Pathology/Lab Coding Alert

Question: Our lab bills our Medicare carrier for the technical component of pathology services for certain rural hospitals that we serve. I know that our ability to do so is tenuous -- what is the current status of this -grandfather- provision?

Minnesota Subscriber

Answer: Although Congress failed to extend the -grandfather- exception by the expiration date of July 1, 2008, new legislation extends the protection for 18 months -- retroactive to July 1 and proceeding through Dec. 31, 2009.

The grandfather protection allows certain independent clinical laboratories to bill Medicare Part B for the technical component (TC) of certain pathology services provided to hospital in- and outpatients.

Who qualifies? The protection applies to hospital/lab TC billing arrangements that were in place as of July 22, 1999. That's when CMS said that it would end the billing arrangements, claiming that the Part A payment covered the TC costs and that the lab should bill the hospital, not Part B, for the TC services.

Myth: Although the grandfather protection appears to provide the exception to specific laboratories, the rule actually bases the exemption on the status of -qualifying hospitals.- According to the law, a hospital qualifies for the grandfather exception to TC bundling in its diagnosis-related group (DRG) and ambulatory payment classification (APC) Medicare payments if, on July 22, 1999: (a) an outside laboratory performed the hospital's histology and/or cytology work, and (b) the outside lab billed Medicare Part B for the TC.

What services qualify? Labs that are in a -grandfathered- arrangement with a hospital can bill Part B for the TC of anatomic pathology and cytopathology services, such as surgical pathology examinations 88302-88309 (- Surgical pathology, gross and microscopic examination -). That means you can continue billing Medicare for these services either globally or with modifiers TC (Technical component) and 26 (Professional component). Without the grandfather exception you must bill Medicare only for the physician service, using modifier 26. Then you will have to arrange with the hospital to recover the TC expenses based on what Medicare pays the hospital under the APC or DRG rate.