CMS Takes Aim at Potentially Inappropriate Medicare Lab Test Billing

April 2019 ~

CMS has announced plans to analyze whether clinical labs improperly unbundled Medicare billing codes for panel diagnostic tests in order to receive higher payments.

In a letter addressed to Senate Finance Chair Chuck Grassley, CMS Administrator Seema Verma stated the agency will be examining lab test bills submitted to Medicare to ensure that the government is not overpaying laboratories as a result of inappropriate coding. The letter comes in response to a request for oversight sent from Grassley, this past January, which followed a Government Accountability Office (GAO) report warning Medicare could overspend billions of dollars on lab tests under a new payment system.

The GAO report examined CMS’ implementation of the 2014 congressional mandate that the agency makes changes to its payment rates for laboratory tests. According to the GAO’s findings, under the new system, the agency had been paying separately for each test within a panel, rather than bundling them.

Administrator Verma noted, on the GAO’s findings, that it had previously based payment rates for laboratory tests on incomplete laboratory data – representing just over 96% of Medicare’s spending on CLFS tests in calendar year 2016.

Verma notes in her response, “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.”

She continues, “CMS is working to analyze claims data to determine whether any panel tests with their own CPT codes were instead billed by laboratories using separate CPT codes. 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.”

Source(s): Department of Health & Human Service; Senate Committee on Finance; Modern Healthcare; HMA Weekly Roundup March 27, 2019; KHN Morning Briefing;