Corporate Compliance

Note from the instructor: Medicare clarifies key components of claims processing for clinical diagnostic laboratory services

Medicare Insider, September 30, 2014

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This week’s note from the instructor is written by Judith L. Kares, JD, regulatory specialist for HCPro.  
In a recent transmittal (R3071CP) and related MLN Matters article (MM8883), CMS updated its guidelines for correct processing of certain laboratory services (“lab services”). These updates primarily focus on the appropriate claims billing jurisdiction for lab services performed by “independent laboratories,” including the applicable billing jurisdiction for related specimen collection fees and travel allowance. For further information, hospitals should review the relevant sections of the Medicare Claims Processing Manual (MCPM), Chapter 16.
Definition of relevant terms
Let us begin with definitions of key terms found in Chapter 16 of the MCPM. For purposes of these billing rules, an “independent laboratory” is both independent of an attending or consulting physician’s office and of a hospital that meets at least the requirements to qualify as an emergency hospital under relevant provisions of the Social Security Act. A “referring laboratory” is a Medicare-approved laboratory that receives a specimen to be tested and refers the specimen to another laboratory for performance of the laboratory test. A “reference laboratory” is a Medicare-enrolled laboratory that receives a specimen from another, referring laboratory for testing and actually performs the test.
Billing rules regarding who can bill for referred lab services provided by an independent laboratory
Medicare has special billings rules for referred lab services performed by an independent laboratory. In such cases, a referring laboratory generally may bill for certain lab services (those listed on the clinical laboratory fee schedule) when performed by a reference independent laboratory only if the referring laboratory meets certain conditions:
  • the referring laboratory is located in, or is part of, a rural hospital;
  • the referring laboratory is wholly owned by the entity performing such test, the referring laboratory wholly owns the entity performing such test, or both the referring laboratory and the entity performing such test are wholly-owned by a third entity; or
  •  the referring laboratory does not refer more than 30% of the clinical laboratory tests for which it receives requests for testing during the year (not counting referrals made under the wholly-owned condition described above)
On the other hand, claims for referred laboratory services may be made only by suppliers having specialty code 69 (i.e., independent clinical laboratories). Claims for referred laboratory services made by other entities will be returned as unprocessable. Independent laboratories should use modifier 90 to identify all referred laboratory services. The name, address, and CLIA number of both the referring laboratory and the reference laboratory should be reported on the claim.
In any event, only one entity may bill for a lab service referred to an independent laboratory. It is the responsibility of the referring laboratory to ensure the reference laboratory does not bill Medicare for the referred service if the referring laboratory does so (or intends to do so).
Please note that the above-referenced restrictions on the billing of referred lab servicesapply only to lab services performed by independent laboratories and do not apply to services performed in a physician office laboratory or a qualified hospital laboratory.
Updates on billing jurisdiction
Irrespective of who may bill for referred lab services, in its recent update, CMS clarified that the location where the independent laboratory performs the test determines the appropriate billing jurisdiction for the lab services, as well as for the related specimen collection fees and travel allowance. This is the case even if the sample originates in a different jurisdiction from where the sample is being tested. In addition, jurisdiction is not affected by whether or not the independent laboratory uses a central billing office or whether or not the independent laboratory provides services to customers outside its MAC’s service area.
Hospitals are encouraged to review their current lab referral policies and their related claims submission and billing practices to assure they are in compliance with applicable Medicare rules, as clarified in these recent CMS releases.

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