Saturday, December 26, 2020

Blog #5 of 5: 81407 as Weirdest Tier 2 Code (&) Strange Impact on 70/30 Billing Rule (&) Wacko CLIA-CMS Edits

Triggered by the December 22 release of the OIG report on lab spending for CY2019, I've written a set of 5 blogs.

  • #1 - OIG report; Focus on 81408 as biggest genomic code
  • #2 - Review of all Tier 2 payments (81400-81408)
  • #3 - Review of MolDx Tier 2 payments
  • #4 - Review of NGS MAC Tier 2 payments
  • #5 - 81407 as the weirdest Tier 2 code
click to enlarge

Blog #1 here, Blog #2 here, Blog #3 here, Blog #4 here, Blog #5 here.


Earlier this month, OIG announced that hitherto nearly unknown Tier 2 code 81408 had become the largest genomic CPT code in the Medicare system, with nearly $290M of payments in CY2019.  I've discussed aspects of this in several preceding blogs.   I've also looked at the Tier 2 system (codes 81400-81408) as a whole which are extraordinarily skewed to billing via the Novitas system (e.g. of $400M in Tier 2 codes in 2019, only a couple percent of all Tier 2 codes were paid via the MolDx and NGS MAC systems together, which are the vast majority of US population and states).   '

  • Tier 2 payments in 2019, at $400M, were almost as much as paid for all genomic codes just a few years ago (2017).  

In looking at Tier 2 codes, I noticed that the several labs that account for most Tier 2 code billing, tend to bill zero or very little of code Tier 2 Level 8, 81407 (here).   

You can see this in a basic national chart of Medicare Tier 2 code payments in CY2018.   Payments for 81406 were $22M, for 81408 $123M, but 81407 plummets to only $6M:

When I review of the genes earmarked by AMA CPT for Tier 2 codes 81406, 81407, and 81408, it's unclear when 81407 would work this way.  

(A partial explanation is that 81406 and 81408 have CMS MUE edits of 2, allow 2 payments per day, while 81407 has an MUE edit of 1.  However, that doesn't account for the plummeting utilization of 81407 compared to 81406, 81408, shown above.)

Exercise for the Reader

I'll leave it as an exercise for the reader to log on to CMS public records for recipients of payments in 2016, 2017, 2018, with a search on Code 81407.   

In contrast to the skyrocketing growth of 81408 in these three years (and 2019), 81407 was billed by a few labs that came and went from year to year without any pattern.   

Labs billing 81407 often had unusual names; I'm making this one up, but names like "ABC Laboratory, Boca Raton, FL" would not stand out.   

Sometimes, the only internet footprint of these labs is (A) registering an NPI number, (B) showing up in CMS records for Tier 2 codes with a few million dollars of payments, and then (C) a tiny bankruptcy notice in some court filing that Google detects.  Well, I'm not saying there's anything wrong with that.

Impact of Huge Lab Price Ranges on 70/30 Rule

In 1994, the OIG introduced the term "shell laboratory," remarking, " [it] conducts very little testing on the premises, even though it is Medicare certified....Despite the location of the actual testing, the local ``shell''  laboratory bills Medicare directly for these tests."  Correspondingly, Medicare statute at 1833(h)(5(A) allows referred test billing only if less than 30% of a lab's tests are referred out.  

However, in 1989/1990, when the 70/30 percentage rule was introduced by Congress (see OBRA 1989 §6111 and OBRA 1990 §4154), most lab tests had similar prices, e.g. $5, $10, $15.   

Today, lab tests run from $3-$4 (82962, glucose, 81002, urinalysis, 85611 prothrombin) up to over $5000.  

Let's stop at Medicare largest genetic test in 2019, 81408, at $2000.   It seems like a lab can refer out about 1,000 cases of 81408 for every 2,000 tests of 81002 it does in house (the 70/30 test percentage rule; see here).  
If there were #2,000 in-house $3 tests, that would garner $6,000, while the #1,000 81408 tests referred out would be payable at $2M.   A lab could seemingly could bill $2,006,000 while meeting the 70/30 rule at SSA 1834(h)(5).   This could lead to a sort of industry that outsources 81408 tests selectively.   (By the way, it would require only 500 patients, to reach $2,006,000, with each of the 500 patients getting 4 of the $3 test and 2 units, the payable limit, of the 81408 $2000 test).  

CMS paid for 146,000 81408 tests in 2019; it's not known how many were paid as reference tests (send out tests) from places like "ABC Laboratory" that vanish within the year.  

Referred lab tests (if scrupulously coded, which might not be the case) should have a -90 modifier, e.g. 81408-90.  

CMS doesn't publish data what proportion any particular lab code arrives with -90 modifiers, although those facts might be obtainable via a FOIA request.   

CLIA Edits for Tier 2 Codes: The Final Shock

I'm guessing that CMS processing lab codes on claims to require a CLIA number and category that is the same as those listed in the CMS CLIA/Code/Claim requirements files.  If so, the requirements are just batty.   

Most genetic codes require "220,310" which is "chemistry" or "immunology" status.  A few require 900 "cytogenetics."  

OMG.  The requirements for the Tier 2 codes are published by CMS as in the table below.  All can use 610 (histopathol) while several can also use 220, 310, 400, which are Dx Immunol, Chem, and Heme.  I'm not expert in this and it looks as if you would have to have CLIA certification 610 histopathology to bill whole gene sequencing code 81408.   I don't know that for sure and will check around, but it looks crazy.  See the chart below of what CLIA subtypes are assigned to what CPT codes.

This makes another point.  At least in principal, many CLIA classifications are predicated on CPT codes.  When CPT codes skew to grab-bag codes (like 81408 or 81479), it's not possible to tailor the CLIA classifications to the needs and qualificiations of a particular identified test.   We think of CPT codes as designed to handle provider-payer communications, but they also have a regulatory function in applying CLIA rules.