CMS Change Request (CR) 8776 (PDF, 186KB) explains recurring Outpatient PPS update and CR 8764 (PDF, 110 KB) explains recurring Integrated Outpatient Code Editor (I/OCE) specifications for date of service beginning July 1, 2014. In these CRs, CMS announces the new modifier L1 for use by PPS hospitals when submitting claims for separate payment of outpatient lab tests that are paid under the Clinical Laboratory Fee Schedule (CLFS).

As of January 1, 2014 date of service, hospitals have been reporting separately payable labs on 14X type of bills (TOB). However, the National Uniform Billing Committee (NUBC) addressed CMS with some concerns. Historically, the definition for 14X TOB is for non-patient (specimen only) lab services where the patient did not receive outpatient services on the same date of service.

CMS instructs in CR 8776 that beginning with July 1, 2014 date of service, separately payable labs should be billed on 13X TOB and with modifier L1. This guidance directs all hospitals to revert back to billing non-patient lab tests on TOB 14X which is consistent with the NUBC’s definition of this bill type. Modifier L1 will be used with lab services only in either of these two circumstances:

1. When the hospital collects the specimen and only provides lab services on that date of service; or,
2. When the hospital provides outpatient lab services and they are clinically unrelated to other hospital outpatient services furnished on the same day.

In the second circumstance, unrelated means the laboratory test is ordered by a different physician other than the physician who ordered the other hospital outpatient services, for a different diagnosis. If this definition is met, the lab test would be eligible to be reported with modifier L1 to trigger separate payment. If the definition is not met, modifier L1 would not be reported and the lab payment would be packaged into another separately payable service. PPS hospitals do not have to resubmit claims for lab tests that had previously been billed using 14X TOB prior to July 1, 2014 date of service.

 

Also in CR 8776, CMS clarifies its current payment policy regarding the limited set of Part B inpatient services that a hospital may bill for when a beneficiary is either not eligible for or not entitled to Part A coverage or when a beneficiary has exhausted their Part A benefits. Included in that short list of services is lab service paid under the CLFS.

CMS clarifies that in these scenarios, lab testing is excluded from OPPS packaging rules if the primary service with which the lab would have been bundled into is not a payable Part B inpatient service. CMS has adjusted its claims processing logic to make separate payment for laboratory services paid under the CLFS that would otherwise be packaged under OPPS beginning in 2014.

In CR 8776 states that "Medicare contractors shall adjust 12X claims for beneficiaries who are either not entitled to Part A at all, or are entitled to Part A but have exhausted their Part A benefits where the laboratory services were packaged for 2014 date of service that are brought to their attention."

For those hospitals that billed under 12X TOB including these lab services; please submit a 127 TOB adjustment claim with a D1 condition code (Change of Charges) and remove those services. You will then need to rebill for those lab services on a 13X TOB with L1 modifier to receive separate reimbursement.

Please note that CR 8776 does not address Sole Community Hospitals (SCH) billing for unrelated lab on 14X TOB that have not received additional reimbursement since January 1, 2014. SCHs should refer to additional guidance in MLN Matters Article SE1412 (PDF, 71 KB).

For claims submitted by a SCH, MACs have no way to discern which labs should have been paid the add-on payment versus which labs should have been paid as true non-patient labs and cannot reprocess these claims. Therefore, SCH providers may cancel claims that were submitted without the modifier L1 prior to July 1, 2014 and then submit a new 13X TOB with the appended modifier after July 1, 2014 in order to receive the corrected reimbursement.