It's hard enough to explain Medicare's awkward "14 day rule." Among other things, it bundles payment for genomic testing on inpatient cancers unless the test is ordered at least 14 days after inpatient discharge.
Explaining the in's and out's is a 30 minute class. Let's ask a different question: Where did it come from? My human blog is below, and an AI blog for comparison, at bottom.
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Negotiated Rulemaking Proposed
In 1997, the lab industry was concerned that different Part B MACs (aka "carriers") had very different local policies for lab tests and even different definitions, or no definitions, of basic terms. Section 4554 of the Balanced Budget Act of 1997 brought CMS into "negotiated rulemaking" with the lab industry. The goal was that a lab, like Quest, could submit the same lab claim in Florida and Alaska and it would be processed the same way.
Negotiated Rulemaking Conducted
See a CMS webpage here. A multi-year process resulted in the creation of 23 NCDs for common lab tests. Published on November 23, 2001, these are now almost 25 years old.
The LCDs are basic - covering urine culture, HIV testing for monitoring, prothrombin time, thyroid testing, etc. Here.
Along the way, CMS published some definitions that are not NCDs. For example, CMS defined the "date of service" as the date of specimen collection.
Date of Service and "Archive"
Of course, it doesn't make sense for the date of service to be the "date of specimen collection" forever. What if you go back to a paraffin block after 2 years? If the DOS was the date of specimen collection, it would be unbillable (you can't submit 2-year-old claims). So CMS said, if the specimen is stored more than 30 days, the DOS would be the day it's pulled from the archive.
This was simplified to a 30-day rule (it didn't matter if you literally put it in an archive or not, or what an "archive" was.)
DOS Enters Regulation
CMS has a lot of definitions and guidance in its manuals. But if they want to really depend on something, CMS may put the statement into a legally binding regulation. This happened for Lab DOS in fall 2006, effective CY 2007.
On Tuesday, August 22, 2006, at Fed Reg 71:49065, CMS proposed "to add a new regulation 414.414 to address concerns regarding the date of service of a clinical laboratory test that uses a stored specimen." (Reference to 2001 and 2002 notices that were less official.)
Critically, where the money meets the road, CMS stated that:
- The date of service of a test may affect payment because, if the date of service falls during an inpatient stay or on a day on which the beneficiary had an outpatient procedure, payment for the laboratory test usually is bundled with the hospital service.
CMS proposed a 14 day exception issuing a new date of service (the date of test performance) if the test was ordered by the physician 14 days after an inpatient discharge or a hospital outpatient day procedure discharge.
On Friday, December 1, 2006, 71:69705-706, CMS finalized the rule and updated the regulation position to 514.410. It never becomes clear exactly how 14 days was chosen. The discussion on December 1 is fairly detailed, becuase (as I recall) lab stakeholders meet with Congress, with CMS, etc, about concerns. Trivia point - the 14 day rule date of service was shifted from "date from archive" to "date of performance" between August and December.
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In 2007, the rule was extended to apply to pathology specimens as well.
In about 2014, most tests other than "molecular pathology tests" were bundled to an inpatient or outpatient stay and not paid separately. "Molecular pathology" was implemented to mean, human DNA or RNA.
In about 2017, CMS made an exception for molecular pathology tests, which could now be billed "by the lab that performed the test" rather than only the hospital were the specimen was collected.
See the calendar 2006 policy-making here.
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AI CORNER
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I gave Chat GPT 5 this blog, and the federal rule (2006), and asked it to write it up.
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Here’s a polished expert-level blog article draft that integrates your notes with the regulatory history documented in the August 22, 2006 proposed rule and December 1, 2006 final rule from the uploaded Federal Register.
Medicare’s Date of Service Rule and the Origins of the 14-Day Rule
It’s hard enough to explain Medicare’s awkward “14-day rule.” In practice, it means that most lab tests tied to an inpatient admission or outpatient hospital encounter are bundled into the hospital’s payment unless the ordering physician waits at least 14 days after discharge. For molecular tests in oncology, this policy has had decades of downstream consequences.
But instead of another tutorial on how the 14-day rule works, let’s ask: Where did it come from?
Negotiated Rulemaking: Setting the Stage
The story begins with Section 4554 of the Balanced Budget Act of 1997. At that time, clinical labs faced a patchwork of inconsistent local policies across Medicare carriers. A single test might be reimbursed in one jurisdiction but denied in another. To fix this, Congress required CMS to engage in “negotiated rulemaking” with industry stakeholders.
The process culminated in 23 National Coverage Determinations (NCDs) for common lab tests, published on November 23, 2001. These were intended to harmonize coverage rules nationally for routine services like urine cultures, prothrombin time, and thyroid testing.
Along the way, CMS also formalized definitions. Most importantly, the “date of service” (DOS) for a laboratory test was defined as the date of specimen collection.
The Archival Problem
That rule worked well—until it didn’t. Consider this scenario:
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A tissue block from 2004 is retrieved in 2006 for a new test.
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If the DOS were the original collection date, the claim would be unbillable—Medicare does not accept 2-year-old claims.
To solve this, CMS introduced the 30-day archive rule. If a specimen was stored for more than 30 days, the DOS shifted from the original collection date to the date the specimen was pulled from storage. This avoided impossible billing situations, even if the concept of “archiving” was never fully defined.
The Leap Into Regulation
By 2006, CMS wanted a more formal framework. On August 22, 2006, CMS proposed adding new regulation §414.410 to define lab DOS, focusing specifically on the problem of tests performed on stored specimens.
The agency explicitly acknowledged the payment consequences:
“The date of service of a test may affect payment because, if the date of service falls during an inpatient stay or on a day on which the beneficiary had an outpatient procedure, payment for the laboratory test usually is bundled with the hospital service.”
To address stakeholder concerns, CMS proposed a new exception. The DOS could shift to the date of test performance if:
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The test was ordered by the patient’s physician at least 14 days after hospital discharge.
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The test could not reasonably have been ordered during the hospitalization.
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The hospital procedure was performed for reasons other than specimen collection.
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The test was medically necessary.
Finalization and the Birth of the 14-Day Rule
On December 1, 2006, CMS finalized the rule, moving the operative section to §414.510. Several key points are worth noting:
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The final rule shifted the exception from an “archive” framing to a broader “date of performance” exception.
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The 14-day interval was retained despite industry objections that it was arbitrary. CMS rejected requests for shorter intervals, citing risks of unbundling hospital care.
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A carve-out was added for chemotherapy sensitivity tests, where fresh tissue was required, and results were rarely relevant to inpatient treatment decisions.
The rule became effective for CY 2007.
Aftermath and Evolution
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2007: The DOS/14-day framework was extended to pathology specimens.
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2014: CMS clarified that almost all lab tests remained bundled, except molecular pathology (human DNA/RNA) tests.
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2017: CMS issued a major revision: molecular pathology tests could now be billed by the performing laboratory, not the hospital where the specimen was collected.
Why It Still Matters
For molecular oncology, the 14-day rule continues to shape billing workflows, hospital-lab relationships, and even test ordering patterns. What began as a regulatory fix for billing archived specimens morphed into one of Medicare’s most enduring—and most confusing—laboratory payment rules.
In short, the 14-day rule was not a deliberate policy to slow innovation. It was a side effect of CMS trying to reconcile specimen storage rules, hospital bundling, and the fear of unbundling abuses. Nearly twenty years later, labs and hospitals are still living with the consequences.
