Billing for Laboratory Testing

on Tuesday, 02 June 2015. All News Items | Outpatient Services | Billing

Coming In and Going Out

Coming In and Going Out

At the National Spelling Bee, spellers can ask for the definition of the word they are trying to spell.  Words can sound similar in pronunciation but be spelled differently based on definition.  For example, do you know the difference in the words “emigrate” and “immigrate”?  Emigrate means to leave a country (he emigrated from Ireland) and immigrate means to move into a country (he immigrated to America).  The comings in and going out of laboratory tests also have rules – well Medicare billing rules at least.

It is not unusual these days for a hospital to have an outpatient and outreach laboratory where patients may present with their physician orders for lab tests or where physician offices, clinics, or other healthcare entities may send specimens to be tested.  Hospital laboratories perform a wide array of laboratory tests, but there are some esoteric tests that a hospital lab may not perform and these tests are sent to a specialized reference laboratory for testing.  So with lab tests coming in and going out, who bills Medicare for the tests?  Actually, there are rules about that…

Outpatient Lab Testing

Only the hospital can bill Medicare for laboratory testing provided to hospital inpatients and outpatients.  This includes lab tests performed by an outside reference laboratory on specimens from hospital inpatients and outpatients.  Section 40.3 of the Medicare Claims Processing Manual, Chapter16, states: “When the hospital obtains laboratory tests for outpatients under arrangements with clinical laboratories or other hospital laboratories, only the hospital can bill for the arranged services.”  In such cases, the hospital would bill Medicare for the lab services on an outpatient claim (13x type of bill) and the hospital would pay the reference laboratory for the testing.

Section 40.3 referenced above also defines who is and is not an outpatient.  The section that defines “outpatient” refers to critical access hospitals, but the manual goes on to say the same rules apply in determining whether clinical laboratory services are furnished as part of outpatient services of a hospital.  The patient is considered a hospital “outpatient” when one of the following occurs:

  • He or she is present in the hospital when the specimen is collected,
  • Other outpatient services are received on the same day the specimen is collected,
  • The specimen is collected by an employee of the hospital or a hospital provider-based-department.

Non-Patient Lab Testing

When the patient’s specimen is not collected at the hospital or by a hospital employee and the patient is not receiving other hospital outpatient services on that day, the patient is considered a non-patient.  For tests performed in the hospital’s own laboratory, the hospital bills Medicare on a 14x type of bill.  If the tests are sent to a reference laboratory for testing, either the hospital or the reference lab may bill Medicare for the testing.  Only one laboratory may bill for a referred laboratory service.  It is the responsibility of the referring laboratory (hospital in this case) to ensure that the reference laboratory does not bill Medicare for the referred service when the hospital bills Medicare.


There are some special rules for specimens received from certain types of healthcare entities.

Skilled Nursing Facilities

  • For Part A SNF inpatients, the SNF must bill Medicare directly.
  • For Part B SNF inpatients or outpatients, either the SNF or the performing laboratory may bill Medicare.

End-Stage Renal Disease Lab Tests

  • All ESRD-related laboratory services are included in the ESRD PPS base rate and must be reported by the ESRD facility.  A list of lab tests that are routinely performed for the treatment of ESRD can be found at ESRD Consolidated Billing webpage.
  • Laboratory services that are not related to the treatment of ESRD are separately billable under the ESRD PPS.  Hospital outpatients with unrelated ESRD tests must be billed by the hospital.  Non-patient unrelated lab testing may be billed by either the ESRD facility or the hospital laboratory.
  • If the ESRD facility or testing laboratory bills a laboratory service that was not related to the treatment of ESRD, the bill must include the modifier AY.  The AY modifier serves as an attestation that the item or service is medically necessary for the dialysis patient but is not being used for the treatment of ESRD.

Hospice Patients

  • Hospice nurses often collect specimens and bring them to a hospital laboratory for testing.  All services related to the patient’s terminal or co-morbid conditions are covered under the hospice benefit.  The hospital laboratory would bill the Hospice provider for these laboratory services.

Separate Payment for Lab Tests under OPPS

In 2014, Medicare packaged most laboratory tests under the Outpatient Prospective Payment System as ancillary services with a revised Status Indicator (SI) of “N”.  This means there is no separate payment for laboratory services.  There are some exceptions when lab services will be paid separately by Medicare.  These exceptions include:

  • Lab tests on non-patient specimens billed on a 14x type of bill
  • When laboratory tests are the only outpatient service the patient receives for that day.  These are billed on a 13x type of bill and an L1 modifier is appended to the lab services.
  • Unrelated laboratory tests that are ordered by a different physician for a different diagnosis than other outpatient services received that day.  These are also billed on a 13x type of bill with the L1 modifier.

Other Payer Rules for Lab Tests

To keep life interesting and providers on their toes, not all payers follow Medicare rules.  You will have to check with individual payers to determine how laboratory tests should be billed.  Some payers may require the testing lab to bill and others may have specific criteria for when the referring lab can bill.  For example Alabama Medicaid states the following concerning charges for referred testing.

 Hospital labs may bill Medicaid on behalf of the reference lab that a specimen is sent to for analysis. Payment may be made to the referring laboratory but only if one of the following conditions is met:

  • The referring laboratory is located in, or is part of, a rural hospital;
  • The referring laboratory is wholly owned by the entity performing such test, the referring laboratory wholly owns the entity performing such test, or both the referring laboratory and the entity performing such test are wholly-owned by a third entity; or
  • The referring laboratory does not refer more than 30 percent of the clinical laboratory tests for which it receives requests for testing during the year (not counting referrals made under the wholly-owned condition described above).

Note also that AL Medicaid only allows venipuncture to be billed if the specimen is tested at a different lab than the lab collecting the specimen – “Hospital labs may bill ‘routine venipuncture’ only for collection of laboratory specimens when sending blood specimens to another site for analysis”

Hospital providers must consider the comings in and goings out of laboratory specimens in order to know who and how to bill.  It’s enough to make one want to immigrate to another career – or would that be emigrate?

Article by Debbie Rubio

Debbie Rubio, BS, MT (ASCP), is the Manager of Regulatory Affairs and Compliance at Medical Management Plus, Inc.  Debbie has over twenty-seven years of experience in healthcare including nine years as the Clinical Compliance Coordinator at a large multi-facility health system.  In her current position, Debbie monitors, interprets and communicates current and upcoming regulatory and compliance issues as they relate to specific entities concerning Medicare and other payers.  You may contact Debbie at This email address is being protected from spambots. You need JavaScript enabled to view it.

This material was compiled to share information.  MMP, Inc. is not offering legal advice.  Every reasonable effort has been taken to ensure the information is accurate and useful.

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