The billing question behind the proposal
The Centers for Medicare & Medicaid Services is reviewing when a clinical laboratory or pathology provider may bill Medicare for a test performed on a specimen collected during a hospital outpatient procedure. The question often arises when a hospital collects and stores tissue, but a physician orders the test after the patient leaves the hospital.
The proposal appears in the draft Calendar Year 2018 Hospital Outpatient Prospective Payment System rule. If CMS adopts the revisions, they could affect billing procedures at independent laboratories and hospitals.
Under the Medicare payment systems, Medicare generally pays one bundled amount for an outpatient encounter. The payment covers services provided during that stay, including clinical laboratory diagnostic tests and the technical component of anatomic pathology services. For that reason, the hospital, rather than an outside laboratory, usually bills Medicare for testing related to the encounter.
The payment rules allowed more separate billing before 2014. At that time, hospitals could bill separately for diagnostic tests ordered during an outpatient stay if the relevant procedural codes appeared on the Medicare Clinical Laboratory Fee Schedule. CMS later moved most of those tests into the outpatient payment bundle.
Separate payment is now available in limited situations. These include a test that is the only service provided, a preventive service, or a molecular pathology test. Advanced diagnostic laboratory tests, as defined under the Protecting Access to Medicare Act and discussed in laboratory payment changes under the Protecting Access to Medicare Act, are also outside the bundle.
How the 14-Day Rule changes the payer
The standard Date of Service rule generally uses the date when the specimen was collected. Stored specimens are treated differently. If a specimen has been stored for 30 days or less, the Date of Service may become the date when the test was performed, but only if the test meets several requirements.
The specimen must have been collected during a hospital surgical procedure. Collecting it at another time must have been medically inappropriate. The physician must order the test at least 14 days after the patient is discharged. The test results also cannot be used to guide treatment during the original hospital stay.
CMS implemented this framework in 2007. It is commonly called the 14-Day Rule. If a test on a recently stored specimen fails to meet any condition, the outpatient packaging policy applies. The independent laboratory cannot bill Medicare directly. Instead, it must bill the hospital.
This arrangement can connect a later service to the payment structure for an earlier encounter, even when the later service concerns a different clinical decision. For example, an oncologist may order a molecular test to guide cancer treatment with tissue collected during a recent hospital stay. If the order is placed within 14 days after discharge, an independent laboratory that performs the analysis may not be able to bill Medicare. The hospital then bears the cost of a test unrelated to the initial outpatient encounter.
Three paths CMS is considering
Laboratory stakeholders have identified operational problems with the rule, particularly as molecular pathology has grown. They have warned that hospitals may delay submitting test orders to avoid the 14-Day Rule. Such delays can postpone results and treatment decisions for Medicare beneficiaries.
CMS proposed three possible responses. The first would create a broad exception for molecular pathology tests and advanced diagnostic tests. Under this approach, laboratories could bill Medicare directly when the test is ordered within 14 days after discharge, provided the other requirements are met.
The second option would limit the exception to advanced diagnostic laboratory tests. CMS suggested that hospitals may be able to perform standard molecular pathology tests themselves. Under that view, the access concerns raised by stakeholders may apply mainly to highly specialized advanced diagnostic tests.
The third option would revise the “under arrangements” rules for molecular pathology and advanced diagnostic tests already exempt from outpatient packaging. This approach would create a specific exception for those services.
The issue extends beyond laboratory billing because the date assigned to a service can determine which organization receives the bill and whether testing proceeds without delay. A similar timing problem can arise when an authorization for a GLP-1 prescription is submitted without the medical history required by a health plan. A denial can restart the process and its deadlines, a sequence mapped in our guide to GLP-1s with insurance.
What happens next
Stakeholders may submit comments on the three approaches through September 11, 2017. CMS is expected to publish the final 2018 outpatient payment rule before the end of the calendar year. Until then, it is uncertain whether the agency will adopt any proposed Date of Service changes.
A broad exception would remove hospitals from the billing transaction for qualifying tests and simplify direct billing for independent laboratories. A narrower exception would preserve more of the existing payment structure while providing relief for advanced diagnostic laboratory tests.
If CMS does not change the rule, laboratories and hospitals will continue under the current framework. A test that does not meet the Date of Service requirements will remain subject to outpatient packaging, and the hospital will remain responsible for the Medicare billing relationship. The pending decision is whether CMS will revise the Date of Service rules or keep the existing boundary between outpatient packaging and direct payment to laboratories.