Pathology/Lab Coding Alert

Section 542 of the Benefits Improvement and Protection Act of 2000 (BIPA) secured a two-year reprieve for independent laboratories that bill the technical component (TC) of physician pathology services to Medicare. Although pleased with the ruling, many labs and pathology practices have struggled to understand the requirements to qualify for the grandfather exception. HCFA clarified the ruling in Program Memorandum AB-01-47.

Laboratories must understand whether they qualify for the exception, and how to secure it if they wish to bill their local Medicare carrier for TC services supplied to hospital inpatients and outpatients. Otherwise, labs must bill the hospital for reimbursement, usually under the ambulatory payment classifications (APC) rates, which are lower for some services. If they qualify for the exception, laboratories must also understand which pathology services the law impacts, and how to code for the technical component of those services using appropriate modifiers.

At least for now, BIPA has saved us from what would have been an overall significant decrease in revenues, says Stan Werner, MT (ASCP), administrative director and corporate compliance officer of Peterson Clinical Laboratory in Manhattan, Kan. Such savings may be available to many independent laboratories, but they must follow the constraints and requirements enunciated in the HCFA program memorandum.

TC Billing: A Look Back and a Look Ahead

Under the payment rules outlined in the Medicare Carriers Manual (MCM), Medicare had to recognize payment of the technical component of certain pathology physician services when they were furnished to hospital patients by an independent laboratory. However, in a rule published in the Nov. 2, 1999, Federal Register, HCFA declared that it would end payments to independent laboratories under the physician fee schedule for technical component physician pathology services furnished to hospital inpatients. For these services, the independent laboratory would have to make arrangements with the hospital to receive payment. The effective date for this change was to be Jan. 1, 2001.

Then HCFA announced that the same restriction would be placed on hospital outpatient services for the technical component billing effective with the implementation of the outpatient prospective payment system (OPPS), but later delayed to coincide with the inpatient change. This was to comply with the outpatient final rule requiring that hospitals provide directly, or under arrangements, all services furnished to hospital outpatients.

Section 542 of the BIPA law provides that the Medicare carrier can continue to pay independent laboratories for the TC of physician pathology services to inpatients and outpatients of a covered hospital. However, the law allows a continuation of this practice only until Jan. 1, 2003.

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