Numerous Issues Identified With Bid Demo’s 303 Tests

National expert in coding and billing predicts some confusion during the pilot demonstration

CEO SUMMARY: One experienced expert in billing and coding was surprised at the list of 303 tests to be included in the Medicare Laboratory Competitive Bidding Demonstration Project. He notes that the list of 303 tests includes a number of codes and descriptions that are not consistent with CPT codes used by laboratories to prepare and submit claims to Medicare. This may cause some confusion for labs that plan to bid for the San Diego demonstration pilot site.

William K. Dettwyler, M.T., is the Procedure Code Analyst for Codus Medicus of Salem, Oregon. Dettwyler has extensive experience in laboratory coding and billing. When Oregon reformed its Medicaid program in the mid-1980s, Dettwyler had a lead role in designing the laboratory codes and billing guidelines for the Oregon Medicaid program. He also worked for many years as a laboratory consultant to the Medicare Carrier Aetna, when it was the Part B Payer for Oregon.

AS MANY PATHOLO GISTS AND LAB directors are learning, the Laboratory Sevices Competitive Bidding Demonstration Project that the federal Centers for Medicare & Medicaid Services (CMS) is foisting on the lab profession is confusing, unnecessarily complex, and not likely to achieve its objectives.

One aspect of the bidding requirements that I find particularly troubling is the list of 303 lab test procedures that are the subject of the bidding demonstration. This list of procedures and tests appears to have been put together in a disordered manner. Individuals with experience in coding and billing for laboratory services will recognize that this list is not how the Medicare program currently requires laboratories to prepare and present claims for laboratory services under the Part B schedule.

Derived From Payment Data

 Rather, this list of 303 tests appears to be developed by CMS from its payment data. Because of that fact, this bid demo test list presents some issues that will complicate CMS’s efforts to accurately process, pay, and record claims activity during the three-year period of the pilot demonstration project. For laboratories that participate in the demonstration project, it will require extra care in preparing bids and filing accurate claims.

One obvious point to make is that laboratories are required to submit claims to CMS with a CPT/HCPCS code that is approved by the American Medical Association (AMA) and/or CMS. Not every test identification number provided by CMS on the list meets this criteria. There are a number of tests identified by ATP (Automated Test Panel) numbers in the list of 303 tests. ATP numbers are not used by laboratories to submit claims to Medicare. Rather, CMS uses these ATP numbers in its payment system.

In the bidding documents, CMS acknowledges this. It explains how laboratories must unbundle the comprehensive panels to prepare bids for tests that are identified by the ATP numbers. That is why I believe the government used its payment system to generate this list of tests. It is likely that the payment system was also the source of the utilization numbers for each test that CMS provided in the bidder’s package.

If this is true, it is significant for another reason. It is evidence that the government is not capturing claims by the CPT codes used when a laboratory submits a bill for payment. Instead, the government is using its payment system to track utilization—and to produce this list of 303 tests. Essentially, labs are talking to Medicare in CPT code language and using their CPT coding to track their utilization. Meanwhile, it appears that Medicare tracks utilization by using its payment system numbers, including the ATP codes.

Answer To Another Question

If CMS does lack the ability to track, in detail and with acceptable accuracy, the number of claims submitted by CPT codes, along with the number of claims paid and denied, this fact might also answer another question that laboratories have asked about the bidding demonstration requirements.

I’ve heard that there was intense discussion at the bidders’ conference in San Diego earlier this month about utilization numbers. Utilization numbers are an important factor in the bidding requirements. Each laboratory bidder must provide both a price and a specific volume number for each test that it can provide during the demonstration period.

CMS will aggregate the test volumes of individual bidders as it works from lowest
bidder to higher bidders. As soon as it has the needed test volume to match its estimated utilization number for the San Diego MSA, it will close the bidding.

For this reason, laboratories are keenly interested in how CMS and its contractor, RTI International (RTI) determined three components: 1) actual utilization numbers for 2006 in the San Diego MSA;
2) the actual number of denied lab test claims in the San Diego MSA for 2006; and, 3) the details of the “trending factor” calculations CMS/RTI used to determine utilization growth.

What Is Denial Rate?

Apparently, many labs asked CMS to make this data public. Further, labs were keenly interested to get information about the rate of claims denials for Part B laboratory services. They pointed out that the denial rate may be as much as 25% and the volume of these unreimbursed tests performed for Medicare beneficiaries needs to be part of the cumulative utilization figure included in the bidding demonstration for the San Diego MSA.

It was reported that CMS officials declined to make that information available. There could be a good reason why CMS refuses to provide such data: it doesn’t have it! If CMS primarily relies on its payment system for utilization data and other information, then information from denied claims handled by processors at the Medicare carriers may not be captured and available to CMS.

Returning to the list of 303 tests, I noticed a number of tests were listed that most laboratories seldom perform anymore. One example is “8100-Urinalysis, non auto w/scope.” I was surprised to see 6,327 tests reimbursed for this in 2006. Few providers are doing manual UAs. My suspicion is that these may represent paid claims to providers, including physicians’ offices, using the wrong code.

However, the fact that CMS is includ- ing a number of tests on the list of 303 that are no longer offered by most clinical laboratories, large and small, indicates that
some of this utilization volume probably originates in physicians’ offices or physicians’ office laboratories (POLs). Laboratory bidders should be entitled to learn how much of the lab test volume CMS is reporting is actually sourced from testing done in doctors’ offices and their POLs.

Another test on the list deser ves comment. CMS has included “36415- Routine Venipuncture.” Venipuncture is a surgical procedure in the CPT book and is not a laboratory analytical procedure. A great number of healthcare providers perform venipuncture. It is inappropriate for this procedure to be included in a list of laboratory tests to be included in the bidding demonstration project. CMS and RTI should explain their motivation for including this non-laboratory procedure on the list of 303 clinical laboratory tests.

These are some observations about why there is likely to be confusion and problems with implementing the list of 303 lab tests as described by CMS. Based on my years of experience with coding and billing, it is disappointing to see CMS and RTI deliver such a poorly-designed demonstration project. Further, since the mid-1990s, the constant drumbeat by CMS has been for labs (and all providers) to file accurate claims.

Lacking Same CPT Codes

In summary, it is a major contradiction to longstanding CMS policies for its competitive bid project to include a list of 303 tests which do not carry the identical CPT codes and descriptors as labs use on the claims they file. In fact, labs are constantly told by the government, the OIG, and independent experts that they should not file claims and use codes that do not exist in the CPT or HCPCS billing guides. It does not seem auspicious that labs are now being asked to submit bids and sign contracts for tests identified with CMS’s internal payment labels and not by the appropriate CPT/HCPCS codes.

This confusion should not to be tolerated in a bidding demonstration project that should be transparent and easy to understand by the laboratory personnel expected to bid on these tests. When the bid documents indicate a failure to understand the issues involved in processing lab specimens, how can CMS expect labs to respond correctly? The results will be confusing, causing the project to be challenged and not of any meaningful value.

Built on an Archaic System

 Finally, it is my opinion that, if instituted nationally, competitive bidding for lab services would reduce the number of operating laboratories over a few years.
This would happen because smaller, local laboratories would be financially
squeezed, if not outright excluded by the bidding process in each region.

What would emerge is a “laboratory megasystem”, dominated by as few as one, but probably not more than three or four huge laboratories. Soon thereafter, there would be little competition in the laboratory industry and the government would be at the mercy of its own solution. It could not afford to discipline a lab that is the only one serving a region or shut it down if there were problems.

Such a laboratory megasystem would be able to influence bidding, as there would not be other labs of equal or comparable size to compete with it. Florida’s Medicaid program recently proposed an exclusive contracting system similar to the one CMS is trying in San Diego and it was such a disaster that it was called off. (See TDR, January 5, 2005.)

The stakes are high for Medicare patients, their physicians, and laboratories. That is why it is imperative for CMS to get it right before it begins restricting small labs simply to achieve lower prices through the economies of scale of the largest lab companies.

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