Pathology/Lab Coding Alert

Expect "facility" payment to impact your bottom line.

With a last-minute CMS announcement to delay implementing its newly revised place-of-service (POS) rule from April 1 to October, 2012, you'll have a little more time to get familiar with changes that could have a huge impact on your lab and pathology billing and reimbursement. An official written CMS announcement of the delay was not available as of press time.

Unless CMS makes significant rule changes prior to implementation, you can expect to use a lot more of POS code 21 (Inpatient hospital) and 22 (Outpatient hospital) on your claims. That's especially true if you're an independent lab that's been listing POS 81 (Independent laboratory) for most specimens that come your way.

CMS update: The change is thanks to CMS Transmittal 2407 that clarifies and modifies POS coding rules in the Medicare Claims Processing Manual (CMS IOM Pub. 100-04). You can read the transmittal and MLN Matters article at www.cms.gov/transmittals/downloads/R2407CP.pdf and www.cms.gov/MLNMattersArticles/downloads/MM7631.pdf, respectively.

Who must comply: The guidelines apply to labs and pathologists who bill pathology services paid on the Medicare physician fee schedule (MPFS) and to "certain services provided by independent labs," which refers to all tests paid via the clinical lab fee schedule (CLFS). You'll need to comply whether you're billing the professional component (modifier 26, Professional component) or technical component (modifier TC, Technical component) or the global service for services such as tissue exam (88300-88309, Level ... Surgical pathology), non-gyn cytology (88104-88112, Cytopathology ... except cervical or vaginal) or FISH (such as 88365-88368, In situ hybridization ... morphometric analysis).

"Despite the implementation delay, you should review your POS coding policies in light of the Transmittal 2407 instructions to ensure that you're ready when the final effective date is announced," says Dennis Padget, MBA, CPA, FHFMA, president of DLPadget Enterprises Inc. and publisher of the Pathology Service Coding Handbook, in The Villages, Fla.

Follow Patient's Location

Regardless of the implementation date, the change to POS guidelines could have a big impact on how you bill your claims.

"Unfortunately, 2407 leaves room for differing opinion on exactly what POS means in relation to pathology and lab services. However, I believe CMS's intent is that labs and pathologists should assign the POS based on the physical location of the patient at the time the tissue, fluid, blood, or other lab specimen was obtained," Padget explains "The place where the TC is performed or the site where the pathologist is sitting when the microscopic slides are examined plays no role in the POS code assignment," he says.

That means independent labs and other lab service providers should stop using POS 81 unless the patient comes to the lab to provide the specimen -- an uncommon scenario for anatomic pathology and cytopathology. Instead, you should use the POS code that describes the patient location when the specimen was taken. You can see a complete POS code list in the CMS transmittal, but you're likely to use one of the following POS codes in most situations:

• 21 - -Inpatient hospital
• 22 -- Outpatient hospital
• 24 -- Ambulatory surgery center
• 11 -- Office

Watch for Payment Impact

When you bill for a service using POS 81, Medicare contractors reimburse at the non-facility rate. But payment is at the facility rate when you bill with POS such as 21 or 22.

That can mean a pay cut for your pathologist for certain services, such as 88325 (Consultation, comprehensive, with review of records and specimens, with report on referred material), which pays $196.74 at the non-facility rate, but pays $124.58 at the facility rate (MPFS national amount, conversion factor 34.0376).

You could lose TC: Some Medicare contractors will pay only the professional component allowance when you bill with POS such as 21 or 22. That's because CMS says the technical work is included in the OPPS or DRG fee schedule for outpatients and inpatients. Some Medicare Part B contractors apply the TC-bundling to services in ambulatory surgery centers (POS 24) as well.

'Grandfather' short-circuit averted: Labs that can bill Medicare for the TC of pathology services for hospital inpatients and outpatients under the "grandfather" exception should have through June 30, 2012 to continue those arrangements (see "Prepare for Sunset of TC 'Grandfather' Arrangements" on page 37). But an April 1 POS deadline would have thwarted those billing practices.

"Our contractor, Pinnacle Medicare Services, had told us that beginning April 1, we would not be paid for the TC of pathology from an inpatient or outpatient stay," reports Judith Watson, accounts receivable manager with Doctors' Anatomic Pathology Services in Jonesboro, Ark.

"We're thankful that the April 1 deadline delay will give us the allotted time to convert our "grandfathered" hospitals to account-bill technical component arrangements by July 1, says Stan Werner, MT (ASCP), administrative director of Peterson Laboratory Services PA in Manhattan, Kan.

Use Your Address

If the POS for work performed at your independent lab is no longer "81," (box 24 B on CMS-1500), what about the "service facility location" (box 32 on CMS-1500)?

Line 32 should show the physical address of your independent lab, according to Transmittal 2407. So the POS on line 24B reflects where the patient was when the specimen was taken, but the address on line 32 reflects where the pathologist performs the service or where the lab test is conducted.