The lab industry is facing a great deal of fiscal uncertainty. The Centers for Medicare and Medicaid Services is poised to slash the laboratory fee schedule. The HIPAA 5010 electronic transaction standards are in transition. New molecular diagnostic test coding and reimbursement present challenges. And a costly claims filing change has been mandated by the Blue Cross Blue Shield Association.
These challenges add to the pressure that clinical laboratories already face from cumulative cuts of 20% resulting from health reform enacted in 2010, which includes cuts to the Part B clinical lab fee schedule of 1.75% each year from 2011 through 2015, and an additional productivity adjustment of 11% over ten years. The jury is still out on whether labs may also face up to a 2% cut to the fee schedule as a result of sequestration, which begins in January 2013. The laboratory industry is more challenged than ever to provide cost-effective, high quality services. Let’s take a look at some of the major issues currently impacting lab reimbursement.
SGR-mandated Medicare reductions
For the past decade, Medicare expenditures have exceeded targets, and the sustainable growth rate (SGR), a formula used to reduce Medicare spending by providers, has mandated substantial cuts.
Medicare payments were slated for a 27.4% cut on January 1, 2012. In February, President Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA). The legislation included a temporary reprieve to cuts in payment rates on the Medicare physician fee schedule through December 31, 2012. Unfortunately, longer-term solutions may entail sacrifices by the lab industry. The Medicare clinical laboratory fee schedule will be cut by 2% effective January 1, 2013, to help drive an estimated $2.7 billion in savings by reducing reimbursements for clinical lab tests over 10 years.
The MCTRJCA also includes an extension allowing specific pathologists and independent laboratories to bill Medicare directly for the Technical Component (TC) of physician pathology services provided to hospital patients through June 30, 2012. Unless it is extended further, labs currently providing TC services will have to collect payment directly from hospitals after June 30.
HIPAA 5010 transition
On January 1, 2012, HIPAA 5010 was mandated as the electronic transaction standard regulating the transmission of billing claims data. However, many payers failed to prepare for the transition in a timely manner, causing significant processing delays and claims denials for lab providers. Labs have been required to evaluate transition inconsistencies, claims rejections, and many other transition-related problems across hundreds of individual payers at different phases of transition. Many labs are still submitting claims using both 4010 and 5010 formats on a payer-by-payer basis.
Due to mounting challenges caused by lack of payer readiness to implement the 5010 standard, CMS delayed enforcement of the standard until June 30, 2012.
MDx test reimbursement
Just as molecular diagnostics and genetic testing are poised to revolutionize healthcare treatment and outcomes, pricing and reimbursement challenges are impacting new molecular diagnostic (MDx) test reimbursement and commercialization, and possibly the future of personalized medicine. Medicare Administrative Contractors (MACs) handling claim payment contracts have significant influence over the MDx reimbursement landscape. Palmetto GBA, the contractor for California and six other states, has stepped up to help determine fair reimbursement amounts for molecular diagnostic tests.
Palmetto GBA launched an extensive molecular diagnostics program effective March 1, 2012, for the coding and pricing of new genomic tests. The program requires providers to use either a new “Z” code or Palmetto Test Identifier (PTI) assignment on molecular diagnostic claims to avoid claim rejections. Palmetto also announced two local coverage determination policies that restrict payment on genomic tests that have not previously gone through the coverage approval process with Palmetto policy staff.
The AMA recently completed its CPT code revisions for molecular tests. The Centers for Medicare and Medicaid Services must decide how it will reimburse labs for each code, and whether the codes will remain on the clinical lab fee schedule or be moved to the physician fee schedule. CMS recently issued a policy requesting that the AMA’s new molecular diagnostic CPT codes be included on all billing claims alongside stacking, or other nonspecific CPT codes.
Other payers and contractors are watching Palmetto GBA’s policy to determine whether the Z codes/PTI will take hold, or if they should begin to use the new MDx codes developed by the AMA.
Blue Cross Blue Shield claims
The Blue Cross Blue Shield Association has a policy requiring clinical labs to submit claims to the individual Blue Plan in the state where a specimen is collected, instead of to the Blue Plan in the state where the testing is performed. The policy may contribute to significant out-of-pocket expenses for patients whose claims may be considered out-of-network because the testing lab is not contracted with the Blue Plan where the patient’s specimen was collected.
The cost for services provided by independent clinical labs will likely increase due to the administrative costs of having to maintain separate contracts with numerous Blue Plans instead of submitting claims to one local Blue Plan. To compound matters, many Blue Plans will not contract with independent clinical labs that are not physically located in the state.
The terrain is rocky—but a solid base of knowledge can help you navigate it.
Lâle White co-founded XIFIN in 2001 and serves as CEO. She is a nationally recognized expert in the field of medical financial management and regulatory compliance, with more than 25 years experience in information systems development and medical billing. She has consulted for major laboratories and associations, and worked with HCFA and the U.S. OIG to develop the first OIG Model Compliance Program.