Knowledge Base Article

An addendum to this article can be found by clicking here.

Background

The MolDX program requires billing laboratories to register in the DEX Diagnostics Exchange and apply for and obtain a unique test identifier (a Z-code) for each molecular diagnostic test (MDT) or lab developed test (LDT) they perform. If the billing laboratory does not perform the test but instead sends it to an outside laboratory to be performed, it is still the billing laboratory that must submit the Z-code on its claim. In this case, the billing lab obtains the DEX Z-CodeTM for the molecular test(s) from the performing laboratory, either directly or through the DEX system. Only certain MAC jurisdictions participate in the MolDX program. Since Palmetto is a MAC that participates, Jurisdiction J providers must follow the rules of the MolDX program sometime after transition (effective date to be announced by Palmetto but no earlier than March 2018).

Because of the unique nature of the tests in the MolDX program, hospital laboratories often do not perform these tests, but send most or all of them to an outside reference laboratory to be performed. Currently, Medicare’s laboratory billing and date of service rules require hospitals to bill Medicare directly for tests performed by another laboratory on hospital inpatients or outpatients. The hospital lab has to then pay the testing lab “under arrangements” for performing the test. The only current exception to this requirement is the laboratory date of service 14-day rule, which only applies when the test is ordered at least 14 days after discharge along with other criteria. This can be a burden on hospitals because sometimes the Medicare reimbursement to the hospital is less than the reference lab’s charge for the test. The MolDX program adds the additional burden of having to obtain and submit the Z-code on the Medicare claim in order to be paid.

So how does the new lab DOS policy affect the MolDX program?

In the 2018 OPPS final rule, CMS finalized a new laboratory date of service rule for hospital outpatients for molecular pathology and advanced diagnostic laboratory tests (ADLTs).  These are MDTs and ADLTs that are not packaged under OPPS but are paid separately under the lab fee schedule with an OPPS Status Indicator of “A.”  Basically, beginning January 1, 2018, if these types of tests are collected from a hospital outpatient but the test is not performed until after the patient’s discharge, then under the new rule, the testing lab must bill Medicare directly. The hospital lab cannot bill Medicare for molecular pathology tests and ADLTs performed after discharge unless they actually perform the test.

Because of this new rule, hospital laboratories will not be billing for molecular diagnostic tests and ADLTs with an SI of “A” that they do not perform in their own laboratory if all the requirements of the new date of service rule are met. This means they will not have to obtain or report a unique test identifier (a Z-code) for these tests that are sent to outside laboratories. In this case, the new rule relieves both of the burdens mentioned above.

There are some tests within the MolDX program that do not meet the definition for separately payable MDTs or ADLTs. These tests are conditionally packaged under OPPS with a status indicator of “Q4.” Medicare packages payment for the “Q4” lab tests when reported on a claim with other outpatient services, but pays hospitals separately for these tests if only laboratory tests are billed on the claim. When billing for these tests, the hospital will need to include a Z-code on the claim even if the test was performed under arrangements by an outside laboratory.

There are numerous local coverage determinations (LCDs) for the MolDX tests in the MAC jurisdictions that participate in the MolDX program. Providers should be familiar with the covered indications for the tests they furnish, whether they perform the test themselves or send it to an outside lab for testing. These outside testing labs will not be happy to be denied their Medicare reimbursement for lack of medical necessity because your hospital did not follow the LCD requirements.

The new rule does not apply to tests performed on inpatients. For inpatient testing sent to outside laboratories, the hospital bills Medicare directly and the testing lab receives payment from the hospital.  The only exception would be for tests that meet the lab DOS 14-day rule. Hospitals submit an inpatient claim to Medicare and are paid a MS-DRG payment for inpatients so individual lab CPT/HCPCS codes are not reported on the claim.

Figuring It Out

1. Performing laboratory bills; hospital doesn’t need Z-code: All hospital laboratories will want to identify the molecular pathology and ADLTs with an SI of “A” that they send to an outside lab for testing. Providers can determine the Status Indicator of laboratory tests by referring to Addendum B of the final rule. If the testing meets the new date of service rules (which it should), the testing lab must bill Medicare directly for these tests. Per the OPPS final rule, “hospital laboratories cannot bill for these tests unless they perform them.” Since the hospital will not be billing for tests sent out for testing that meet the new lab date of service rule, the hospital will not need to obtain a Z-code for these tests.

2. Hospital bills for tests performed by another lab and reports Z-code: Hospitals also need to identify the MolDX tests they send to an outside lab for testing that have a status indicator of “Q4.” Providers can determine the Status Indicator of laboratory tests by referring to Addendum B of the final rule. The hospital will bill Medicare directly for these tests and will need to obtain a Z-code from either the performing lab directly or through the DEX system. The Z-code must be submitted on the claim when billing Medicare for these tests.

3. Hospital performs and bills for tests and reports Z-code; And finally, hospitals need to identify the MolDX tests they perform in the hospital lab. The hospital will need to apply for and obtain the DEX Z-CodeTM before performing these tests. The Z-code must be submitted on the claim when billing Medicare for these tests.

Hospital labs need to be aware of both the new date of service rule and the reporting requirements for MolDX tests, and how one rule affects the other.  Review and follow the steps above to determine which molecular pathology and ADLTs your hospital must bill and when Z-code reporting is required.

Resources:
MolDX website - https://www.palmettogba.com/moldx
OPPS Addendum B - https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html
Watch for Medicare Transmittals that give more information on the new Laboratory Date of Service rule.