Pathology/Lab Coding Alert

Ownership is the key for bundling rule.

Did you know that one of the least publicized changes in the 2012 Medicare Physician fee schedule could be one of the costliest if it applies to you?

That's the word from Marc Hartstein, deputy director of the Hospital and Ambulatory Policy Group at CMS, who spoke about the "three-day payment window" during the CPT® 2012 Annual Symposium in Chicago.

Hospital Ownership Triggers Rule

If a Medicare patient has diagnostic or related non-diagnostic services furnished in a facility wholly owned or operated by a hospital and then gets admitted to that hospital within three days, those prior services are bundled into the patient's hospital stay. This rule has been in place since June 2010 -- however, CMS tweaks the rule effective July 1, 2012, and now it may impact you more.

Here's why: Medicare considers those services "operating costs of inpatient hospital services," which are included in the hospital's payment under the IPPS, according to Harstein in his presentation. This applies to you even if your practice or lab is not located at the same site as the hospital. As long as it's wholly owned and operated by the hospital, the three-day payment window rule will apply.

Diagnostic: Based on this ownership relationship, hospitals "must include on the claim for a Medicare beneficiary's inpatient stay, all outpatient diagnostic services ... provided during the payment window," according to Harstein. That includes clinical diagnostic lab tests and diagnostic pathology (revenue codes 030X and 031X). Medicare will not make any payment for diagnostic services provided in an entity wholly owned or wholly operated by the hospital.

Related non-diagnostic: The same three-day bundling requirement applies for "related" non-diagnostic outpatient services, which includes "all non-diagnostic services unless the hospital attests that the services are clinically unrelated to the later inpatient stay," Harstein stated. Medicare will pay for these related non-diagnostic services provided in an entity wholly owned or operated by the hospital at the facility rate, instead of the outpatient rate.

Use This Modifier

If your practice is owned and operated by a hospital and you perform diagnostic testing or a related non-diagnostic service within three days of a patient's hospital admission, you should append modifier PD (Diagnostic or related nondiagnostic item or service provided in a wholly owned or wholly operated entity to a patient who is admitted as an inpatient within 3 days, or 1 day) to your claim to let Medicare know that your service is subject to the three-day payment rule.

For example: A pathologist whose practice includes an outpatient clinic for breast FNA and Mohs procedures is owned and operated by Hospital A. The pathologist extracts a breast-mass fine needle aspirate, performs evaluation of the specimen for adequacy, and completes the FNA interpretation in his clinic. The pathologist reports breast cancer findings to the treating physician, indicating that excision is appropriate.

Two days later, the patient is admitted to Hospital A for a partial mastectomy procedure. The pathologist can bill the FNA (10021, Fine needle aspiration, without imaging guidance), and append modifier PD. The modifier effectively turns the clinic-based procedure into a facility-based procedure. That means the clinic cannot bill for the costs associated with the supplies or other practice expenses related to the FNA, which could result in significant loss of income.

The pathologist should also bill for the immediate adequacy check and the FNA interpretation using 88172 (Cytopathology, evaluation of fine needle aspirate; immediate cytohistologic study to determine adequacy for diagnosis, first evaluation episode, each site) and 88173 (... interpretation and report) with modifier PD. Medicare will included these services in the hospital's payment under the IPPS rather than paying the pathology practice directly for the services.