Category: Industry News

Centers for Medicare and Medicaid Services (CMS) published its final rule with comment period revising the Medicare Hospital Outpatient Prospective Payment System (OPPS) for 2018. Labs that provide services to hospital outpatients may want to review the new OPPS rule changes, particularly the revisions to the laboratory date of service (DOS) policy (see CMS excerpt highlighted below).

The new carve out exceptions to the 14-day rule will allow labs to bill Medicare directly under the Clinical Laboratory Fee Schedule (CLFS) for molecular pathology tests and advanced diagnostic laboratory tests (ADLTs) that are excluded from OPPS packaging rules and ordered less than 14 days after a patient’s outpatient hospital discharge. In these instances, the DOS for the excepted tests would be the date of testing rather than the date of specimen collection. The OPPS 2018 definition of a qualifying ADLT only refers to criterion A, and does not qualify a test as an ADLT using criteria B or C. The new rule goes into effect with January 1, 2018 date of service. This new rule does not change the inpatient 14-day rule.

How the new rule will impact your revenue cycle depends on the type of testing your lab performs for Medicare hospital outpatients. The biggest change is the opportunity for labs who perform testing excluded from the OPPS packaging policy to bill Medicare directly, using the date of testing as the date of service on the claim.

How will this impact your lab’s reimbursement? Hospitals who have been administratively and financially burdened by the outpatient 14-day rule, may be incented to withdraw from institutional billing arrangements in favor of the lab billing Medicare directly. Consider the following.

• If your lab test is covered by Medicare, is the allowed amount listed on the Medicare CLFS more or less than your current institutional billing fee schedule? How will your lab address and process Medicare pre-claim requirements such as medical necessity or local coverage determinations? Does your claims clearinghouse check for Medically Unlikely Edits (MUEs)? When exposed to MUEs, will your claims submission process perform the necessary edits to ensure your Medicare claims make it to adjudication?
• If your test is not covered by Medicare, or Medicare’s reimbursement is not at an acceptable level, you may want to attempt to retain the current institutional billing arrangement—such an arrangement is not precluded by the new rule. Ensure your billing system can report the appropriate DOS on the institutional invoice for the ADLTs and molecular pathology tests excluded from OPPS packaging policy. As hospitals have historically absorbed the cost of these tests performed for Medicare hospital outpatients, they may be unwilling to retain institutional arrangements except for those qualifying tests that are in high-demand.

How will the outpatient 14-day rule change affect test ordering behavior? Hospitals waiting to place test orders on day fourteen, can now order tests earlier. Will earlier ordering improve test result quality and delivery? Working with viable specimens, producing better results, and providing faster turnaround times?

The OPPS 2018 laboratory DOS policy exceptions open up a whole new world of reimbursement for labs who perform testing excluded from the OPPS packaging policy. As you consider how these changes will impact your lab’s revenue cycle process and reimbursement results, learn how Quadax can help. Experienced in laboratory revenue cycle optimization, we help labs of all types maximize their revenue.

The financial impact of PAMA to your laboratory depends largely on the type of testing you perform.  With the recent publication of the 2018 Medicare CLFS reimbursement rates, it is clear that high-volume clinical laboratory testing is facing substantial downward pricing pressure while much of the advanced molecular diagnostics and genomic testing market reimbursement is neutral to positive.  Because of this, it is not surprising that two influential industry groups, the American Clinical Lab Association (ACLA) and Coalition for 21^st Century Medicine (C21), have issued opposing statements about the implementation of PAMA. Notwithstanding a successful last-minute legal challenge by those opposing PAMA, the industry must prepare for the likelihood and reality of an implementation on January 1^st, 2018.  If you haven’t done so already, knowing how PAMA will impact your lab’s revenue is a critical next step in this preparation.

The Protecting Access to Medicare Act of 2014 (PAMA) revised the payment methodology for clinical diagnostic laboratory tests paid under the Medicare Clinical Laboratory Fee Schedule (CLFS). Final Payment rates released November 17, 2017 will be implemented effective January 1, 2018. Studying Medicare’s new market-based payment system for laboratory services, there are areas of opportunity. Preliminary analysis indicates that molecular and genetic diagnostic testing services may benefit from the new rates. Other clinical testing services may experience a decrease in rates, in which case it becomes very important to understand which claim populations are impacted. may need to apply more complex financial models. All laboratories should also consider PAMA’s secondary impact on commercial payers (both contracted and non-contracted) who derive their allowed amounts from the prevailing Medicare CLFS. Trying to determine the exact impact PAMA will have on your lab can be its own challenge.

Quadax has developed a proprietary modeling tool that is helping our laboratory clients plan and prepare for PAMA’s initial and on-going impact. By using this tool to identify and quantify areas of greatest challenge and opportunity, our client service teams provide the data to help drive our customer’s decision-making process. To deliver the best results, we collaborate with our clients bringing together our joint expertise in the analysis and interpretation of the data, reporting requirements, and clinical aspects of the tests. If you are interested in learning more about our proprietary PAMA modeling tool and how we can use it to benefit your lab, please contact us. We are here to help.

As your lab considers future opportunities—from enhanced operating efficiencies to test menu diversification—an optimized revenue cycle management solution is key. One that solves for both tactics and strategy so that reimbursement efforts maximize revenue in the new world of PAMA-driven pricing.

In the face of PAMA’s substantial cuts to the Part B Clinical Laboratory Fee Schedule (CLFS) on January 1, 2018, many hospitals are reassessing the value proposition of their laboratory service offering.

Before deciding to sell or outsource portions of your lab program, your health system may want to consider the laboratory’s contribution to an enhanced patient experience and the powerful patient management decision support afforded by mining laboratory data. Though such a decision to divest your laboratory operation may produce short-term benefits, it may limit long-term growth strategies and competitiveness for your health system.

The PAMA Impact

The Protecting Access to Medicare Act of 2014 (PAMA) revised the payment methodology for clinical diagnostic laboratory tests paid under the Medicare Clinical Laboratory Fee Schedule (CLFS). With the implementation of PAMA just months away, hospitals are reevaluating their laboratory business. Just how big an impact will PAMA have on your lab’s revenue? In the context of a hospital lab program’s possible three business segments – inpatient, outpatient, and outreach (e.g. non-hospital patient) – it appears only outpatient and outreach will be affected by PAMA, with the greatest impact on outreach.

• Inpatient lab services, governed by Part A, are not impacted by PAMA cuts targeting Part B. Also, Medicare reimburses hospitals for inpatient lab services as part of Diagnosis Related Group (DRG) bundled payments and therefore does not use the CLFS for payment rates.
• Outpatient lab services, governed by Part B, are most often paid by Medicare within Ambulatory Payment Classifications (APC) payment bundles. Medicare has bundled the majority of CLFS and the technical component of most anatomic pathology procedures from the Physician Fee Schedule (PFS) into the Evaluation and Management (E&M) service payment. However, PAMA rates will still apply to a small subset of CLFS CPT codes that are still paid fee-for-service (e.g. molecular diagnostics).
• Outreach lab services performed on non-hospital patients will be the segment most impacted by PAMA.

Gain Operational Efficiency

Hospitals expect their labs to be efficient, productive, and competitive. Can hospital labs gain the efficiency to offset anticipated losses expected with PAMA? Do they have the right equipment? Are they doing the right tests on site? Are they staffed appropriately and processing specimens in an efficient manner? Are test menus optimized across multiple hospital campuses?  Is your lab increasing the number of patients served and tests performed, while decreasing the need to repeat tests through improved specimen handling and result reporting? Operational efficiency benefits from continuous improvement efforts. Track your lab’s success in this area by using key performance indicators (KPIs) such as turnaround time (TAT), count of unresulted or canceled lab tests, reagent and material cost per accession, and labor costs.  While operational efficiency is important, defining your lab program’s value still requires a wider view.

Separate Your Lab’s Financials, Claim Management and Reimbursement Processing

A health system’s lab financials are often rolled-up to combine with hospital figures. As part of a merged Profit and Loss, it can be difficult to track the true financial performance of the lab program. The lab’s financial performance can also be impacted by the sharing of hospital billing and reimbursement resources. Viewed as a secondary initiative by shared resources, lab programs may experience a higher incident of bad debt due to inefficient collections and low net revenue. Lab testing services reimbursement efforts may benefit from separation through the implementation of a lab-centric revenue cycle solution.

Another reason to consider separation, is the unique pre-claim requirements of specialized testing. As health systems bring genetic and molecular testing to their hospital lab program to drive personalized medicine, the steps needed to get reimbursed correctly require expert knowledge and processing. Cutting-edge molecular and genetic tests must meet payers’ medical necessity and prior authorization requirements.

Many hospitals now find themselves in a Medicare Administrative Contractor (MAC) Jurisdiction that has implemented the MolDx program.  In order to be considered for reimbursement, all Part A and Part B claims for molecular diagnostics testing, whether performed in-house or by a reference laboratory, must be submitted to the MAC with the appropriate Diagnostics Exchange (DEX) Z-Code assigned to the test.  Given these and other MolDx billing requirements, your hospital lab program may want to consider laboratory business process outsourcing options to receive maximum reimbursement for specialized testing since many legacy hospital billing systems are unable to adapt to the special billing requirements of the MolDx program.  Even for a mid-sized hospital, hundreds of thousands of dollars may be left on the table because of the inability to submit Z-Codes on your claims for molecular diagnostics testing to your MAC.

Alternative Value Proposition

Using cost containment as the sole basis for determining a hospital lab program’s worth may be too limiting. How does your hospital outreach lab contribute to your health system’s patient experience? Balancing service and return-on-investment, health systems may want to consider the value of quality testing done onsite with rapid turnaround times.

What about serving the increasing number of hospital-employed physicians? As physician provider’s become hospital employees, labs are jockeying for position. Hospital labs have a unique advantage… location, location, location. But to leverage that advantage, hospital labs need to sell their service, speed, and quality to the ordering physicians. Is your hospital lab program creating valuable connections with hospital employed physicians? Can your outreach lab compete solely on a cost basis? Or is there additional value to be considered?

Laboratory data is actionable and has predictive value. As hospitals and health systems move toward value-based health care, their lab programs could provide a major source of information. What if your hospital lab was viewed as a collaborative partner offering innovative data analytics, utilization management, and diagnostic decision support? What if your lab could gather information on and provide an understanding of referral patterns, helping physicians order the right tests?

Defining Your Hospital Lab’s Future Value

Many health system executives feel forced to sell off the lab program because it is not viewed as a core fundamental service. Without a process in place to measure the profitability or value of their lab’s business, hospitals tend to undervalue their worth. You can respond by communicating your lab’s value. You can start by optimizing your lab’s revenue cycle. Quadax, an expert in laboratory billing, can help. With service options sized to fit (Business Process Outsourcing, Software-as-a-Service, Hybrid), your lab can maximize reimbursement and demonstrate its value. Learn more about Quadax services, visit Understanding Your Lab’s Revenue Cycle.

Centers for Medicare & Medicaid Services (CMS) released Transmittal 3881 on Friday, Oct. 13, 2017 requiring the submission of data for lab tests processed with “unlisted” codes effective beginning January 16, 2018. Medicare Contractors (MACs) will report to CMS specific laboratory tests and associated claims data for any test paid under the Clinical Laboratory Fee Schedule (CLFS) as a Not Otherwise Classified (NOC), Not Otherwise Specified (NOS), or an Unlisted Service or Procedure code, including but not limited to the following: 81099, 81479, 81599, 84999, 85999, 86849, 86999, 87999, 88749 and 89398. Claims that fail to follow the new procedures will be returned as unprocessable.