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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.

Finally fall weather has arrived in the South. The days are not too hot or too cold, so it is the perfect season to spend some time outdoors. Yesterday my dog and I went walking through the woods. Many of the paths had obstacles such as fallen trees or low hanging branches, so we would have to adjust and try a different route. This is also the time of year to get ready to adjust your paths with Medicare due to policy changes finalized in the 2018 Outpatient Prospective Payment System (OPPS) Final Rule that will become effective January 1, 2018.

Two of our Wednesday@One articles last week addressed finalized policies from the 2018 OPPS Final Rule – changes to the inpatient only list and payment reduction for separately payable drugs purchased through the 340B program.  This week we will examine some of the other significant policy changes from the 2018 OPPS final rule that will require some provider adjustments.

Drug Administration

Over the past several years, CMS has taken numerous actions to move the OPPS more toward an actual prospective payment system as the name indicates.  To this end, “the OPPS packages payments for multiple interrelated items and services into a single payment to create incentives for hospitals to furnish services most efficiently and to manage their resources with maximum flexibility.”  Specifically, over the past few years CMS has created and expanded comprehensive APCs which bundle payment for all adjunctive services into the payment for the primary service, packaged add-on codes, and conditionally packaged payment of ancillary services with a geometric mean cost of $100 or less.

Drug administration services have, up until this year, escaped the packaging concept as CMS examined various alternative payment policies for drug administration, including the associated drug administration add-on codes.  Finally, in 2018 CMS takes a baby step toward packaging of some drug administrative services.  They are conditionally packaging payment for some Level 1 and Level 2 drug administration services with a status indicator (SI) of “Q1” (see table below). Vaccine administration codes for preventive services (influenza, pneumococcal, and hepatitis B) and add-on drug administration codes, which still have an SI of “S,” are not packaged and will continue to be paid separately.  Vaccine admin codes 90471 and 90473, that are for administration of vaccines other than preventive services, are conditionally packaged. Since the Level 1 and 2 drug admin codes are conditionally packaged, they will be separately payable when not billed on the same claim as a HCPCS code with status indicator “S”, “T”, or “V”. The main impact from this drug admin packaging for hospitals will be for CPT code 96372 (therapeutic SQ/IM injection), and CPT codes 96401 and 96402 (chemotherapy SQ/IM injection codes).

As usual for packaged codes, CMS reminds hospitals that they are expected to report all HCPCS codes that describe the services provided, regardless of whether or not those services are separately paid or their payment is packaged. Although CMS did not package payment for add-on drug administration codes for 2018, they discussed the comments received and may propose more drug administration packaging in future years.

Lab Date of Service Policy

Probably the most difficult revised policy to explain and understand is the lab date of service policy. Laboratory date of service (DOS) rules start simple:

1. The DOS for clinical diagnostic laboratory services generally is the date the specimen is collected.
2. For archived lab specimens that are stored for more than 30 days before testing, the DOS is the date the specimen was obtained from storage.

Now this is where it starts getting complicated with what is known as the 14-day rule.

3. The DOS is the date the test was performed (instead of the date of collection) if the following conditions are met:
4. The test is ordered by the patient’s physician at least 14 days following the date of the patient’s discharge from the hospital;
5. The specimen was collected while the patient was undergoing a hospital surgical procedure;
6. It would be medically inappropriate to have collected the sample other than during the hospital procedure for which the patient was admitted;
7. The results of the test do not guide treatment provided during the hospital stay; and
8. The test was reasonable and medically necessary for the treatment of an illness.
9. Another 14-day rule applies to chemotherapy sensitive tests performed on live tissue under the same conditions as described above with only slight variation to the first condition:
10. The decision regarding the specific chemotherapeutic agents to test is made at least 14 days after discharge;

Both of these 14-day rules apply to hospital inpatients and outpatients and the key point is that the test is ordered at least 14 days after discharge.  These DOS requirements determine whether the hospital bills Medicare for a clinical diagnostic laboratory test (CDLT) or whether the laboratory performing the test bills Medicare directly. When the 14-day rule applies, laboratory tests are not bundled into the hospital stay, but are instead paid separately under Medicare Part B to the testing laboratory.

Stakeholders expressed concerns about the current DOS policy because it requires hospitals to bill for tests they did not perform and that may have no relationship to or bearing on treatment received by the patient while in the hospital and it creates billing difficulties for the hospital. CMS agreed with these concerns and modified the date of service rule for hospital outpatients for molecular pathology tests and advanced diagnostic laboratory tests (ADLTs) that are not packaged under OPPS.  These types of lab test have a Status Indicator of “A” on Addendum B.

The new rule states that in the case of a molecular pathology test or an ADLT, the DOS of the test must be the date the test was performed only if—

• The test was performed following a hospital outpatient’s discharge from the hospital outpatient department;
• The specimen was collected from a hospital outpatient during an encounter (as both are defined in 42 CFR 410.2);
• It was medically appropriate to have collected the sample from the hospital outpatient during the hospital outpatient encounter;
• The results of the test do not guide treatment provided during the hospital outpatient encounter; and
• The test was reasonable and medically necessary for the treatment of an illness.

This new exception to the laboratory DOS policy does not apply to ADLT or molecular pathology tests when performed on a specimen collected from a hospital inpatient.

This new laboratory DOS policy will enable laboratories performing ADLTs and molecular pathology tests excluded from the OPPS packaging policy to bill Medicare directly for those tests, instead of requiring them to seek payment from the hospital outpatient department.  In fact, for molecular pathology tests and ADLTs meeting the above requirements, the DOS must be the date the test was performed and the test must be billed by the performing laboratory. Hospital laboratories cannot bill for these tests unless they perform them.

Supervision of OP Therapeutic Services

In the 2009 OPPS final rule, CMS clarified that direct supervision is required for hospital outpatient therapeutic services covered and paid by Medicare that are furnished in hospitals as well as in provider-based departments (PBDs) of hospitals.  They further clarified in the 2010 rule that this supervision requirement also applies to Critical Access Hospitals (CAHs).  Beginning in March 2010 and extending through December 31, 2016, CMS or Congress implemented and extended nonenforcement of this supervision requirement for CAHs and small rural hospitals having 100 or fewer beds.  Due to concerns that some small rural hospitals and CAHs have insufficient staff available to furnish direct supervision, CMS is reinstating the non-enforcement instruction for CYs 2018 and 2019.  This nonenforcement again applies to CAHs and small rural hospitals with 100 or fewer beds to give them more time to comply with the supervision requirements for outpatient therapeutic services and to submit specific services to be evaluated by the HOP Panel for a recommended change in the supervision level.

Other 2018 OPPS Updates

• Skin Substitutes – CMS will continue to assign skin substitutes as low cost or high cost based on their unit or per day cost. In addition, a skin substitute product that does not meet high cost criteria for CY 2018, but was assigned to the high cost group for CY 2017, will remain assigned to the high cost group for CY 2018 in order to maintain payment consistency.
• Comprehensive APCs – There are no new C-APCs for 2018.
• Brachytherapy – CMS decided not to finalize a proposed policy to establish an edit that requires a brachytherapy treatment code when a brachytherapy insertion code is billed. They are deleting Composite APC 8001 (LDR Prostate Brachytherapy Composite) and assigning HCPCS code 55875 to existing C-APC 5627 (Level 7 Radiation Therapy). 
• SRS Treatment – CMS is deleting modifier CP for services that are adjunctive to the primary stereotactic radiosurgery services (SRS) treatment described by HCPCS codes 77371 and 77372, but reported on a different claim. They will continue to make separate payment for the 10 planning and preparation codes adjunctive to the delivery of SRS treatments when furnished within one month of treatment.
• Bone Marrow Aspiration and Biopsy – CMS is deleting the add-on code G0364 and creating a new code (38222) to describe a diagnostic bone marrow with both aspiration and biopsy. The new code is assigned a status indicator of “J1” to the same APC as the codes for a bone marrow aspiration or a bone marrow biopsy performed separately.

This is not of course all of the policy changes from the 2018 OPPS final rule, but maybe the ones you should consider first and make process changes if necessary. The path to billing for Medicare services continually requires adjustments.

Over the past several weeks, our newsletter has focused attention on the transition of the Jurisdiction J (Alabama, Georgia, and Tennessee) Medicare Administrative Contractor (MAC) from Cahaba to Palmetto GBA.  For those providers affected by this transition, please pay special attention to this article as you will be required to participate in this program under the Palmetto contract.  Special information affecting Jurisdiction J is included at the end of this article.

If you are a regular reader of our Wednesday@One newsletter, you may already know that my original role in healthcare was as a clinical laboratory scientist (CLS) or Medical Technologist (MT). I loved working in the clinical laboratory, but my detail oriented brain also loves my current work with Medicare regulations. In the realm of healthcare compliance, I keep up with the rapid and never-ending changes of Medicare healthcare regulations.  Unfortunately, since Compliance is now my focus, I no longer keep up with the also rapid and never-ending changes to laboratory medicine. 

Molecular diagnostic testing (MDT) is one area of laboratory advancements that is having a tremendous impact on the practice of medicine overall.  Human genomics is reshaping the medical approach to therapy and diagnosis in areas such as inherited genetic diseases, infectious disease, oncology, human leucocyte antigen typing to predict immune function, coagulation, and pharmacogenomics—the genetic prediction of which drugs will work best.  As this testing has become more common, healthcare payers have struggled with determining the appropriate coverage and payment for these tests.

Some of the challenges for Medicare related to molecular diagnostic testing were:

• HCPCS and CPT descriptions for these codes describe the pathology and laboratory categories but do not identify a specific test.
• The Clinical Laboratory Fee Schedule pricing methodology does not account for the unique characteristics of these tests.
• Who determines if the tests fall within a Medicare benefit category?
• Some tests have not been assessed for clinical and analytical validity and clinical utility.

Medicare’s solution was the Molecular Diagnostic Services (MolDX) Program, which was developed by Palmetto GBA in 2011 to identify and establish coverage and reimbursement for molecular diagnostic tests. Palmetto GBA currently administers the MolDX Program and all its information. 

The program applies to all private, reference, and hospital laboratories that perform molecular diagnostic testing and submit claims to Medicare Part A or Part B.  The following molecular diagnostic assays/tests are included in MolDX.

How does the MolDX Program address the above challenges?

The MolDX program performs the following functions, which solve the challenges noted above concerning molecular diagnostic tests:

• Facilitates detailed and unique identification through registration of molecular diagnostics tests to facilitate claims processing and to track utilization.
• Establishes clinical utility expectations
• Completes technical assessments of published test data to determine clinical utility and coverage
• Establishes reimbursement

How does the MolDX Program work?

Obtain a DEX Z-Code

Laboratories must apply for and obtain a unique test identifier for each MDT or LDT (lab developed test) they perform.

Attention Hospitals - You are NOT expected to submit tests to obtain Z-Codes for tests sent to another laboratory to perform.  You submit tests to obtain a Z-code only for those tests you perform in-house.  However, the MolDX FAQs state it is the responsibility of the billing provider to obtain a DEX Z-Code™ identifier, such as in cases where the performing lab is not in a jurisdiction under the MolDX program. Since reference labs performing genetic testing generally offer services across the nation, most will have already obtained the necessary Z-codes.

These are the steps required for participation in the MolDX program:

• You are required to register your organization in the DEX Diagnostics Exchange if you plan to submit claims for the MolDX codes to MACs participating in the MolDX program (see list of Participating MACs below). 
• Providers billing Part A for molecular tests performed by a proprietary or reference laboratory will “Request Sharing” in DEX, from your reference lab, to get access to the Z-Code for billing purposes. You must obtain the DEX Z-CodeTM for the molecular test(s) from the performing laboratory, either directly or through the DEX system. 
• Hospital providers billing for molecular services performed by their hospital-based laboratory must register and obtain a unique DEX Z-CodeTM for each molecular test in the MolDX code ranges designated above. 

Obtain a Technical Assessment Approval (Coverage Determination)

Once a Z-code is assigned, coverage is determined through a technical assessment (TA). Established FDA-approved tests with proven utility that are performed within labeling indications may not require a technical assessment. A TA is required for molecular assays that are laboratory developed tests (LDT), employ new or novel technology, or have undefined or unproven clinical utility. For these tests, labs/developers must submit a detailed dossier of clinical data to substantiate the test meets Medicare’s requirements for coverage. The Technical Assessment Submission Instructions (M00115) provides the steps to submit a dossier.

All new test services will be denied as noncovered until the test completes the TA process and reasonable and necessary criteria is established. Claims submission for tests in the TA process should be suspended until a final coverage determination is made. Labs should not provide lab tests pending a TA approval until coverage is approved and appropriate billing and coding guidelines are published.

Once a coverage determination has been established, the results will be published to the provider community. A Local Coverage Determination (LCD) or Coverage Article may be developed if the test requires administration of reasonable and necessary limitations.

Report Z-Code on Claim

When the unique test identifier (DEX Z-Code™) is reported in conjunction with the appropriate CPT/HCPCS code on the claim, it allows Medicare to determine the exact test that has been performed, facilitating the process of making pricing and/or coverage determinations. The MolDX Manual provides instructions on the claim line detail fields for reporting the Z-codes.

• Part B providers – Paper claim - Block 19 of the CMS 1500 claim form; electronic claims (837P) - SV101-7 field adjacent to the applicable CPT code.
• Part A providers – Paper claim - block 80 of the UB04 claim form; electronic claims (837I) - line SV202-7.
• Part A providers will need to specify which lines are billed for MolDX and the appropriate DEX Z-Code per line within the remarks section of the claim.

Adjudication

The molecular test is adjudicated in accordance with the MAC’s LCDs and coverage articles.

Palmetto GBA’s “Molecular Diagnostic Tests (MDT)” LCD provides coverage for MDTs and LDTs that are identified as covered in the LCD. Palmetto has also developed and published specific LCDs, and/or coverage articles for some MolDX tests. MDTs and LDTs not identified as covered in an NCD, LCD, or coverage article are not covered.  Palmetto GBA will continue to accept and consider requests on excluded genetic tests.  You can find a link to Palmetto’s LCDs, as well as list of covered and excluded tests, on Palmetto’s MolDX website.

Participating MACs

Although Palmetto “owns” the MolDX program, several other MACs also participate in the program.  These include Noridian JE and JF, CGS J15, and WPS J5 and J8.  Each of these MACs have coverage policies and websites dedicated to the MolDX program.  If you are a provider in one of these jurisdictions, please check you MACs website for more information.  At this time CMS has not determined how MolDX will be expanded.

Jurisdiction J Transition

Medicare Part A and Part B providers in the Palmetto GBA Jurisdiction J will be required to register all molecular tests with the Diagnostics ExchangeTM (DEX), an online test registry.  There will be a phase in for Jurisdiction J to allow time for test providers to obtain their Z-codes. We strongly suggest labs and other test providers begin the process now to avoid any claim processing delays once the Z-code is required on the claim, which is currently projected to be no later than claims submitted on or after June 1, 2018 (note this is not Date of Service driven). 

Refer to the Steps for Participating in the MolDX Program listed above to determine exactly what actions are needed for JJ providers billing for molecular diagnostic testing.  JJ providers should carefully study all the information on the MolDX website and become familiar with Palmetto’s MolDX LCDs.  This is a necessary piece of the JJ transition.

As a child I loved watching and playing along with game shows.  A lot of television viewers must also enjoy game shows as they continue to be popular with the ongoing creation of new shows and now even an entire channel dedicated to game shows. There are game shows where the contestants must answer difficult questions, game shows where people gamble on random choices, and game shows where the contestants try to guess answers given by others.  Though it is not an official “game show,” every year it is fun to guess which proposals from CMS’s proposed rules for inpatient and outpatient prospective payment systems will make the cut to become final Medicare requirements.  “Fun” may not be the word everyone would choose to describe this guessing game – some might consider it nerve racking.  There are some clues you can use to help with your guess: the tone of the discussion in the proposed rule and the resulting public conversations from interested parties. 

Based on public arguments concerning the 2018 Outpatient Prospective Payment System (OPPS) proposed payment reduction for drugs purchased through the 340B program, I truly thought CMS would back off, either altogether with no payment reduction or at least a lesser payment reduction.  There were numerous objections to the proposal from some influential entities – hospital associations, previous different and less severe proposals by the Medicare Payment Advisory Commission (MedPAC) and the Office of Inspector General (OIG), Hospital Outpatient Payment (HOP) Advisory Panel, and even members of Congress.  BUT – sound the buzzer – I was wrong.  CMS has indeed finalized their proposal to reduce payment for separately payable drugs purchased under the 340B program to ASP -22.5% as opposed to ASP +6% for drugs not purchased through the 340B program.

Background on the 340B Program

• The program allows participating hospitals and other health care providers to purchase certain “covered outpatient drugs” at discounted prices from drug manufacturers.
• It was established by section 340B of the Public Health Service Act by the Veterans Health Care Act of 1992 and is administered by the Health Resources and Services Administration (HRSA) within the Department of Health and Human Services (HHS).
• Health care providers eligible to participate in the 340B program if they meet certain criteria are:
• Federal health care grant recipients,
• Hospitals with a Medicare disproportionate share hospital (DSH) percentage > 11.75%,
• Critical Access Hospitals (CAHs),
• Children’s Hospitals with a DSH adjustment > 11.75%,
• Sole Community Hospitals (SCHs) with a DSH adjustment ≥0%
• Rural Referral Centers (RRCs) with a DSH adjustment ≥0%, and
• Freestanding Cancer Hospitals with a DSH adjustment > 11.75%.
• HRSA calculates the maximum (ceiling) price a participating drug manufacturer can charge a covered entity for each covered outpatient drug based on average manufacturer price (AMP) and a unit rebate amount (URA) that considers innovator vs. non-innovator drugs and the availability of generics.
• Deeper discounts (known as “subceiling prices”) are available on some covered outpatient drugs through HRSA’s Prime Vendor Program (PVP).
• The statutory intent of the 340B Program is to maximize scarce Federal resources as much as possible, reaching more eligible patients, and providing care that is more comprehensive.

CMS’s Reasons for the Payment Reductions

Payment Not Aligned with Costs

CMS’s goal is to make Medicare payment for separately payable drugs more aligned with the resources expended by hospitals to acquire such drugs. Various reports by government agencies estimated 340B hospitals receive a significant minimum discount for drugs paid under the OPPS with even deeper discounts if participating in the PVP program.

• MedPAC – discount of 22.5% of the ASP
• OIG – discount of 33.6% of the ASP
• GAO – discount of 20-50% of the ASP

Another MedPAC report estimated savings of $3.8 billion on outpatient drugs purchased through the 340B Program in 2013.  Also, participation in the program has grown steadily, from 583 participating hospitals in 2005, to 1,365 hospitals in 2010, and 2,140 hospitals in 2014.

There are limitations in estimating 340B drug costs due to the inability to identify which drugs were purchased through the 340B Program within Medicare claims data.  This is another concern CMS addresses in the final rule.

Drug Utilization/Spending

A MedPAC study also found that “Medicare spending grew faster among hospitals that participated in the 340B Program … than among hospitals that did not participate in the 340B Program …”.  The GAO found per beneficiary Medicare Part B drug spending, including oncology drug spending, was substantially higher at 340B DSH hospitals than at non-340B hospitals.  According to the GAO report, this indicates that, on average, beneficiaries at 340B DSH hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other non-340B hospitals in GAO’s analysis.

Beneficiary Costs

CMS is also concerned about the cost of co-pays for Medicare beneficiaries.  Medicare beneficiaries are liable for a 20% copayment of the OPPS payment rate, which is currently ASP+6% (regardless of the 340B purchase price for the drug).  In another unfavorable report, the OIG found 35 drugs where the “difference between the Part B [payment] amount and the 340B ceiling price was so large that, in at least one quarter of 2013, the beneficiary’s coinsurance alone… was greater than the amount a covered entity spent to acquire the drug.”

Public Comments

A number of commenters agreed with CMS’s proposal and reasons and also put forth a few other reasons for going forward with the payment reduction. Here are some of reasons given by commenters.

• Reverse the “perverse incentives” that have driven the closure and consolidation of the nation’s community cancer care system
• Only a small minority of 340B participating hospitals are using the program to benefit patients in need
• The increasing scope and magnitude of required 340B discounts are increasing drug prices to record-breaking levels as manufacturers factor these discounts into pricing decisions
• Future decreases in prices for supplemental insurance due to coinsurance savings from the 340B payment reduction if it is implemented
• Encourage site-neutral care as patients may receive the same services at a physician office setting without a significant difference in their financial liability between settings
• Address the incentive for hospitals to utilize these drugs solely for financial reasons

The major opposition to the payment reduction expressed by commenters was the lack of CMS’s statutory authority to impose such a large reduction in the payment rate for 340B drugs, and that payment cuts of this magnitude would greatly “undermine 340B hospitals’ ability to continue programs designed to improve access to services—the very goal of the 340B Program.”  If you are interested in the details of CMS’s response, you can read the display copy of the Final Rule beginning on page 562.  In summary, CMS stood their ground on most of the proposals although they did concede some additional exceptions and a change in the required modifier reporting. 

The Final Decision

For CY 2018, separately payable Part B drugs assigned status indicator (SI) “K” that are acquired through the 340B Program (including 340B PVP) will be paid at the ASP minus 22.5 percent when billed by a hospital paid under the OPPS that is not excepted from the payment adjustment.  Since separately payable Part B drugs with an SI of “K” were paid at ASP + 6% in 2017, the 340B drug payment reduction actually represents a total reduction of 28.5% from 2017 to 2018.  Also, since separately payable drugs not purchased through the 340B program will continue to be paid at ASP + 6% in 2018 the payment rate for these drugs posted in Addendum B of the 2018 OPPS Final Rule is ASP + 6%. Therefore, to calculate the reduced payment, you must first determine ASP by subtracting 6% and then the final reduced payment by subtracting the 22.5% to arrive at ASP – 22.5%, which is a reduction of 28.5% from the posted payment rate.

CMS believes an average discount to set payment rates for 340B-acquired separately payable drugs achieves the goals of (1) adjusting payments to better reflect resources expended to acquire such drugs, and (2) protecting the confidential nature of discounts applied to a specific drug. According to CMS, the estimated average minimum discount of 22.5% of the ASP calculated by MedPAC adequately represents the average minimum discount a 340B participating hospital receives for separately payable drugs.  In fact, they think it is likely the average discount is higher, potentially significantly higher, than the average minimum of 22.5%.  CMS wants to ensure that Medicare beneficiaries are not liable for a copayment rate that is tied to the current methodology of ASP+6% when the actual cost to the hospital to purchase the drug under the 340B Program is much lower than the ASP for the drug.

Exclusions and Exceptions

Exclusions from the 340B payment reduction are (1) drugs on pass-through payment status, which are required to be paid based on the ASP methodology (status indicator “G” – paid at ASP + 6%), and (2) vaccines, which are excluded from the 340B Program (status indicator L, paid at reasonable cost).  The following types of facilities are also excepted from the 340B payment discount:

• Critical Access Hospitals (CAHs),
• Rural Sole Community Hospitals (SCHs),
• Children’s Hospitals, and
• PPS-exempt Cancer Hospitals.

CMS decided not to make exceptions for the following:

• Biosimilar biological products will be paid the same as other separately payable drugs. Pass-through biosimilars will be paid ASP+6% and non-pass-through biosimilars will be paid at ASP-22.5%.  Currently there are only two biosimilars on the market, both with pass-through status for all of CY2018.  This means there are no biosimilars at this time that will be affected by the reduced payment for 340B drugs.
• Drugs provided in nonexcepted off-campus provider-based departments will be paid in accordance with section 1847A of the Act (generally, ASP+6 percent), consistent with Part B drug payment policy in the physician office although CMS may consider payment adjustments for these PBDs in 2019.
• Rural referral centers (RRCs) will be subject to the reduced payment if they participate in the 340B program.
• Blood clotting factors and radiopharmaceuticals that are not pass-through drugs will be paid ASP-22.5% if purchased through the 340B program.

Modifier Requirements

In response to comments, CMS is requiring a modifier for drugs acquired under the 340B Program instead of requiring its use on drugs that were not acquired under the 340B Program. In addition, they are establishing an informational modifier for use by certain providers who will be excepted from the 340B payment reduction.

• Effective January 1, 2018, Medicare will require hospitals subject to the 340B payment policy to report modifier “JG” on the same claim line as the drug HCPCS code to identify a 340B-acquired drug. These drugs will be paid at ASP-22.5%.
• Rural SCHs, children’s hospitals and PPS-exempt cancer hospitals excepted from the 340B payment adjustment will be required to report informational modifier “TB” for 340B-acquired drugs, and will continue to be paid ASP+6 percent.

These modifiers will facilitate the collection and tracking of 340B claims data whether they affect payment or not.

Budget Neutrality

CMS plans to implement the payment reduction for 340B drugs in a budget neutral manner.  “To maintain budget neutrality within the OPPS, the estimated $1.6 billion in reduced drug payments from adoption of this final alternative 340B drug payment methodology will be redistributed in an equal offsetting amount to all hospitals paid under the OPPS through increased payment rates for non-drug items and services furnished by all hospitals paid under the OPPS for CY 2018. Specifically, the redistributed dollars will increase the conversion factor across non-drug rates by 3.2% for CY 2018.”

Comment Solicitation

It is clear this is not the final word on this issue.  CMS states they may revisit the alternative 340B drug payment methodology in CY 2019 rulemaking and I am going to make another guess and say they definitely will. They are still seeking public comments on ways to more closely align the actual acquisition costs that hospitals incur rather than using an average minimum discounted rate while still keeping the ceiling price confidential as required by law.

I guessed wrong concerning the reduction in payment proposal for drugs acquired under the 340B program, but at least I didn’t have any money riding on it.  Unfortunately, hospitals do have money riding on it, maybe even a lot of money.

If you are interested in determining the potential impact the 340B payment reduction will have on your hospital, please contact Medical Management Plus, Inc. at 205-941-1105.  Utilizing the Medicare claims data from our sister company, RealTime Medicare Data (RTMD), we can compare your actual Medicare payments for drugs with an SI of “K” from a recent 12-month timeframe to the proposed 22.5% reduction from ASP.  As explained above this involves first subtracting 6% from the Addendum B payment rate of ASP + 6%, and then reducing the ASP by 22.5%, for a total of 28.5% below the posted payment rate. 

“Inpatient only” services are generally, but now always, surgical services that require inpatient care because of the nature of the procedure, the typical underlying physical condition of patients who require the service, or the need for at least 24 hours of postoperative recovery time or monitoring before the patient can be safely discharged.

• Source: Medicare Claims Processing Manual, Chapter 4 – Part B Hospital

CMS released the Calendar Year (CY) 2018 OPPS/ASC Final Rule last Wednesday November 1st. For CY 2018 CMS proposed two changes to the Inpatient Only (IPO) List and had one request for solicitation. This article provides highlights from section IX. Procedures That Will Be Paid Only as Inpatient Procedures section of the Final Rule.

Total Knee Arthroplasty Public Comments

Many commenters believed that appropriately selected patients who are in excellent health, have no or limited medical comorbidities, and have sufficient caregiver support could be successful candidates for outpatient TKA. Following are TKA topic specific comments and how CMS responded.

Patient Selection for Outpatient TKA

Commenters

• Commenters supported the proposal, with “caveats regarding patient safety, including requests that CMS develop, with input from stakeholders, patient selection criteria and risk stratification protocols for TKA to be performed in an outpatient setting.”
• Two orthopedic specialty societies noted their organizations are in the process of developing these patient selection and protocol tools.

CMS Responds

• CMS believes that surgeons, clinical staff, and medical specialty societies performing outpatient TKA procedures possess the specialized clinical knowledge and experience are most suited to create patient selection guidelines. As such, they do not expect to create or endorse specific guidelines or content.

Determining Appropriate Site for Surgery

Commenters

• There were requests that “CMS explicitly state that the surgeon is the final arbiter of the appropriate site for the surgical procedure, that CMS provide an incentive for outpatient and ambulatory settings performing TKA, PHA, and THA to be a part of a registry such as the American Joint Replacement Registry, and CMS confirm that all surgeons will continue to have the option to select the appropriate setting (inpatient or outpatient) for the procedure.”

CMS Responds

• CMS indicates they “continue to believe that the decision regarding the most appropriate care setting for a given surgical procedure is a complex medical judgment made by the physician based on the beneficiary’s individual clinical needs and preferences and on the general coverage rules requiring any procedure be reasonable and necessary.”
• CMS reminds you that removal from the IPO List does not require the procedure to be performed only on an outpatient basis and that the “2-Midnight” rule continues to be in effect and was established to provide guidance on when an inpatient admission would be appropriate for payment under Medicare Part A (inpatient hospital services).

Impact on Medicare Payment Models

Commenters

• Numerous commenters believe this could potentially impact two current Medicare payment models (Bundled Payment Care Initiative (BPCI) and Comprehensive Care for Joint Replacement (CJR) Model). They expressed concern that younger and healthier patients would be more likely to undergo outpatient TKA’s and that TKA patients in the Inpatient setting would be higher risk and/or likely to need additional post-acute care support. This shift could increase average episode payment affecting a hospital’s ability to fall below an episode established target price.

CMS Responds

• Initially, CMS does not expect a significant volume of TKA cases to shift to the hospital outpatient setting as a result of removing this procedure from the IPO List. They do “intend to monitor the overall volume and complexity of TKA cases performed in the hospital outpatient department to determine whether any future refinements of these models are warranted.”

After consideration of public comments CMS finalized their proposal to remove the TKA procedure described by CPT code 27447 from the IPO List beginning in CY 2018 and to assign the procedure to C-APC 5115 with status indicator “J1”.

Moratorium on Recovery Audit Contractor (RAC) TKA reviews

CMS also finalized the proposal to prohibit RAC “reviews for patient status for TKA procedures performed in the inpatient setting for a period of 2 years to allow time and experience for these procedures under this setting.”

Public Requests for “Removal of” or “Additions to” Procedures on IPO List

Request for “Removal”

CMS notes there were requests to remove several additional procedures from the IPO List. The following table includes CPT codes that were requested to be removed.  

‍Request for “Additions to”

One commenter requested adding CPT 92941 (Percutaneous transluminal revascularization of acute total/subtotal occlusion during acute myocardial infarction, coronary artery or coronary artery bypass graft, and combination of intracoronary stent, arthrectomy and angioplasty, including aspiration thrombectomy when performed, single vessel) to the IPO List because this is an emergent procedure to treat acute myocardial infarction patients.

Codes Finalized for “Removal from” or “Addition to” the IPO List in CY 2018

The following table details the finalized changes to the CY 2018 IPO list.

‍Should Partial Hip Arthroplasty (PHA) & Total Hip Arthroplasty (THA) be removed from IPO List?

As a reminder, in the CY 2018 OPPS Proposed Rule, CMS requested public comments to several questions related to whether or not PHA (CPT code 27125 (Hemiarthroplasty, hip, partial (e.g., femoral stem prosthesis, bipolar arthroplasty)), and THA, CPT code 27130 (arthroplasty, acetabular and proximal femoral prosthetic replacement (total hip arthroplasty), with or without autograft or allograft) procedures should be removed from the IPO List.

CMS further sought comment on whether these procedures meet criteria to be added to the ASC Covered Procedures List and how removing these from the IPO List would affect the BPCI and CJR models.

In the Final Rule CMS thanks commenters for their detailed responses and will consider them in future policymaking. So for now, hip procedures remain on the IPO List. Section IX. Procedures That Will Be Paid Only as Inpatient Procedures can be found on pages 657 through 685 of the unpublished Final Rule.

Resources:

Link to unpublished CY 2018 OPPS/ASC Final Rule:  

https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1678-FC.html

Note: The Final Rule is schedule to be published in the Federal Register on 11/13/2017

Link to CY 2018 OPPS/ASC Final Rule Fact Sheet: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-11-01.html

Q:

How do you code cellulitis when a patient also has diabetes?  Can we assume a linkage?

A:

The provider needs to document the cellulitis as a diabetic skin complication before assigning cellulitis related to diabetes.  Skin complication NEC is indexed under diabetes; however, diabetes with cellulitis is not.  The “with” guideline does not apply to “not elsewhere classified” index entries that cover broad categories of conditions.  As always, query the physician when the documentation is not clear.

References

Coding Clinic for ICD-10-CM/PCS, Fourth Quarter 2017 Page 100 

I once illustrated the myriad of Medicare contractors and affiliates that perform pre-payment and/or post-payment medical reviews as a spider’s web – a day late for a Halloween connection. There are at least a couple of reasons supporting an association between the two. First, healthcare providers would never want to be caught in the “web” of reviews (especially if the spider proves to be the cause of their demise).  And secondly, as the filaments of a spider’s web connect together, there are connections between the different Medicare auditors.  Medicare Administrative Contractors (MACs) may review problematic issues identified by the Comprehensive Error Rate Testing program (CERT).  MACs may refer at-risk issues to other reviewers such as the Recovery Auditors (RACs) or the RACs might refer topics back to the MACs.  The MACs or RACs may follow-up on overpayment issues identified by the Office of Inspector General (OIG) or the OIG may further investigate inappropriate payment issues identified by the MACs or RACs. This month’s report on new RAC and OIG review issues are perfect examples of this inter-related web of reviews.

There has not been a lot of new issues approved for Recovery Audit Contractor (RAC) reviews in the last month.  HMS, the Region 4 Recovery Auditor, appears to have reposted some issues such as the complex review of medical necessity of sacral neurostimulation for outpatient hospitals.  HMS also added an automated review for critical access hospital (CAH) and outpatient hospital services on October 6, 2017 – Outpatient Services Overlapping or During an Inpatient Stay.  This review topic may be the result of findings of a recent report from the Office of Inspector General (OIG), which was addressed in detail in a Wednesday@One article from August. This automated issue is not yet listed on either the Cotiviti or Performant websites. There were no other newly approved issues related to hospital services for any of the RACs.

Hospital related issues have also been rare in the new updates to the OIG Work Plan the past few months.  In the October updates, there is one issue that affects hospitals.  The OIG will be reviewing supporting documentation to determine whether bariatric services meet the conditions for coverage and are supported in accordance with Federal requirements (Social Security Act, §§ 1815(a) and 1833(e)) and in keeping with the CMS National Coverage Determination (NCD) 100.1.  Medicare Parts A and B only cover certain bariatric procedures when the patient meets the following criteria:

• a body mass index of 35 or higher,
• at least one comorbidity related to obesity, and
• had previously unsuccessful medical treatment for obesity.

Treatments for obesity alone are not covered. A CERT special study of bariatric surgical procedures found that approximately 98 percent of improper payments lacked sufficient documentation to support the procedures.  This issue was highlighted in the July 2014 Medicare Quarterly Provider Compliance newsletter.

So even though these are new posted issues for these contractors, they are issues we have seen before.

Calculating Interim Rates for Graduate Medical Education (GME) Payments to New Teaching Hospitals

Provides instructions to the MACS on calculating interim rates for Graduate Medical Education (GME) payments to new teaching hospitals.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10240.pdf

Quarterly Healthcare Common Procedure Coding System (HCPCS) Drug/Biological Code Changes - October 2017 Update

Recurring quarterly update to HCPCS code set – created new modifier ZC for use with biosimilars manufactured by Merck/Samsung Bioepis, such as Infliximab.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10234.pdf

Updates to Medicare’s Cost Report Worksheet S-10 to Capture Uncompensated Care Data

Provides additional guidance to 1886(d) hospitals to ensure appropriate reporting of uncompensated care costs and to achieve proper Medicare reimbursement.  Summarizes revisions and clarifications to the instructions for the Worksheet S-10 of the Medicare cost report.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE17031.pdf

Quarterly Update to the National Correct Coding Initiative (NCCI) Procedure to Procedure (PTP) Edits, Version 24.0, Effective January 1, 2018

Recurring quarterly updates of CCI edits.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10306.pdf

Accepting Payment from Patients with a Workers' Compensation Medicare Set-Aside Arrangement (WCMSA), a Liability Insurance Medicare Set-Aside Arrangement (LMSA), or a No-Fault Insurance Medicare Set-Aside Arrangement (NFMSA) - RESCINDED

Rescinded October 3, 2017

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE17019.pdf

Implementing the Remittance Advice Messaging for the 20 Hour Weekly Minimum for Partial Hospitalization Program Services – REISSUE

Re-issued on October 3, 2017, to confirm that its content remains valid even though Special Edition Article SE1607 was rescinded.  Message on remittance reminding providers that PHP patients require a minimum of 20 hours of PHP services per week, in accordance with the plan of care.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM9880.pdf

Medicare Appeals; Adjustment to the Amount in Controversy (AIC) Threshold Amounts for Calendar Year 2018

Federal Register Notice – The calendar year 2018 AIC threshold amounts are $160 for ALJ hearings and $1,600 for judicial review.

https://www.gpo.gov/fdsys/pkg/FR-2017-09-29/pdf/2017-20883.pdf

January 2018 Quarterly Average Sales Price (ASP) Medicare Part B Drug Pricing Files and Revisions to Prior Quarterly Pricing Files

Quarterly update to drug pricing. OPPS hospitals are paid ASP + 6% for separately paid drugs (both pass-through and non-pass-through drugs).

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10320.pdf

Transition to New Medicare Numbers and Cards

Factsheet telling the why, when, and how to be ready for the new cards.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/TransitiontoNewMedicareNumbersandCards-909365.pdf

Clarification Regarding the Use of Control Materials as Calibrators to Determine Test Cut-off Values (Laboratories)

Memorandum to State Survey Agency Directors clarifying information concerning laboratory controls and calibration materials.

https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/SurveyCertificationGenInfo/Downloads/Survey-and-Cert-Letter-17-46.pdf

Changes to the Laboratory National Coverage Determination (NCD) Edit Software for January 2018

Quarterly updates to the national coverage policies for certain laboratory tests.  There is a link within the article to a spreadsheet of all the changes – deletions and additions.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10309.pdf

Clinical Laboratory Fee Schedule Not Otherwise Classified, Not Otherwise Specified or Unlisted Service or Procedure Code Data Collection

Instructs providers to include the laboratory test name or short description in Field 19 when billing an unlisted laboratory test code on a 1500 claim form. Also, laboratory “reporting entities” must report private payor payment rates and volumes for unique tests reported with an unlisted code.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10232.pdf

2018 Medicare Electronic Health Record (EHR) Incentive Program Payment Adjustment Fact Sheet for Hospitals

Fact sheet on the EHR payment adjustments for eligible hospitals.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-10.html

Notice of New Interest Rate for Medicare Overpayments and Underpayments -1st Qtr. Notification for FY 2018

The certified interest rate effective October 18, 2017 for Medicare over- and under-payment is 9.750%.

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R295FM.pdf

Defending Medical Review Decisions at Administrative Law Judge (ALJ) Hearings

Updates Medicare Program Integrity Manual due to recent changes in the Office of Medicare Hearings and Appeals process, such as restrictions on the number of contractors able to participate during oral testimony and the adoption of the witness role for those cases in which additional support may be sought.

https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2017Downloads/R748PI.pdf

Medicare Quarterly Provider Compliance Newsletter – October 2017

Provide education on how to avoid common billing errors and other erroneous activities when dealing with the Medicare Fee-For-Service (FFS) Program. This quarter’s newsletter addresses Arthroscopic Rotator Cuff Repair (Physicians), CERT errors for Outpatient Hospital Services, and a DME item.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/MedQtrlyComp-Newsletter-ICN909271.pdf

Prohibition on Billing Dually Eligible Individuals Enrolled in the Qualified Medicare Beneficiary (QMB) Program – REVISED

Revised October 18, 2017 to indicate the Provider Remittance Advice and Medicare Summary Notice identifies the QMB status of beneficiaries and exemption from cost-sharing for Part A and B claims processed on or after October 2, 2017.  It also recommends how providers can use these and other upcoming system changes to promote compliance with QMB billing requirements.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1128.pdf

Fiscal Year (FY) 2018 Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) PPS Changes - REVISED

Updates to some financial information, tables, files, and lists.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/MM10273.pdf

American Hospital Association (AHA) Letter to Office of Inspector General (OIG)

The AHA request to OIG to implement actions to address fundamental flaws and inaccuracies in the OIG hospital compliance reviews.

http://www.aha.org/advocacy-issues/letter/2017/171002-let-hatton-cms-hospital-compliance-reviews.pdf

Hurricane Nate and Medicare Disaster Related Alabama, Florida, Louisiana and Mississippi Claims

Describes CMS authorized waivers for providers affected by Hurricane Nate.

https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE17034.pdf

In a June 2016 Wednesday@One article about the new payment rates for laboratory tests, it was pointed out that Medicare wants competitive pricing for the services for which they pay. That is why the new lab payment rates are designed to be competitive with the rates of private insurers.

Background

The Protecting Access to Medicare Act of 2014 (PAMA) mandated a change to the way Medicare determines payment rates for laboratory tests under the Clinical Laboratory Fee Schedule. The purpose of this change was to make Medicare lab payments competitive with what private insurers are paid. A final rule was published in June 2016 implementing this requirement. To determine the basis for the revised payment rates, certain laboratories were required to submit private payor data to Medicare.  Below is some information that appeared in that previous Wednesday@One article concerning how the new payment rates were to be determined.

Payment Rates Determination

• Private payor rates for laboratory tests reported by the applicable laboratories will be the basis for the revised Medicare payment rates for most laboratory tests on the CLFS beginning in January 2018.
• The payment amount for a test on the CLFS furnished on or after January 1, 2018, will be equal to the weighted median of private payor rates determined for the test.
• The payment amount for a test cannot drop more than 10 percent as compared to the previous year’s payment amount for the first three years after implementation of the new payment system, and not more than 15 percent per year for the subsequent three years.
• Payment rates under the revised CLFS will be updated to reflect market rates paid by private payors every three years for most tests, and every year for ALDTs.

Preliminary CLFS Rates

On September 22, CMS published preliminary rates for the new private payor rate-based Clinical Lab Fee Schedule (CLFS) that will go into effect on January 1, 2018.  The data reported to CMS upon which the new CLFS rates are based captured over 96% of laboratory tests on the CLFS and represented over 96% of Medicare’s spending on tests in CY 2016.  CMS will be accepting comments on the preliminary determinations until October 23, 2017.  To see the preliminary rates, how to submit comments, and more information about the PAMA requirements see the CLFS PAMA Regulations webpage.

The table of preliminary payment rates with 10% phase-in reduction in 2018, 2019 and 2020 includes 1,360 laboratory HCPCS codes.  Of these,

• 879 codes have a 2018 payment reduction of 10% (the cap),
• 115 codes have a payment reduction < 10%,
• 134 codes have an increase in payment,
• 161 codes did not have a payment rate for 2017 but are assigned one for 2018,
• 71 codes are not assigned a 2018 payment rate due to payment and/or volume equal to 0 or they were new codes for 2017 or 2018.

Payment rates will continue to be adjusted until they reach the weighted median.  For 2018, 2019, and 2020, the maximum decrease per year will be a 10% reduction (reduction cap); after that, the reduction will be 15% for the next three years.  Regarding the reductions,

• 410 codes will reach the full payment change in 2018 (this includes the 115 codes with a reduction < 10%, the 134 codes with an increase in payment rates, and the 161 codes with a new rate for 2018),
• 61 codes will reach the full payment change in 2019,
• 102 codes will reach the full payment change in 2020,
• 716 codes will still require adjustment after 2020 to reach the full payment change.

Here are the proposed payments rates for some common laboratory tests.

For hospitals, the adjustments to payment rates will not have as significant an impact as they will for independent testing laboratories. This is because since 2014, the payment for most Medicare outpatient clinical laboratory tests billed by hospitals is packaged into the payment for other outpatient services.  This means lab tests performed in the emergency department, outpatient surgery, outpatient clinics or performed with other outpatient services are not separately paid. Separate payment for lab tests is only made to hospitals when the laboratory tests are the only outpatient services performed and billed on a claim. This includes testing on outpatients referred to the hospital lab by their physician and lab specimens sent to the hospital lab for testing.  Therefore, the impact on any particular hospital depends on the volume of outpatient hospital outreach lab testing.

Let’s look at the potential impact on hospitals.  Using data from our sister company, RealTime Medicare Data (RTMD), I determined the Medicare payments for a year for the common laboratory tests listed above from several hospitals with a significant amount of outpatient laboratory payments. These are actual payments so they represent laboratory testing that was separately paid by Medicare.  I averaged the payment data and estimated volumes based on 2017 pricing to allow comparison between these volumes and your facility’s volumes.  As you can see, even hospital laboratories with robust outreach business have limited loss of payments, with a total of around $166,000 annually for these 8 high-volume lab tests.  Of course, there are many more lab tests and payment reductions for most tests will continue over time, at least over a three period until a new evaluation of private payor payments is done.

Even though this is not a huge reimbursement loss for hospitals, in these days of already declining revenues and increasing costs, every penny counts.  And these are just more lost pennies.

As our readers may have noticed over the last two weeks, we are providing information on the transition of Jurisdiction J from Cahaba GBA as the Medicare Administrative Contractor (MAC) to Palmetto GBA beginning in January and February of 2018. Numerous MMP clients are located in Jurisdiction J, so we believe providing information on the transition is beneficial to our clients and other providers in this Jurisdiction (Alabama, Georgia, and Tennessee).  Along these lines, the focus coverage policy for this month is B-type natriuretic peptide (BNP). I selected this policy because Cahaba GBA has been conducting pre-payment medical review of BNP in the outpatient/non-patient laboratory setting for several years with consistent error rates in the range of 99-100%.  These denials are mainly due to “the documentation submitted did not support clinical urgency for 83880” which would be expected for acute potential cardiac events.

Since our newsletter is read nation-wide, I do not want to forget our readers in other Jurisdictions.   It turns out it is easy to remember almost everyone when discussing coverage of BNP, because 7 of the 8 MACs (9 of 11 Jurisdictions) also have Local Coverage Determinations (LCDs) for BNP.  And with only one exception, the indications and limitations for coverage across these policies is consistent.  Here is a listing of the various Part A LCDs for BNP (CPT code 83880). You can easily view the specific policies by entering the Document ID # in the Quick Search section of the Medicare Coverage Database webpage.

Although stated somewhat differently between policies, the consensus for coverage of BNP is that it is covered:

• When used in combination with other medical data such as medical history, physical examination, laboratory studies, chest x-ray, and electrocardiography; and
• To distinguish cardiac cause of acute dyspnea from pulmonary or other non-cardiac causes;
• To distinguish decompensated CHF from exacerbated chronic obstructive pulmonary disease (COPD) in a symptomatic patient with combined chronic CHF and COPD (Cahaba’s LCD does not include this indication, although Cahaba has stated in verbal discussion with providers that this would be a covered use of BNP.); or
• As a risk stratification tool (to assess risk of death, myocardial infarction or congestive heart failure) among patients with acute coronary syndrome (myocardial infarction with or without T-wave elevation and unstable angina) when obtained in the first few days after the onset of ischemic symptoms.

Providers also need to be familiar with the ICD-10 diagnosis codes that “support medical necessity.”  The list of codes supporting medical necessity varies between LCDs. It is likely the MAC will deny coverage utilizing automated edits when a claim is submitted without a “covered” diagnosis code.

BNP is not covered:

• As a stand-alone test, without being used in conjunction with standard diagnostic tests, medical history and clinical findings;
• For monitoring the efficiency of treatment for CHF and in tailoring the therapy for heart failure;
• For adjustment of therapy in individual patients, or
• As part of cardiovascular risk assessment panels (screening).

Some policies quote the American College of Cardiology/American Heart Association 2005 Guideline Update for the Diagnosis and Management of Chronic Heart Failure in the Adult.  These guidelines were updated in 2017 and can be viewed on the ACC website. Some physicians argue the new guidelines support a standard of care to monitor and adjust therapy, determine prognosis and establish disease severity in CHF patients followed in an ambulatory setting based on the

“Class I recommendation (Level of Evidence: A) for measurement of B-type natriuretic peptide (BNP) or N-terminal (NT)-proBNP for establishing prognosis or disease severity in chronic HF.” 

However the full ACC/AHA article states, “Because of the absence of clear and consistent evidence for improvement in mortality and cardiovascular outcomes (43-62), there are insufficient data to inform specific guideline recommendations related to natriuretic peptide–guided therapy or serial measurements of BNP or NT-proBNP levels for the purpose of reducing hospitalization or deaths in the present document.”

The National Government Services (NGS) LCD for Jurisdictions K and 06 is significantly different, though extremely specific, from the other LCDs by allowing coverage for:

• To establish prognosis or disease severity in chronic CHF when needed to guide therapy,
• To achieve optimal dosing of guideline-directed medical therapy (GDMT) in select clinically euvolemic patients followed in a well-structured heart failure (HF) disease management program,
• To guide therapeutic decision-making in individuals who have amyloidosis.

Laboratory tests are not paid separately for inpatients or for outpatients having other outpatient services, and even when paid the Clinical Lab Fee Schedule payment rate for BNP is around only $46.  The Medicare issue with laboratory tests such as BNP is not the payment rate per test, but that millions of lab tests across the nation can add up to large reimbursement amounts for Medicare.

Hospitals need to evaluate whether their physicians are following the Medicare LCD guidelines for their Jurisdiction when ordering BNP testing on outpatients in a setting other than the Emergency Department.  Should another MAC besides Cahaba perform audits, what does your hospital have at risk?