American College of Physicians: Internal Medicine — Doctors for Adults ®


Recent CMS lab test standards simplify billing rules

From the December ACP Observer, copyright 2003 by the American College of Physicians.

By Brett Baker and Carol McKenzie

Q: Has Medicare standardized the rules to make it easier for physicians to navigate its Part B laboratory payment policies?

A: Late last year, the Centers for Medicare and Medicaid Services (CMS) issued new rules establishing national coverage and administrative policies for common Part B diagnostic lab services. The revised regulations were a response to physician complaints that their lab and billing staff were wasting time trying to make sense of confusing coverage policies being handed down by local Medicare carriers.

Q: How have the policies for lab tests changed as a result of the Medicare standardization effort?

A: The new national rules help physicians in several ways. For one, they establish national coverage policies—called national coverage determinations (NCDs)—for the 23 tests that account for 60% of all clinical lab tests ordered. Those tests include blood counts, lipid and thyroid tests, and urine cultures. (See "Lab tests with specific policies."

Each NCD lists the ICD-9 codes that Medicare will cover for that particular test; the ICD-9 codes that do not support medical necessity; and the ICD-9 codes that Medicare will not cover. You can bill Medicare beneficiaries directly for tests never covered for specific ICD-9 codes.

(The new lab test policies are online. Click on the lab test that appears in the list.)

Second, the new rules standardize the administrative, or billing, policies that pertain to all lab tests covered under Medicare Part B. The policies pertain to tests performed in a hospital lab, independent lab, physician office lab or other type of lab. They apply to both physicians and nonphysician practitioners ordering laboratory services.

Here are some highlights of the new rules, which make it easier to bill for the tests you furnish or order for your patients.

Physician-supplied information for payment decisions

  • The ordering physician and lab must maintain documentation of medical condition(s) for which a laboratory test is reasonable and necessary.

  • The CMS encourages physicians to provide a diagnosis for each lab test ordered, while encouraging labs to submit that diagnosis information with the claim.

    Even though the CMS does not require it, physicians should provide information supporting the test ordered to the lab. This increases the likelihood that the test will be covered—and prevents time-consuming, multiple communications with the lab.

  • If the ordering physician submits an ICD-9 code on the requisition and the lab has reason to question it, any coding change must be authorized in writing by the physician and kept by the lab. That documentation must be submitted to the carrier if it decides to review the claim.

  • Medicare will accept up to eight diagnostic codes per test. However, if your billing system or your carrier's system can't list this many, you may list excess diagnoses in a narrative field.

  • If a lab receives a requisition with a narrative description rather than an ICD-9 as the diagnosis, the lab may translate that narrative to the appropriate ICD-9 code. That code does not have to exactly match the narrative description. However, the lab must maintain the requisition with the translated narrative description to submit to the carrier in case the carrier decides to review the claim.

  • All diagnosis codes included on the submitted claim must be reviewed by the carrier when making a coverage determination.

  • The date of service reported on the claim is the date the specimen is collected.

Frequency limitations

  • The CMS has established frequency limitations, or expected frequency, for each of the 23 lab tests covered by the new national policies for which the agency deemed a frequency to be appropriate.

    Carriers can develop local medical review policies for tests not covered by NCDs. However, carriers must publish frequency expectations in a local medical review policy if they decide it is appropriate to set limits on the frequency of a test. To establish a frequency expectation, carriers must consult groups that include medical specialty societies.

  • Physicians and labs are encouraged to submit supporting documentation to justify a lab test, particularly when that test exceeds the expected frequency for that beneficiary. If you don't provide supporting documentation and the test exceeds the frequency, your carrier can automatically deny the claim.

  • When rejecting a claim for exceeding a frequency expectation, carriers must use the following denial code: "Payment adjusted because the payer deems the information submitted does not support this many services." In addition, the CMS requires local carriers to reference a local medical review policy when denying claims. (For more information, see "Medicare directs carriers to explain denials based on local policy to beneficiaries."

  • Physicians and labs can ask for a denied claim to be reconsidered by providing additional supporting documentation after a claim is denied because it exceeds the recommended frequency.

Pre- and post-payment claim reviews

  • Carriers must contact the physician or lab that submitted a claim when conducting either a pre- or post-payment review of a claim's medical necessity.

  • When a carrier determines that a lab billing for the test has provided insufficient information to determine medical necessity, that carrier must request medical necessity documentation from the ordering physician. Carriers must limit their request to information pertinent to the claim in question, and they must also make it clear that they are reviewing a claim for which payment was already made to the lab.

  • Labs can request medical necessity documentation from the physician, but those requests must be limited to the information pertinent to the claim to avoid unnecessary distribution of beneficiary information.

  • The carrier can deny the claim (or request repayment) if neither the lab nor the physician provides sufficient medical necessity justification.

Appropriate use of procedure codes and modifiers

  • Carriers are to use discretionary authority when evaluating a test that includes the term "screen" or "screening" in its descriptor. Carriers should not deny a service based solely on the presence of those terms, because their use does not necessarily describe a test performed in the absence of signs or symptoms of illness.

    If a patient is tested to rule out or confirm a suspected diagnosis because of signs or symptoms, this is considered a diagnostic test, not a screening test.

  • Use modifier -59 to report multiple submissions—indicating different anatomical sites or wounds—for services performed on the same beneficiary on the same day.

  • Use modifier -91 to report the same service repeated for the same patient on the same day, such as tests performed at different times.

  • Use the GY- modifier to indicate that a service is statutorily excluded, and use the GZ- modifier to indicate that the service is not expected to be covered as reasonable or necessary. (You should submit claims using these modifiers separately.) Use the GA- modifier to denote that you have obtained a signed, advanced beneficiary notice. (For more information, see "Providing uncovered services? Use these modifiers" in the May 2002 ACP-ASIM Observer.)

Brett Baker is a third-party payment specialist and Carol McKenzie is an administrative coordinator in the College's Washington office.


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