Knowledge Base Article

In 1999, CMS proposed a policy to pay only the hospital for the technical component (TC) of physician pathology services furnished to hospital patients. However, various legislative provisions since then have continued to delay the implementation of this provision. Under these delays, the independent or pathology laboratories providing the technical component of pathology services for covered hospitals have continued to bill Medicare directly. Covered hospitals are those hospitals that had an arrangement with an independent laboratory that was in effect as of July 22, 1999, under which the laboratory furnished the TC of physician pathology services to fee-for service Medicare beneficiaries who were patients of the hospital.

The Tax Relief Act of 2012 again extended the moratorium on this policy through June 30, 2012. Effective July 1, 2012, the moratorium expires and only hospitals can bill for the TC of physician pathology services furnished to hospital inpatients or outpatients. Pathologists and independent laboratories that provide the TC of physician pathology services furnished to hospital patients may no longer bill for and receive Medicare payment for these services, effective for claims with dates of service on and after July 1, 2012.

Medical Management Plus, Inc. has received numerous questions concerning this requirement. Following are several questions and answers to help hospitals understand the implementation of the rule.

1. Is this change for certain? It is always possible that Congress will pass legislation extending the moratorium again prior to July 1, 2012. However, at this time, the regulation is expected to begin July 1.
   
2. Which hospitals are affected? Hospitals that were covered under the grandfather clause of the original regulation (see definition of covered hospitals above), send their pathology specimens to an independent or pathology laboratory for processing and allow the processing laboratory to bill Medicare directly.
   
   
3. Note that some larger hospitals may provide pathology processing services in the hospital laboratory and bill Medicare directly for these services. Some other hospitals may send pathology specimens out for processing, but may already bill Medicare directly by choice or because they do not meet the definition of a covered hospital.
4. What types of services are involved? Physician cytopathology and surgical pathology technical component services for hospital inpatients and outpatients. Tissue specimens removed during an inpatient or outpatient surgical procedure are processed prior to the microscopic evaluation/interpretation by a pathologist. This processing is the technical component of pathology services and includes such services as embedding the tissue specimen, slicing thin tissue sections, preparing and staining the pathology slides. See the 88xxx CPT codes paid under APCs 0342, 0343, and 0344 on the Outpatient Prospective Payment System (OPPS) Addendum B for the affected codes. Note that pathology TC services provided during surgery, such as frozen sections, would also be included when these are performed and billed to Medicare by the pathology laboratory.
   
5. How will hospitals be reimbursed by Medicare for these services? For hospital inpatients, Medicare payment is made under a DRG payment which includes any pathology services provided to the patient. The pathology services will be paid under the Outpatient Prospective Payment System (OPPS) APCs for hospital outpatient services.
   
6. How will hospitals know what CPT codes to bill for each patient? Since each patient specimen may require different pathology testing, it is best to have the processing laboratory provide the hospital the applicable CPT codes for each case. The hospital and laboratory providing the TC should develop a process for timely exchange of this information in order not to delay hospital billing. Pathologists may request additional testing in order to make a definitive diagnosis of a pathology specimen, so remember to address add-on or late charges.
   
7. How will the independent/pathology laboratory be paid for its services? The hospital and independent/pathology laboratory will have to negotiate a financial agreement where the hospital pays the processing laboratory for its pathology TC services. The hospital will have to consider the reimbursement it will receive for outpatient services versus the cost of TC services plus any other costs for providing the service (such as handling, supplies, billing cost, etc.) The testing laboratory will have to consider its total costs versus the payment amount from the hospital. The parties will also have to consider whether payment is per CPT code, per case, per specimen, etc.
   
8. Does this affect the pathology professional charges? No, pathologists will continue to bill and be reimbursed by Medicare Part B directly for their professional services.

The following flowchart illustrates the process.