Professional Services in the Clinical Lab:

Billable or Not?

By G. John Verhovshek, MA, CPC
A payer representative recently wrote to Coding Edge with a problem:

“A clinical pathologist is also the medical director of a hospital-based laboratory. He is paid a hospital salary for his services as the lab director. He has been billing lab codes with modifier 26 Professional component appended. Some commonly-billed codes are 80053 Comprehensive metabolic panel, 81001 Urinalysis, by dip stick or tablet reagent for bilirubin, glucose, hemoglobin, ketones, leukocytes, nitrite, pH, protein, specific gravity, urobilinogen, any number of these constituents; automated, with microscopy, 85025 Blood count; complete (CBC), automated (Hgb, Hct, RBC, WBC and platelet count) and automated differential WBC count, and 85610 Prothrombine time. We deny these services because we pay the hospital a global rate (based on RBRVS) for lab services. Additionally, documentation does not substantiate that the pathologist performed any professional service related to the lab code(s) billed. Is the pathologist’s coding appropriate?”

In this particular case, because the pathologist receives a salary from the hospital for his services, separate billing for the professional component of lab services is not appropriate: This would amount to double dipping.
The basic question of whether a pathologist may report professional services in a clinical laboratory, however, goes to the heart of an ongoing coding controversy.

CAP, AMA Back Professional Component Billing

The College of American Pathologists (CAP) and other physician advocacy groups defend separate billing for the professional component of clinical laboratory services. CAP’s Professional Relations Manual states:

“Professional component billing is one valid method of billing for the professional services of pathologists in the clinical laboratory. In many communities, the standard practice is for the pathologist to directly bill patients for the professional component of clinical laboratory services. When the pathologist bills a professional component to a non-Medicare patient, no payment is made by the hospital to the pathologist for this service. The hospital’s bill for the technical component covers hospital costs for laboratory equipment, supplies and non-physician personnel—it does not include the professional services of the pathologist.”

In other words, CAP reasons that non-Medicare payers do not take the pathologist’s services into account when making hospital payments for laboratory services, and the pathologist may seek separate professional component payment directly from the patient or the patient’s insurer. For Medicare beneficiaries, the rules are different.
The American Medical Association (AMA) supports CAP’s position. Most recently, CPT® Assistant Vol. 15, Issue 8, August 2005, noted, “Pathologists often report the professional component of clinical laboratory tests because they oversee the clinical laboratory and are responsible for the results.” The article insists modifier 26 is required for codes 80048-89356 “in those instances when the physician is only billing for the professional component of the laboratory tests (eg, medical direction, supervision or interpretation).”
The AMA further asserts, “A written report for an individual patient is not a requirement for having performed a professional component service.”
This last instruction runs contrary to that published by Ingenix and adopted by some payers. Ingenix Insights article, “Laboratory Services and Modifiers,” states, “Laboratory and pathology services that have a professional component require that the physician interpret a test, slide, or sample and provide a written report of that interpretation. It is considered inherent to the service that if there is an interpretation, there must be a report of that interpretation, even if ‘with interpretation and report’ is not stated in the code description.”
In an open response to Ingenix, the AMA countered:

“We disagree with your opinion that a written report must be generated by the pathologist in order to append the professional component modifier to pathology and laboratory CPT^® codes … Specifically for pathology and laboratory services, the modifier 26 can be used for medical direction, supervision and/or interpretation for all laboratory CPT^® codes…. In using Modifier 26 for pathology and laboratory codes 80049-87999, a written report for an individual patient is not a requirement for having performed a professional component service since it can be reported for medical direction of the tests performed.”

The AMA reasoned that Ingenix had interpreted the intent of modifier 26—and the definition of “professional services”—too narrowly. The AMA lists a pathologist’s responsibilities as medical director of hospital clinical laboratories, to include:

• Assuring that tests, examinations, and procedures are properly performed, recorded, and reported;
• Recommending appropriate follow-up diagnostic tests, when appropriate;
• Supervising laboratory technicians and advising technicians regarding aberrant results;
• Evaluating clinical laboratory data and establishing a process for review of test results prior to issuance of patient reports.

Ingenix concedes a pathologist’s billing for clinical laboratory professional services has withstood legal scrutiny, stating, “Current case law favoring this billing methodology involves facilities that have billed and have been reimbursed by a private payer over an extended period of time.”
A policy statement on the New Jersey Society of Pathologists’ website sums up the situation well:

“This practice [separate billing for the professional component of clinical laboratory services] has been in effect for many years in Texas, California, Illinois, and Florida, and pathologists from other states have been rapidly adopting it. Although its validity and legality have been challenged by commercial carriers and other entities several times, it has successfully been defended by several State Pathology Societies and is fully endorsed by the College of American Pathologists and the American Pathology Foundation.
“Although it is your right, it is also worth noting that engaging in this practice carries significant responsibilities from the Pathologists, requiring an active involvement in the Clinical Laboratory as physicians.”

CMS Makes a Single Payment

Payers following Centers for Medicare & Medicaid Services (CMS) guidelines will not make separate payment for the pathologist’s professional services in the hospital. Medicare pays a single “global” fee to the hospital to cover all expenses, and the pathologist must negotiate with the hospital for service compensation. CAP’s Professional Relations Manual explains, “Medicare rules require pathologists to seek payment from the hospital for the professional component of clinical pathology services to Medicare patients because the hospital’s Medicare payment rate includes payment for these physician services.”
Several payers have clearly adopted the Medicare standard. Blue Cross/Blue Shield of Montana, for instance, has published a Clinical Laboratory Compensation Policy stating, “BCBSMT compensates one global fee for clinical lab services. Compensation includes payment for the performance of the laboratory test and clinical oversight.” Clinical oversight specifically includes the pathologist’s professional services in the clinical lab.

Payment Should Come from Somewhere

Ingenix’ “Laboratory Services and Modifiers” concludes, “Until CMS or CPT^® guidelines are specific to using modifier 26 for physician oversight or further clarification is given, the issue of billing for physician oversight will need to be addressed on a payer-by-payer basis [for non-Medicare payers].”
The bottom line is this: A pathologist in a clinical laboratory has a legitimate claim to reimbursement for his or her supervisory services, either through payment from the hospital, the patient, or the patient’s insurer. Although insurers may elect to make a single payment for clinical laboratory services, as Medicare does, they cannot elect to forego payment altogether for professional services. When a single payment does not include reimbursement for professional services, or the pathologist is not otherwise reimbursed (through a hospital salary, for instance), separate payment should be made for the professional component of medically-necessary laboratory services, as reported with an appropriate CPT^® code and modifier 26 appended.
G. John Verhovshek, MA, CPC, is AAPC’s director of clinical coding communications.

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