, be sure to have the physicians office fax a corrected form immediately and keep it in the medical record. Accepting a new diagnosis over the phone without documentation can become troublesome in an audit.

Review of Claim Forms (HCFA 1500)

Billing forms should also be reviewed in the expanded audit that takes place at least annually. By selecting certain pathology reports and reviewing the associated HCFA 1500, an audit can help ensure that the intended charges reflect what is actually posted.

This is the place in the audit where we typically find problems like multiple units of service that are not accurately reported. For example, the pathology report may show two nevi submitted from distinct locations on the body, but the claim form may report one unit of 88305 instead of two, Castillo says.

Another common error in translating information from the pathology report to the claim form is applying the diagnosis information incorrectly. Although more than one diagnosis may appear on the lab report, it is important that these are put on the HCFA 1500 in the proper order. For example, if a pathologist evaluates a neoplastic ovary (88307), the definitive pathologic diagnosis (e.g., malignant teratoma, 183.0) must be listed first on the HCFA 1500 to support the medical necessity of the service. Although the patient may have presented with pelvic pain (625.9) as the initial symptom that led to the oophorectomy, that ICD-9 code must be reported second on the HCFA 1500 because it does not support medical necessity for 88307.

Review of Remittance Advice

HCFA provides an explanation of benefits (EOB), and most third-party payers provide a similar clarification when a claim is denied. According to Padget, the remittance advice can provide valuable information about ICD-9 and/or CPT coding errors that may have caused a claim rejection.

By comparing the remittance advice to the other information, including the requisition, the pathology report and the claim form, the source of the error can often be identified. For example, the EOB may indicate that a claim for 88329 (pathology consultation during surgery) and 88331 (pathology consultation during surgery; first tissue block, with frozen section[s], single specimen) is denied based on a Correct Coding Initiative (CCI) edit. CCI prohibits reporting these two codes together for a single consultation because the services of 88329 are a component of (bundled into) 88331.

However, if the pathology report makes it clear that the codes represented two distinct consultation sessions, both services could have been reported by appending modifier -59 (distinct procedural service). For example, if a pathologist was called to surgery for a consultation involving a frozen section to establish a diagnosis of neoplasm of the colon, the appropriate code would be 88331. If the pathologist was later called back into surgery to consult on margins of the colon resection, the service would be coded 88329.

Reviewing the EOB can reveal all sorts of coding errors, such as unbundling, upcoding, or improper use (or lack of use) of modifiers, Castillo says. It can also uncover problems such as laboratories reporting tests for which it is not approved under the Clinical Laboratory Improvement Amendments (CLIA), and tests for which the lab should have an advance beneficiary notice (ABN) on file.

The remittance advice can also alert pathology practices and laboratories to coding requirements that they may have missed. If a lab failed to use updated CPT codes for certain tests, or missed a policy update, the EOB could alert them to the source of the claims denials. However, if the remittance advice is reviewed only in an annual audit, much of this valuable information is lost. That is why I recommend the laboratory or pathology practice sit down once a month with the billing agent to discuss any trends that might point to a problem, Padget says.

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