Pathology/Lab Coding Alert

After the threat of a 10.1 percent Medicare pay cut for 2008, the Medicare, Medicaid and SCHIP Extension Act of 2007 came in under the wire last year to leave us with the current 0.5 percent increase that started Jan. 1.

The downside: The law expires on June 30, so Medicare allowances after that are still up in the air.

The congressional action means that instead of using the 34.0682 conversion factor to calculate your pay, Medicare carriers will use a conversion factor of 38.0870 for the first half of 2008.

For instance: If your pathologist bills a colon biopsy using 88305 (Level IV -- Surgical pathology, gross and microscopic examination, colon biopsy), you-ll get $102.83 instead of $91.98 for the national payment amount.

Despite the congressional reprieve, however, physicians shouldn't take their attention off of the legislative wrangling that will be required to fix payments after June 30, says Jean Acevedo, LHRM, CPC, CHC, PCS, of Acevedo Consulting Inc. "People should be worried that come July 1, 2008, their reimbursement will drop to the 10.1 percent reduction," she says.

Potential upside: "I-ve never seen Congress attempt just a six-month fix," Acevedo says. "Maybe the Senate is planning to actually tackle the core problem with the fee schedule between now and June. If so, that could actually be good news."

The temporary pay increase isn't the only good news for labs. Until June 30, Congress also extends the "grandfather" exception (Section 542 of the Benefits Improvement and Protection Act [BIPA]) that allows independent labs to bill Medicare for the technical component (TC) of hospital-patient pathology services.

Hospitals qualify for the exception only if they had the billing arrangements with an independent lab as of July 22, 1999, when CMS first proposed eliminating this payment scheme.

The grandfather exception is significant for cash-strapped rural hospitals that cannot afford in-house pathology services and therefore rely on independent labs.

"The extension is an important reprieve for rural hospitals and labs like ours that serve them," says Stan Werner, MT (ASCP), administrative director of Peterson Laboratory Services PA in Manhattan, Kan.

The exemption only applies to TC of anatomic pathology and cytopathology services for hospital inpatients and outpatients.

For example: A pathologist employed by an independent lab performs a thyroidectomy exam for an inpatient at a hospital with "qualifying arrangements" under the grandfather exception. The lab should bill 88307 (Level V -- Surgical pathology, gross and microscopic examination, thyroid, total/lobe) for the global service -- both technical and professional components.

On the other hand: If the example involved a non-qualifying hospital, the independent lab could bill Medicare only for the physician service using modifier 26 (Professional component). Medicare would pay the hospital for the technical component under the APC rate, and the lab would have to arrange with the hospital to recover those expenses.