Friday, June 3, 2022

Medicare Lab Tests and the Complications of Outpatient Bundling: The OPPS "A" Modifier Wears Many Hats

We're coming around to another July 1, which means CMS will release hundreds of pages of rulemaking for both Physician (Part B) and Hospital Outpatient (OPPS) policies.   From time to time, some new policy has a big impact on lab test claims processing.   I'll very briefly review these, and then show how the "A" status indicator is called on to play several different roles.

Before 2007

Before 2007, hospital outpatient lab tests (whether clin lab or pathology) were paid by the lab that performed them.

2007 14 Day Rule

Around 2007, CMS brought in the 14 day rule. All lab tests performed on specimens (blood or tissue) from hospital outpatient clinic days or procedures had to be billed BY THE HOSPITAL.   They could be billed, but only by the hospital.  This led to a derangement of care for example for breast cancer lumpectomy patients.  The hospital in Vermont didn't want to be responsible for billing a $3500 Oncotype Dx Breast test performed in California.  

We settled into an unpleasant period where the molecular test was delayed for 14 days and ordered on the 14th day post biopsy, so you'd hope to have results by day 20 or so with shipping and lab time.   

OIG sometimes enforced this rule with hefty settlements (here).  Find the date of service rule at 42 CFR 414.510 and its web page here.

2014 Bundling Rule

Around 2014, CMS passed a new rule, in a separate regulation. that most lab tests were bundled (42 CFR 419.2(b)(17)),  meaning they are ancillary part of another service (an office visit or a biopsy) which is not paid separately.  

It took several years to fully implement this rule, see the delays memorialized under the caption "enforcement discription" at CMS.   The bundling or packaging rule now applies to both clin lab and pathology tests, unless an exception intervenes.    The "packaging" regulation did not affect the 14 day rule exceptions which continued to operate the same way.

2018 Rule

As explained on the Date of Service homepage, CMS altered the Date of Service regulation 414.510 on January 1, 2018, with the net effect that "molecular pathology" tests were unpackaged and were payable immediately and to the lab that performed the molecular test (be it the hospital lab or the outside reference lab).  Not on the home page or regulation, but elsewhere in CMS policymaking, CMS ruled in early 2020 that COVID tests were separately payable, which is a variance from the general rule that microbiology tests are packaged.

The Status Indicator System (SI)

Every quarter, CMS updates its hospital patient policies for new codes and other changes via quarterly transmittals, and each quarter, CMS updates a master OPPS file called "Appendix B" which gives the claims processing status indicator (SI) of every CPT code.   See the OPPS quarterly files here.   Noridian provides a handy table of the numerous OPPS status indicator abbreviations (here).

Generally, lab tests are status indicator Q4, meaning they are bundled or packaged as long as there is an event to package them to (an outpatient clinic visit at the hospital, or, a procedure).    Tests that are payable separately (possibly depending on other rules, though) are Status A.

The Hard-Working Status A Indicator

There are at least four conditions under which Status A is deployed.   CMS provides a Zip file of all current Status A lab tests at the bottom of the Date of Service home page.  (See Zip file, Laboratory tests subject to

  • A (A1) - The test is a molecular pathology, which in practice, CMS defines as a test of human DNA or RNA.
  • A (A2) - The test is a Type A (MAAA-like) ADLT.
  • A (A3) - The test is related to COVID.
  • A (A4) - The test is a chemosensitivity test of living cancer cells.
  • A (A5) - Proteomic MAAA tests for cancer with Category I CPT codes
CMS  doesn't use the A1-A4 nomenclature, I've used use it to show the different ways "A" is arrived at.  CMS reserves the right to add one-off additions to the above lists, so there is literally one test called out by CPT code in the regulation as unbundled although it doesn't fit any of the regular rules (81490). 

Note that A1 is operative only if the test is performed after the patient's discharged and this "effectively unbundles" the date of the test performance away from the date of specimen collection (here). 

However, for what I am calling "A3," for COVID, the unbundling presumably applies even if the date of testing is the same as the date of collection.

Note that most, but not all, tests that are MAAA-like ADLTs (rule A2) are already unbundled because they usually DNA/RNA tests (A1) or cancer-related proteomic tests (A5).

Category A4, chemosensitivity tests, are a group with a lot of policy.  CMS classifies them as Status A, payable, on Appendix B.   But if you read the regulations at 414.510, the unbundling requires more than the letter "A" on the spreadsheet, it requires the specific drugs tested on the cancer cells must be ordered no earlier than Day 14 after biopsy (414.510).    

It remains to be seen how that rule (regarding day 14 drug order) will fit with newer tests like 0324U/0325U, which have the four drugs tested already named right in the test descriptor, so there isn't any mystery to solve when you "order" the specific drugs on Day 14 as the regulation demands.    You already ordered carboplatin and 3 named other drugs by ordering the 0324U test on day 1.  

CR12761 classifies 0324U/5U as A tests, presumably in respect to the chemosensitivity test clause (with its 14 day rule analog) found at 414.510.  (One more thing: there is a 30-year-old NCD, 190.7, that makes cryptically described types of chemosensitivity tests unpayable, here.)

I'm not suggesting CMS should divide up "A" into A1...A5 (they have divided Q into Q1...Q4) but for learning purposes, to understand the diversity of different ideas packed into the A modifier, it may help students to see the different actions of the "A" modifier listed as A1...A5.

Nerd Note Summary

CMS causes the packaging of lab tests via the global regulation at 419.2, but generally unbundles things from the bundling by revisiting and tweaking little complexifying edits at the separate date of service rule at 414.510.

For a chart from Neogenomics that compares commercial payer rules, here.


Photo Wesley Tingey, Unsplash