Pathology/Lab Coding Alert

Last month we looked at how the outpatient prospective payment system will impact billing by independent laboratories for the technical component of outpatient services. This month we take a broader look at how OPPS impacts pathology coding and billing.

As of Aug. 1, 2000, the new outpatient prospective payment system (OPPS) set forth by the Health Care Financing Administration (HCFA) has taken the thousands of codes used for outpatient services and consolidated them into a smaller group of 451 ambulatory payment classifications (APCs). These new payment groups take into consideration many aspects of outpatient care, including medical supplies, staffing efficiencies and several other operational costs.

Exactly how is OPPS changing the face of coding, billing and reimbursement for pathologists and laboratories? That depends on what part of the business youre in, says Caral Edelberg, CPC, CCS-P, president of Medical Management Resources, an emergency medicine coding company based in Jacksonville, Fla., and nationwide speaker on the topic of APCs. At the broadest level, OPPS affects billing for pathology services to hospital outpatients in the following ways:

Although pathology services for outpatients are still reported using CPT Codes , the technical component is now reimbursed at the APC rate.

Billing for the professional component of these pathologist services does not change. It will continue to be billable separately to the local Medicare Part B carrier using CPT codes, payable under Medicares physician fee schedule.

Beginning Jan. 1, 2001, hospitals must bill for the technical component (TC) of these pathology services, to be paid by the Part A fiscal intermediary. This is true even if an independent laboratory performs the TC. In such cases, the hospital will reimburse the independent lab under arrangements, and the lab may no longer bill Part B directly.

Proposed legislation in Congress would permit existing arrangements (as of July 22, 1999) between independent labs and hospitals to be grandfathered. If the legislation is passed, independent labs could continue to bill Part B for pathology TC for hospital inpatients and outpatients.

OPPS does not impact billing for non-hospital (e.g., office) patients. Therefore, hospital-based independent labs and pathologists can continue to bill Medicare directly for the TC of services to these patients, even if purchased from the hospital.

Clinical diagnostic laboratory services remain payable to the hospital under Medicares clinical laboratory fee schedule. These services are not bundled into APC groups. Billing by independent laboratories that provide these services does not change; they continue to bill the hospital.

Certain hospitals are exempt from OPPS, such as Critical Access Hospitals, and initially, Indian Health Service Hospitals. Rural hospitals with 100 or fewer beds will be paid using APCs, but will receive "transition outpatient payments (TOP) to avoid possible payment reductions through 2003.

How APCs Affect Coding and Administration

According to Edelberg, OPPS requires hospitals and outpatient facilities to code and bill in an entirely new way. It also requires dramatic administrative changes for independent laboratories that provide services to the hospital outpatients.

From a physicians point of view, when a pathologist performs a procedure in a hospital or outpatient facility for a Medicare patient, he or she will continue to bill for the professional component of that procedure with the Medicare Part B HCFA 1500 form, exactly as before, explains Edelberg. For independent labs that provide both the technical and professional component of pathology services, the OPPS rules mean two separate billings as of Jan. 1, 2001. Independent labs will need to submit one bill to the Part B Medicare carrier for the professional component, and one to the hospital for the technical component, explains Stan Werner MT (ASCP), administrative director and corporate compliance officer of Peterson Clinical Laboratory in Manhattan, Kan.

Under OPPS, all of the hospital or outpatient facilitys charges for the technical components of the procedure or medical exam have to be consolidated into one bill, instructs Edelberg. This means that the bill cannot be submitted for reimbursement until every department submits its portion to central billing, and it is correctly itemized and coded. All applicable nursing services, x-rays, medications, and pathology and lab tests, along with charges for the room itself, equipment, disposable items, etc., are listed as line items on the Medicare Part A UB-92 form, Edelberg concludes.

Further, the hospital or outpatient facility coder will have only one opportunity to submit a bill. According to HCFA program memorandum A-00-36, Medicare no longer accepts late billing for outpatient hospital Part B bills (bill types 12X, 13X, 14X) effective Aug. 1, 2000. An adjustment bill must be submitted instead of a late charge bill, that is, a resubmission of all of the previously submitted services and the late charges for the same date of service. This will ensure proper duplicate detection, bundling, correct application of coverage policies, and proper editing by the outpatient code editor (OCE) and payment under OPPS.

Now more than ever, the hospital needs the help of the pathologist and laboratory with precise and comprehensive documentation. Because the hospital can submit only one bill to Medicare, independent laboratories will need to set up a system to notify hospitals within 24 hours of any services provided, reports Werner.

Independent laboratories that provide the TC of pathology services for hospital outpatients will also have to establish new letters of agreement with the hospitals, advises Werner. Under the rules that go into effect Jan. 1, 2001, the lab will have to be paid by the hospital under arrangement, which adds an administrative burden for both parties.

Outpatient Coding Example for Independent Lab

An independent laboratory receives a lip tumor specimen from a hospital outpatient. Now, the lab may bill Medicare Part B for the global service 88305 (Level IV surgical pathology, gross and microscopic examination; lip, biopsy/wedge resection), but when the new APC requirements take effect, the labs bill the hospital for the technical component and bill Medicare Part B using modifier -26 for the professional component (physician examination and diagnosis).

The hospital, in turn, will bill Medicare for 88305 facility costs. The service will be reimbursed to the hospital under the APC category 0343 (now $21.82 unadjusted for geographic area). The hospital then will pay the laboratory for the technical component of the 88305 service based on their arrangements. The lab will receive separate reimbursement directly from the Medicare Part B carrier for the professional component. This rate is unaffected by APCs.

How Reimbursement Is Affected

Although all hospital outpatient technical services must be submitted on one bill, the good news is that, unlike inpatient diagnosis related groups (DRGs), reimbursement is not bundled into a single payment without identification of constituent services. Rather, the hospital bills Medicare for multiple outpatient APCs as needed to describe the services provided, and the payment rate for each of the services is separately identifiable. Additionally, Medicare will provide payment for clinical diagnostic laboratory tests and other diagnostic services performed on the same day.

HCFA estimates that APCs will result in a potential 4.6 percent average increase in Medicare payments for hospitals and outpatient facilities, but the picture may not be so rosy for some independent laboratories. Based on the profile of tests typically conducted by our lab, it is estimated that well realize more than a 20 percent reduction in reimbursement for the technical component of pathology services under APCs, Werner claims. Because some pathology services are reimbursed at a lower rate under APCs than under the physician fee schedule, and some at a higher rate, the impact will vary among laboratories depending on the type of work they do.

Reimbursement for 88305 under APCs is about 22 percent less than the Kansas Medicare fee schedule, for example, says Werner. The reduction could be significant for anatomic pathology laboratories because many of the specimens listed under 88305 are commonly acquired during outpatient surgery.