Knowledge Base Article

Just as you think you have mastered the challenge of complying with a Medicare rule, the rule changes and you have to start over. So it goes like this – know about the rules, understand the rules, implement processes to comply with the rules and then make sure the rules don’t change on you. Such was the case with the instructions for billing for certain laboratory tests.

It is almost July and just in time, CMS has issued the modifier to be appended to laboratory services when separate payment under OPPS is appropriate. Modifier L1 will be used starting July 1, 2014 to indicate that laboratory services provided to hospital outpatients meet one of the exceptions of “unrelated” or “lab test only” lab services.

As a reminder, the 2014 OPPS final rule packaged almost all clinical laboratory services as ancillary services with a revised Status Indicator (SI) of “N”. There are exceptions when lab tests are the only service provided or if the lab services are “unrelated” to other outpatient services. The original instructions from CMS for obtaining separate payment for the excepted lab services, was to submit a 14x type of bill (TOB). After concerns from the National Uniform Billing Committee (NUBC) and providers, CMS agreed to change the requirements effective July 1, 2014.

CMS Transmittal 2971 (CR 8776) (MLN Matters Article MM8776) issued May 23, 2014 manualized changes related to the new billing requirements for separately reimbursable laboratory services.

• Non-Patient (Referred) Laboratory Specimen - A non-patient is neither an inpatient nor an outpatient of a hospital. The patient is not physically present at the hospital but has a specimen submitted for analysis, for example, from a physician’s office or a non-hospital clinic. These non-patient laboratory services are to be billed on a TOB 14X. They are paid under the clinical laboratory fee schedule (CLFS) at the lesser of the actual charge or the fee schedule amount. Part B deductible and coinsurance do not apply.
• Outpatient lab tests only - If the only services the hospital provides to an outpatient are outpatient laboratory tests, the lab services are separately reimbursable and may be submitted on a TOB 13x with modifier L1 beginning July 1, 2014. The L1 modifier must be added to each lab line item on the claim. Such patients do not receive any other hospital outpatient services on the same day of service.
• Unrelated outpatient lab tests- If the hospital provides an outpatient laboratory test on the same date of service as other hospital outpatient services that is clinically unrelated to the other hospital outpatient services, then this lab service is also separately reimbursable and may be submitted on a TOB 13x with modifier L1 beginning July 1, 2014. Again, each lab line item that meets the exception requirements for separate Medicare reimbursement must be appended with the L1 modifier. Clinically unrelated means the laboratory test is
• ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services, and
• for a different diagnosis.
• Payment for separately reimbursable outpatient laboratory tests is the lesser of the actual charge or the fee schedule amount for lab tests paid under the CLFS with no Part B deductible or co-pay.

The transmittal also addressed the payment of laboratory services related to Part B Inpatient claims (12x claims when there is no Part A payment). The new Part A to B rebilling rules from the 2014 IPPS Final Rule allow the submission of all Part B services on a 12x TOB when there is no Part A payment because the inpatient admission was not medically necessary. For these claims, the laboratory services will be packaged according to the OPPS rules since associated Part B services are payable under the expanded Part B billing.

When there is no Part A payment because the patient is not eligible for Part A or has exhausted Part A benefits, only limited Part B services may be billed on a 12x TOB. For these types of claims, the laboratory services will be reimbursed separately if the associated Part B services are not billable / payable under the limited Part B billing.

Just as hospitals had likely gotten their systems and processes in place to handle the 14x type of bill, the rules changed. Now hospitals need to start again on new systems and processes for use of the new modifier L1 to allow separate payment for laboratory services. Job security for someone?