More laboratory audits: CMS looking at unbundled coding (again)

April 22nd, 2019 / By Barbara Aubry, RN

The March 19, 2019 letter from Seema Verma, CMS Administrator, to Charles Grassley (Chairman of the Committee on finance) assures that CMS is once again analyzing claims data to determine whether any bundled lab panel tests were billed by laboratories using separate CPT codes.

According to CMS:

“We are continuing to evaluate ways to increase data reporting, including targeted outreach and auditing of laboratories that may meet the definition of an applicable laboratory. CMS had a National Provider Call (NPC) on January 22, 2019, to educate laboratories on the new CLFS (Clinical Laboratory Fee Schedule) requirements. An audio recording and transcript of the call are available online. A Medicare Leaning Network Matters article with helpful information for laboratories is also available, and we continue to update Frequently Asked Questions on our website with information that we believe is of value to laboratories.

Laboratories, or other stakeholders, that have questions or concerns regarding their status as an applicable laboratory or the status of a data submission are encouraged to contact CMS, and we will continue to provide additional information through NPCs and other informational materials.

As you noted, the GAO recommended that CMS phase in payment-rate reductions that start from the actual payment rate rather than the national limitation amounts that Medicare paid prior to calendar year 2018. The requirements to phase-in payment rate reductions from the national limitation amounts were finalized after notice and comment rulemaking in the Medicare Clinical Diagnostic Laboratory Tests Payment System final rule (81 FR 41036) and codified in regulation at 42 C.F.R. §414.507(d).

Prior to the implementation of PAMA, test panels without a Current Procedural Terminology (CPT) code were paid at a bundled rate using a payment algorithm developed by CMS. However, under section 1834A of the Act, Medicare payment rates for each clinical diagnostic laboratory test under the CLFS generally must be a separate amount that is equal to the weighted median of the private payor rates for each test based on the applicable information reported by applicable laboratories. Thus, in a transmittal to Medicare contractors issued in November 2016, CMS implemented a change to claims processing procedures intended to accord with this provision.

 We also specified again on January 1, 2019, in the National Correct Coding Initiative Policy Manual for Medicare Services, that section 1834A of the Act requires separate rates for each test, including panel tests, and thus, such panel tests cannot be billed as individual tests. This manual specification serves to remind laboratories that they must report the panel code and not the codes for individual components of the tests when applicable. Finally, CMS is working to automatically detect claims that have inappropriately unbundled the panel tests.” (emphasis added)

My take

The GAO has been aware of lab unbundled coding and overbilling for years.

In 2014 CMS attempted to implement a Congressional mandate that it overhaul its payment rates for lab tests. According to the November 2018 GAO report, “some labs actually saw an average pay boost rather than a reduction. For 2018 through 2020 Medicare may pay out $733 million more than it would if the CMS had used average pay rates from 2016 as the benchmark. If these payments remain unbundled, however, GAO estimates they could increase Medicare costs by as much as $10.3 billion this year through 2020.” The clinical lab industry fought the changes and brought a lawsuit that was ultimately struck down. They claimed they would “lose billions of dollars in reimbursement cuts.” Regardless, the GAO found that CMS was paying “separately for each test within a panel, rather than bundling them together”—a point Chairman Grassley made to CMS which resulted in Administrator Verma’s reply above.

On a personal note, last spring I had some routine lab work done. The specimens were collected by my doctor’s office and sent to a large lab vendor for processing. I was shocked when I received a $600+ outpatient, non-facility copay bill after meeting my deductible. I had never encountered a lab bill like that before—each test was assigned a separate CPT code. I called my provider’s office, got copies of my record for the date of service, and coded what was ordered. My coding resulted in mostly bundled lab CPT codes. Next, I called my health insurance carrier and discussed the unbundled bill with them. I was very surprised to learn they pay unbundled lab code charges! I discussed the improper lab coding and basically got nowhere.

Few have the coding and auditing experience our audience does. Most would look at a copay and have no idea they have any right to question it. Even if they did, their carrier could have the same response as mine and basically say “sorry, this is how we do business.”

I’m sharing my story in the hope that every coder and biller recognizes there is a beneficiary impacted by every code and charge they assign. While it seems permissible to unbundle charges if they can, they also need to consider how a $600+ unexpected lab copay would impact them, or their family members. I’m glad Chairman Grassley and the GAO are demanding answers. I’m also glad CMS is being pushed to do a more thorough data sweep from every entity that advertises itself as a lab. Each of us who report for work every day pay in to the Medicare Trust Fund. In my humble opinion, we should be concerned about how our money is spent.

Barbara Aubry is a regulatory analyst for 3M Health Information Systems.