Pathology/Lab Coding Alert

Section 542 of the Benefits Improvement and Protection Act of 2000 (BIPA) secured a two-year reprieve for independent laboratories that bill the technical component (TC) of physician pathology services to Medicare. Although pleased with the ruling, many labs and pathology practices have struggled to understand the requirements to qualify for the grandfather exception. HCFA clarified the ruling in Program Memorandum AB-01-47.

Laboratories must understand whether they qualify for the exception, and how to secure it if they wish to bill their local Medicare carrier for TC services supplied to hospital inpatients and outpatients. Otherwise, labs must bill the hospital for reimbursement, usually under the ambulatory payment classifications (APC) rates, which are lower for some services. If they qualify for the exception, laboratories must also understand which pathology services the law impacts, and how to code for the technical component of those services using appropriate modifiers.

At least for now, BIPA has saved us from what would have been an overall significant decrease in revenues, says Stan Werner, MT (ASCP), administrative director and corporate compliance officer of Peterson Clinical Laboratory in Manhattan, Kan. Such savings may be available to many independent laboratories, but they must follow the constraints and requirements enunciated in the HCFA program memorandum.

TC Billing: A Look Back and a Look Ahead

Under the payment rules outlined in the Medicare Carriers Manual (MCM), Medicare had to recognize payment of the technical component of certain pathology physician services when they were furnished to hospital patients by an independent laboratory. However, in a rule published in the Nov. 2, 1999, Federal Register, 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 was to be Jan. 1, 2001.

Then HCFA announced that the same restriction would be placed on hospital outpatient services for the technical component billing effective with the implementation of the outpatient prospective payment system (OPPS), but later delayed to coincide with the inpatient change. This was to comply with the outpatient final rule requiring that hospitals provide directly, or under arrangements, all services furnished to hospital outpatients.

Section 542 of the BIPA law provides that the Medicare carrier can continue to pay independent laboratories for the TC of physician pathology services to inpatients and outpatients of a covered hospital. However, the law allows a continuation of this practice only until Jan. 1, 2003.

Which Laboratories Qualify and How?

Much confusion has surrounded what constitutes a covered hospital and therefore which independent laboratories can qualify for the exception under BIPA. The recent program memorandum from HCFA (AB-01-47) clears up that confusion.

A covered hospital is one that had arrangements with an independent laboratory in effect as of July 22, 1999. Under these arrangements, a laboratory furnished the TC of physician pathology services to fee-for-service Medicare beneficiaries who were hospital inpatients or outpatients, and submitted claims for payment for the TC to a carrier.

This definition only requires that the hospital had such arrangements with any independent laboratory that was recognized by the carrier as of July 22, 1999. If the covered hospital now has arrangements with a different independent laboratory, then that laboratory qualifies for the grandfather exception. One caveat is that if the arrangement in effect on July 22, 1999, limited the provision of the TC billing to certain situations, those limitations stay in place during the grandfather period.

Finally, laboratories must know how to document their eligibility for the TC billing exception. An independent laboratory that has an arrangement with a covered hospital must send to the carrier a copy of the arrangement that the hospital had in effect as of June 22, 1999. If that arrangement was with a different laboratory, the current laboratory must send a copy of the arrangement from the predecessor lab. The instructions allow for other documentation if a copy of the arrangement is not available. The confirmation of eligibility should be furnished for each covered hospital the independent laboratory services.

How to Code TC of Physician Pathology Services

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 performing the procedure (e.g., preparing surgical or cytopathology slides). The professional component represents the physicians evaluation, interpretation and report.

For pathology procedures that include both a technical and professional component, the CPT code accounts for both parts of the service, says Tom Scheanwald, vice president of APS Medical Billing, a billing and practice management company in Toledo, Ohio, serving pathologists and laboratories in more than 15 states. Taken together, the professional and technical portions are referred to as the global service. According to Scheanwald, if the CPT code is reported without a modifier, the code represents both the technical and professional component, and payment would account for both the preparation and interpretation of the specimen. If the same provider actually performs both parts of the service, the CPT code should be reported without modifiers, Scheanwald says.

But, thats frequently not the case for pathology services. Very often, the laboratory owns the equipment, purchases the supplies and pays the personnel involved in pathology testing, while an independent pathologist interprets the tests. For example, if a pathologist consults for a hospital and provides the evaluation of a colorectal polyp prepared in the hospitals histology lab, the entire service would be represented by 88305 (level IV surgical pathology, gross and microscopic examination, polyp, colorectal). The labs histotechnician would prepare slides using lab resources, and the pathologist would interpret the slides and write a report. Because each part of the service is provided by a different entity, there has to be a way to separately report each portion, Scheanwald says.

To report each portion separately, use modifier -26 (professional component) and HCPCS modifier -TC (technical component). In the preceding example, the pathologist would report 88305-26 to indicate that he or she provided only the interpretive portion of the service. Code 88305-TC represents the costs associated with the technical portion of the service, such as histotechnician salary and lab supplies used in preparing the slides. But, in this case, the technical portion of the surgical pathology procedure would be billed by the hospital (facility). The hospital accounts for the technical portion of the service in the APC rate for outpatients, or the DRG (diagnosis-related group) rate for inpatients, Scheanwald says.

In another example, an independent laboratory has arrangements with a covered hospital and receives a lumpectomy specimen from an outpatient. The lab performs the surgical pathology service 88307 (level V surgical pathology, gross and microscopic examination, breast, excision of lesion, 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 grandfather exception, the independent lab can bill the Medicare carrier for 88307 and receive reimbursement for both the technical and professional components of the service under the Part B physician fee schedule.

If, on the other hand, the laboratory did not qualify for the exemption, the pathologist could only bill Medicare for the physician professional service, 88307-26. The hospital would be paid for the 88307-TC under APC 0344 (the APC category that includes 88307) rate rather than the physician fee schedule in Medicare Part B. The lab would have to receive reimbursement from the hospital for the technical component of the service provided.

It is important to understand that not all pathology services include a technical and professional component, Scheanwald says. Some services are professional only, such as clinical pathology consultations (80500-80502), yet many clinical lab tests (80048-87999) are primarily technical. For Medicare patients, the definitive indication of which codes can be reported with modifiers -TC and/or -26 is the Medicare physician fee schedule, or the annually updated list of relative value units (RVUs) published in the Federal Register.

Note: For a list of codes that can be reported with both -TC and -26 according to the most recently published RVU list in the Nov. 1, 2000, Federal Register go to http://www.access.gpo.gov/ Select GPO access, then select Federal Register. On that page, select browse back issues of Federal Register Table of Contents 2000. Select Wednesday November 1, 2000. Scroll to Health Care Financing Administration, and select pp 65525-65574.

According to HCFA program memorandum AB-01-47, the TC of physician pathology services involved in the BIPA law includes cytopathology and surgical pathology physician services described in the MCM Section 15020 B and C. These are the same codes listed with the -TC and -26 modifier in the Federal Register.

Because of BIPA, we dont have to change the way we bill the TC of pathology services for patients from hospitals that qualify for the grandfather exception, Werner says. That is, until the provision expires on Jan. 1, 2003. Thats why the College of American Pathologists is encouraging advocates of TC billing to support legislation that would make permanent the two-year grandfather now protecting independent labs. The pending legislation is called The Physician Pathology Services Fair Payment Act of 2001 and is sponsored as H.R. 1451 and S. 730.

Note: To access program memorandum AB-01-47, go to www.hcfa.gov/pubforms/transmit/AB0147.pdf (you will need Adobe Acrobat, which is available free at www.medville.com).