By Dennis Padget
10/09/07

Coverage, Payment, and Coding Challenges

Pathologists, independent laboratories, and hospitals strive to provide or arrange quality, state-of-the-art, medically efficacious diagnostic laboratory services for patients. However, this objective is encouraged or frustrated to greater or lesser degree by the coverage policies and payment rates maintained by individual third-party payers and insurers.

This chapter analyzes the coverage and payment rate challenges confronted by physician and facility providers of anatomic and clinical pathology services today, and it speculates about the impact of these trends on future services and organizational modalities. Because the American Medical Association’s Current Procedural Terminology (CPT) medical procedure coding system and the World Health Organization’s International Classification of Diseases (ICD) diagnosis coding taxonomy as presently adapted for use in this country are so intimately related to and influential regarding coverage and payment decisions patient-by-patient, they receive careful consideration in this chapter as well.

Medical insurers understandably limit their financial exposure for beneficiary healthcare needs and desires. The coverage contracts they write with employers, unions, individuals, and others stipulate at least the broad categories and types of services that are and are not eligible for payment. Items and procedures commonly excluded from coverage include cosmetic surgery, experimental therapy, and routine dental and eye examinations; for the most part, controversy seldom arises in relation to non-covered services of this type, and beneficiaries understand that if they want the care, they must arrange payment from a source other than their primary healthcare insurer.

Of course, managed care companies and government payers contract directly with healthcare providers for medical services to plan beneficiaries. The “participation agreement” providers are required to execute with each payer includes a commitment to furnish only “covered” medical services, with limited exceptions for when the beneficiary may accept responsibility for payment for a non-covered item or service. Covered and non-covered services are typically spelled out in greater or lesser detail in a hard copy and/or Internet-based manual maintained by each payer; for example, you can view Aetna’s Clinical Policy Bulletins at www.aetna.com/cpb/cpb-menu.html, and a portal to Medicare’s coverage policies is at www.cms.hhs.gov/MCD/overview.asp.

Controversy naturally arises when payer coverage policies don’t square with the practices and standards of the medical profession, in terms of accepted clinical approach to diagnosis or treatment, or from the standpoint of generally approved charge principles. Patients often can’t be held financially responsible for the denied charges in these instances, so the physician or other healthcare provider gets stuck with the cost of the non-covered procedures. Coverage policies that give pathologists and histology/cytology laboratories the most grief in these regards fall under the guise of correct CPT coding rules, medically unlikely units of service, national and local coverage determinations, and general compliance guidelines.

National Correct Coding Initiative

The Health Care Financing Administration, now known as the Centers for Medicare & Medicaid Services (CMS), which is responsible for administering the federal Medicare program, in 1996 instituted its National Correct Coding Initiative (NCCI). The objective of the NCCI program according to the federal government’s National Correct Coding Initiative Policy Manual for Medicare Services is “to promote national correct coding methodologies and to control improper coding that leads to inappropriate payment in [Medicare] Part B claims.” (Basically, Medicare officials decided that the AMA’s way of using the procedure codes in its own codebook—Current Procedural Terminology (CPT)—was too liberal for the program’s frugal tastes and sometimes pinched view of reality, so they came up with the idea of creating a guideline that “correctly” interprets the codes in the AMA’s codebook.) The NCCI program has by this time been adopted (or adapted, as the case may be) by some private medical insurers and managed care companies.

Besides the Policy Manual, the NCCI presents a table of procedure code pairs that cannot be billed together with the same date of service for a patient unless they are “separate” procedures. A separate procedure might be a different specimen, a second anatomic site, or another type of distinction that’s acceptable to Medicare. Although program officials rationalize the NCCI as an “integrity” monitoring device, it’s actually been used over the years as a way to limit Medicare coverage for specific medical procedures in particular circumstances. (A procedure or service that’s not covered according to an NCCI rule can’t be billed to the Medicare beneficiary or a secondary insurer, even if the pathologist or laboratory happens to have an Advance Beneficiary Notice (ABN) on file from the patient.) Prominent examples of this, taken from the world of pathology and laboratory services, are set forth below; for a complete list, see the latest NCCI manual and table downloadable from CMS’s Web site or the NCCI material reproduced in Padget’s Pathology Service Coding Handbook.

• Reflex immunofixation/immunoelectrophoresis. In general, pathologist interpretation of a protein electrophoresis, immunofixation, or immunoelectrophoresis test (among a few others) is a covered physician service. The pathologist’s interpretation may be requested by the patient’s attending physician by standing order of a hospital’s medical staff executive committee or other authorized body, provided the patient is an inpatient or registered outpatient of the hospital at the time the blood is drawn.

Immunofixation tests frequently are performed in response to the outcome of a protein electrophoresis test that immediately precedes it. Both tests are ordinarily interpreted by the pathologist, and generally accepted industry standards support billing a separate professional fee for each interpretation (e.g., 8416526 and 8633426). However, the NCCI cautions laboratories and pathologists not to “routinely perform … immunofixation … or … immunoelectrophoresis to identify the type of monoclonal protein” in a positive protein electrophoresis test. Medicare is concerned that the monoclonal gammopathy may already be known to the treating physician via a test run at another laboratory, for example; in that instance the reflex immunoelectrophoresis or immunofixation test would not be medically necessary.

In light of this Medicare coverage limitation via the NCCI, pathologists and laboratories are encouraged to document the attending physician’s request for reflex immunoelectrophoresis and immunofixation tests and interpretations. One convenient way to do this is via the test order mechanism itself: provide a “protein electrophoresis, with reflex immunofixation if indicated” order option versus a “without reflex” option.

• Multiple non-gynecological cytology smears. Contrary to longstanding AMA policy, NCCI takes the position that multiple smear preparations on one non-gynecological cytology specimen is “duplicate testing,” so only the more complex preparation may be billed. For example, assume that a pleural fluid sample is received in cytology and that it’s prepared for screening and pathologic examination as four Papanicolaou stained direct smear slides and two giemsa stained cytospin smear slides. The AMA considers direct and cytospin smears to be separate and distinct; therefore, codes 88104 and 88108 may be reported together for the one specimen, all other things equal. Medicare on the other hand holds that the lesser procedure—the direct smears in this instance—duplicates the more complex one, so it permits billing only the 88108 code. Similarly, if enriched, concentrated smears are prepared for a non-gynecological cytology specimen along with direct smears, Medicare says only the 88112 code may be reported, but AMA principles recognize both 88112 and 88104 respectively. This arbitrary NCCI policy doesn’t extend to cell block slides, special stains, or special studies (e.g., immunocytochemistry) performed as adjunct or ancillary services with a non-gynecological cytology specimen.

Medicare’s non-coverage determination for multiple smear preparations applies to fine needle aspirate specimens the same as other types of non-gynecological cytology samples. Hence, codes 88108 and 88112 can’t be reported with 88173 showing the same date of service, unless each is for a different specimen. Coincidently, the College of American Pathologists shares Medicare’s viewpoint in this instance, but the AMA has yet to formally weigh in on the issue.

• Flow cytometry immunophenotyping quirks. Medicare considers the cytospin smear examined preceding a flow cytometry immunophenotyping panel to be built into the payment for the special study (select from codes 88184-88189), so a non-gynecological cytology code (e.g., 88108 or 88161) can’t be separately billed for the morphologic evaluation. CMS and the AMA agree that lymphocyte counts by flow cytometry for immunodeficiency-related disorders (see B cell and T cell codes 86355 and 86359 for example) don’t ordinarily require interpretation by a pathologist; report the professional fee with limited clinical consultation code 80500 for the exception cases. Medicare recognizes flow cytometry immunophenotyping charges on more than one specimen per case only if “the morphology or other clinical factors suggest differing results on the different specimens.”

• Limited use of tumor morphometric analysis procedure. The NCCI policy manual opines that tumor morphometric analysis code 88358 is reportable only for “DNA ploidy and S-phase analysis,” but that excludes such analysis by flow cytometry (CPT code 88182 specifically covers that modality). Tumor morphometry in conjunction with immunohistochemistry and in situ hybridization testing is built into the associated CPT codes (see 88360-88361 and 88367-88368), so it’s unclear what legitimate purpose code 88358 may serve these days.

• Immunohistochemistry and flow cytometry are “duplicate” tests. Flow cytometry immunophenotyping (88184-88189) and qualitative immunohistochemistry (88342) frequently are ordered in tandem when evaluating medical conditions such as lymphoma in bone marrow and related surgical specimens. While the AMA and the College of American Pathologists fully recognize the appropriateness of reporting both sets of codes when medically necessary services are rendered, Medicare takes the position that the two methods represent duplicate testing under ordinary circumstances when applied to “similar specimens” with a case, and only the flow cytometry charges are covered in that event. Both methods are covered only when (1) they’re performed to evaluate different medical conditions; (2) the first method is non-diagnostic or inconclusive; or (3) the first method doesn’t fully explain the light microscopy findings. The term “similar specimens” for these purposes refers mainly to blood and bone marrow, bone marrow aspirate smear and biopsy, and separate lymph nodes.

The onus for full, justified payment when both flow cytometry and qualitative IHC are indicated for a case rests squarely on the shoulders of the pathologist assigned to the case. He or she must carefully and clearly spell out in the medical report why the “second” method—that would be the IHC, according to NCCI prescription—was medically necessary to properly evaluate the specimen(s). The rationale should be stated in terms that are consistent with the three conditions Medicare recognizes for coverage of both methods for one case.

• Touch preparation and frozen section on same specimen site are “duplicate” tests. Medicare via the NCCI holds that medically unnecessary duplicate testing is being performed when an intra-operative consultation on a specimen is conducted using both frozen section and cytologic touch preparation. An exception is made for the situation where two distinct sites of the specimen are the subject of the dual techniques, such as frozen section on the main lesion and touch preparation on a surgical margin. However, if a brain tumor biopsy is evaluated during surgery by both microscopic techniques, only the frozen section is billable to the program, beneficiary, and secondary insurer.

Surprisingly, the College of American Pathologists’ position on same-site frozen section and touch preparation differs from that of Medicare only when the two techniques can be said to be non-duplicative from a temporal perspective; for example, a touch preparation is performed when the surgeon insists that the negative frozen section doesn’t comport with his expectations. Conventional wisdom, on the other hand, points out that the formal practice standards prescribed for intra-operative evaluation of some neuropathology specimens (e.g., brain tumor) recognize the diagnostic value of the two techniques used in tandem. Furthermore, medical tradition supports the proposition that the general pathologist who’s immediately engaged in evaluating a specimen during surgery is in the best position to assess the medical necessity of the techniques he or she will bring to bear on behalf of the patient. In summary, conventional wisdom proposes that codes 88331 and 88334 are billable for the same specimen, same site (e.g., single brain tumor biopsy) when the responsible pathologist believes both a frozen section and a touch preparation exam are medically justified, provided only that the patient is not covered by Medicare or an insurer that mandates strict adherence to the NCCI rules.

• Touch preparation and H&E preparation on same specimen are “duplicate” tests. A touch preparation examined outside the context of an intra-operative consultation is ordinarily reported with CPT code 88161. (But see 85097 if it’s from a bone marrow biopsy.) However, NCCI lists 88161 as a component of the standard surgical pathology microscopic examination codes 88304-88309; Medicare is saying that, from its standpoint, a touch preparation duplicates the H&E slides in conjunction with a tissue specimen, so the former isn’t separately chargeable. Combination touch and H&E preparations often arise with enlarged lymph nodes resected due to clinical suspicion of lymphoma, and longstanding conventional wisdom suggests it’s appropriate to capture the extra effort by reporting the lymph node for lymphoma workup as an 88307-level specimen instead of separately reporting an 88161 code with an 88305 lymph node biopsy fee.

• Only new and de novo add-on procedures are separately chargeable with slide consult cases. CPT provides three codes for reporting second and expert opinion consultations on slides initially examined and at least preliminarily diagnosed elsewhere: 88321, 88323, and 88325. The NCCI policy manual states that special stains, immunohistochemistry slides, electron micrograph plates, and other material that comes with a case are part of the base consultation code, so add-on charges aren’t ordinarily appropriate. (The extra slides beyond the routine H&E, Papanicolaou, etc. preparations don’t automatically make the case “comprehensive” either, so be wary of pathology consultants who regularly report code 88325 for their work.) However, special stains and the like that must be repeated or performed for the first time for a case at the consultant’s office are separately chargeable, the same as if they were prepared and examined in conjunction with an in-house case. CMS’s policy seems to be consistent with that of the AMA for pathology consultation cases in general.

Medically Unlikely Edits

In the months leading up to 2005, CMS officials became increasingly concerned that Medicare contractors—Part B carriers (physicians, independent labs, etc.) and Part A fiscal intermediaries (mainly hospitals and skilled nursing facilities)—were overpaying providers due to fraudulent or erroneous excess units of service, like a patient with multiple appendectomies. CMS felt that units of service far greater than would normally be expected for individual patients on a single day were slipping through the claim processing systems due to numerical edits for reasonableness not being in place.

To the consternation of organized medicine (American Medical Association, American Hospital Association, etc.), CMS issued program policy Change Request 2987 on February 18, 2005 “To lower the Medicare Fee-For-Service Paid Claims Error Rate” by introducing a “medically unbelievable edits” (MUE) system. The National Correct Coding Initiative (see immediately preceding section) program administrator would create a table of covered CPT/HCPCS codes and the maximum number of billing units per code that might “believably” appear on a claim for a given date of service for a patient. CMS’s plan was to use the MUE table to “auto-deny all units of service billed in excess of the [medically believable] … number.” The MUE system was to be implemented by contractors in July 2005.

Organized medicine’s predictably negative reaction to CMS’s MUE plan was justified as regards some of the edit limits initially proposed, but there was a visceral response as well, and, with 20-20 hindsight, that may have added to the complications we face today. Physicians in particular seemed to take personal offense to the word unbelievable, so the recoil at times took on an emotional edge not usually seen during deliberations with CMS. And as you’ll see in a moment, the price of getting CMS to change to a less grating word may have been steep.

Looking strictly at pathology, some of the MUE numbers initially put forward by CMS were themselves unbelievable in their unreasonableness. For example, three or more units of tissue biopsy H&E microscopy code 88305 for a patient on a given day were considered “medically unbelievable,” as were two or more units of intra-operative frozen section code 88331 and five or more units of immunoperoxidase stain code 88342; in cytology, more than one unit per day of any of the basic non-gynecological cytology specimen codes 88104, 88108, 88112, or 88173 was considered “medically unbelievable.” The College of American Pathologists (CAP) estimated at the time that these MUE levels would result in one-third of all frozen section charges and one-fourth of all immunoperoxidase stain charges being summarily denied by Medicare—hardly evidence that the rejected units might be nothing more than typographical error!

The various medical specialty associations and other provider representatives worked hard during 2005 and into 2006 to convince CMS that the initially proposed MUE limits weren’t realistic and the system itself likely wasn’t even necessary. The lobbying effort was a success, and CMS finally agreed in March 2006 to withdraw its original proposal and to resubmit the idea for an MUE system at a later date using the normal rulemaking process prescribed by the federal Administrative Procedure Act. The latter concession was very important, because it meant all physicians, hospitals, laboratories, and other providers who would be affected by the edits would have a chance to evaluate and comment on the specific proposals.

The respite was short-lived however. In May 2006 the U.S. Department of Health and Human Services (DHHS) Office of Inspector General issued an audit report entitled Excessive Payments for Outpatient Services Processed by Mutual of Omaha. The OIG analyzed 54 payments in excess of $50,000 each made to hospitals in 2003 by Mutual of Omaha, a Medicare Part A fiscal intermediary, for outpatient claims. The audit revealed that 45 of the claims (83 percent) were incorrectly paid, with the overpayment amounting to very nearly $8.3 million. All the overpayments were attributable to “incorrect and excessive units of service” caused by hospital “clerical errors or … billing systems that could not detect and prevent incorrect billing of units of service.” In one instance Medicare was billed for 10,001 CT scans for a patient, and in another instance the beneficiary account was debited for 141 shoulder arthroscopy procedures on a single day!

Interestingly, the OIG reports that two-thirds of the overpayments—nearly $5.5 million—were caught by the hospitals themselves and voluntarily refunded to the intermediary prior to the audit.

Notwithstanding, CMS took the audit report to be concrete evidence of the need for a rigorous MUE-type claim check system available to all Medicare contractors, both Part A and Part B. Furthermore, CMS concluded that the need was immediate, such that creating and installing the system as a unilateral “program integrity” measure was justified, instead of going through the transparent, but lengthy, public notice/comment rulemaking process.

CMS resumed work on the MUE system almost before the ink on the OIG’s May 2006 audit report was dry. This time around it at least invited the various physician specialty associations to provide input on the numeric limit for each CPT/HCPCS coded service included in the MUE table. (It also decided to render the acronym less offensive to providers by exchanging the word “unlikely” for “unbelievable.”) However, the general provider community and the public at large have been excluded from the process altogether. As a matter of fact, CMS is using the MUE system as an opportunity to reintroduce the nefarious “black box” claim edit: providers are responsible for adhering to a specific Medicare policy without being told the standard of conduct that’s expected per item.

The first round of MUE limits—the so-called Phase I edits—went into effect January 1, 2007. On January 8 staff of DLPadget Enterprises wrote to the CMS representative who’s the principal industry liaison for the MUE program asking where the Phase I table might be located on the CMS Web site. CMS’s response is evidence of the clandestine way in which this system is being managed, maintained, and manipulated, and it’s a classic example of bureaucratic logic as well:

The MUE workgroup is currently reviewing questions concerning release of MUE criteria. Needless to say, until we make a decision, we will not be able to give providers access to the edits. Our greatest concern with making the edits public is that unscrupulous providers may always bill at the MUE allowed level. We are currently developing procedures to prevent providers from taking advantage of the MUE edit levels. We expect to have the procedures in place shortly.

The respondent may not have stopped to think that a “black box” approach actually solves CMS’s concern that providers might start billing more units instead of less: if you don’t know where the “unlikely” breakpoint is, how can you bill up to it? Nonetheless, it’s clear that all providers—particularly physicians, laboratories, and hospitals—are disadvantaged in any meaningful attempt to comply with the MUE system as presently constituted. As explained in a March 21, 2007 subscriber special bulletin released by DLPadget Enterprises:

The Centers for Medicare and Medicaid Services (CMS) will implement the Phase II “medically unlikely edits” (MUE) for unit of service limits for certain CPT and HCPCS codes April 1 as planned. Furthermore, it continues to administer the edits via “black box” approach: physicians, laboratories and hospitals are held to the limits, even though CMS won’t tell you what they are! If a physician or laboratory bills a Part B carrier a quantity in excess of the MUE for a CPT or HCPCS code, the carrier is to deny or suspend payment for the entire line—all units billed, not just those above the MUE limit. (The rest of the claim is to be processed for payment.) However, if a hospital bills a Part A fiscal intermediary a quantity in excess of the MUE for a CPT or HCPCS code, the FI is to return the entire claim to the hospital, unpaid of course. You can resubmit the claim or claim line after you correct the excess unit “error,” but CMS doesn’t offer any suggestions as to how you’re supposed to figure out the magic limit you can’t exceed.

As of the date of this writing, CMS has implemented the Phase I and II edits, and those to be effective July 1 (Phase III) have been finalized. The Phase IV edits (October 1 effective date) are under development, including consideration of the input of various provider organizations. From the limited information that’s leaked out to the provider community, it looks like the edits that now or will implicate the anatomic pathology service sector through the end of 2007 are as follows (there can be and is no guarantee that this information accurately reflects what’s actually in the CMS MUE system files, so use it at your own peril): (a) two unit limit for bone marrow aspiration interpretation code 85097; (b) one unit limit for peripheral blood smear interpretation code 85060; (c) one unit limit for physician blood bank service codes 86077-86079; (d) one unit limit for all Pap test codes (e.g., 88141, 88142-88143, 88164-88167, 88175, P3000-P3001); (e) one unit limit for quantitative lymphocyte count codes 86355, 86357, 86359, and 86367; (f) one unit limit for protein electrophoresis (serum) code 84165 and immunofixation (serum) code 86334; (g) one unit limit for cytogenetics chromosome analysis codes 88245-88269; (h) one unit limit for first flow cytometry immunophenotyping marker code 88184 (technical-only code); (i) one unit limit for seldom-used cytology codes 88130 and 88140; and (j) one unit limit for outside slide consultation codes 88321-88325.

Perhaps an unintended consequence of the initial visceral reaction of the provider community that “unbelievable” was an unacceptable term in this context is exemplified by the proposed Phase IV limit on 88321 outside slide consultation units of service. CMS’s plan for using the MUE system appears to have migrated from a mechanism to catch typographical errors to a way to unilaterally impose coverage limits—the concept has evolved from edits for “unbelievable” units to edits for “undesirable” units. There’s no question that the approved unit of service for consult codes 88321-88325 is the outside case, and it’s readily provable that the frequency of multiple 88321 charges on the same day is well beyond the “unlikely” level. (For example, if Dr. Consultant receives one set of slides from 2006 and another set of slides from last week for patient Mary Jones, two units of code 88321 are billable, even though only one consultation report likely will be issued by Dr. Consultant.) Nonetheless, Medicare obviously would save money if the MUE system were used to impose a new coverage limit that restricted the number of outside consults that are billable per day per beneficiary to one. This edit, if it goes into effect October 1 as presently proposed, will have a significant detrimental effect on many academic medical center-based teaching pathologists and programs in this country.

It’s not clear at the moment whether or how providers might go about getting paid for more units than are prescribed by the MUE system for a given code in a medically necessary situation. The only mechanism mentioned to date in a formal way by CMS is an appeal by physicians or laboratories, but no details for such a process have been provided. The agency has hinted that separate procedure modifier 59 might be acceptable in some situations, like reporting two units of 85097 on one claim line and 8509759 on a second claim line if three distinct bone marrow aspirates are received for a patient, but this is not formally sanctioned in a policy manual or instructional bulletin. It appears that physicians, laboratories, and hospitals will have to learn to function for some time to come within the “black box” environment CMS has created.

National and Local Coverage Determinations

Congress periodically adjusts the inventory of medical services covered under the federal Medicare program. The adjustment may be quite specific, as with Pap tests and colorectal cancer screening, or it may be general, for a broad category like prescription drugs. Either way, it’s up to the secretary of the DHHS to promulgate regulations and policy instructions governing the precise coverage, billing, payment, and other mechanisms that healthcare providers and Medicare contractors must follow.
The secretary of DHHS, through the CMS, publishes a Medicare National Coverage Determinations Manual (CMS IOM Pub. 100-03) in which coverage policies for numerous specific medical procedures are memorialized. The policies basically state whether a given procedure or service is covered, under what conditions it’s covered, and whether there are any limitations on coverage, such as frequency restrictions.

The national coverage determinations (NCDs) most familiar to laboratorians are those for the 23 clinical lab tests that were the focus of the negotiated rulemaking cooperative effort between DHHS officials and members of the laboratory community back in the late ’90s and early ’00s. The NCD for each of these tests specifies the array of possible clinical diagnoses (ICD-9-CM diagnosis codes) from which at least one must reasonably relate to a patient’s current condition or ailment for the test to be payable by Medicare. The clinical lab tests that are part of the negotiated rulemaking process are bacterial urine culture; HIV testing (diagnosis vs. prognosis-monitoring); blood counts; partial thromboplastin time; prothrombin time; serum iron studies; collagen crosslinks; blood glucose testing; glycated hemoglobin/protein; thyroid testing; lipids; digoxin monitoring; alpha-fetoprotein; carcinoembryonic antigen (CEA); human chorionic gonadotropin (HCG); tumor antigen immunoassay (CA125, CA19-9, CA15-3/CA27.29); prostate specific antigen (PSA); gamma glutamyl transferase (GGT); hepatitis/acute hepatitis panel; and fecal occult blood. You can view the specific NCD for each of the 23 tests by visiting http://www.cms.hhs.gov/mcd/index_section.asp?from2=index_section.asp&ncd_sections=40& on the CMS Web site.

Less than a dozen national coverage determinations in the aforementioned Manual pertain directly or indirectly to pathologists or histology/cytology laboratories. Those thought to be of greatest interest due to the possibility of non-coverage in specified circumstances are briefly explained below.

• Cytogenetics studies. Section 190.3 of the Manual provides that cytogenetics studies coverable by Medicare must be “reasonable and necessary for the diagnosis or treatment of … genetic disorders (e.g., mongolism) in a fetus; failure of sexual development; chronic myelogenous leukemia; acute leukemias [consisting of] lymphoid (FAB L1-L3), myeloid (FAB M0-M7), and unclassified; or myelodysplasia.”

• Electron microscopy. Section 190.4 of the Manual describes the conditions under which Medicare covers electron microscopy diagnostic procedures. Basically, the service is covered so long as a less costly method of analysis won’t suffice for a particular patient. The Manual says electron microscopy “is normally warranted only when distinguishing different types of nephritis from renal needle biopsies or when there is an uncertain diagnosis. … When an uncertain diagnosis … results from a less expensive method of examination and an electron microscope examination is therefore necessary, both biopsy examinations are covered. Where the additional expense for an electron microscope examination is not warranted, payment is based upon the less costly methods of examining biopsies.”

• Colorectal cancer screening. Medicare covers colorectal cancer screening by several methods at varying frequencies depending on the individual patient’s risk level. However, tissue biopsy or polypectomy aren’t considered ordinary occurrences with a colorectal cancer screening procedure. Therefore, if the clinician deems it medically necessary to remove a biopsy or a polyp during what starts out as a screening exam, the procedure is to be reclassified as diagnostic. This means the clinician should supply the laboratory and pathologist with an appropriate diagnostic ICD-9-CM code, not a screening code. Said another way, a pathologist or a laboratory should never report a screening ICD-9-CM code in conjunction with a colon biopsy or polyp specimen.

• Gastric bypass (bariatric) surgery. Gastric bypass surgery is now covered by Medicare for morbid obesity regardless of the patient’s age. Hence, patient age is no longer a risk factor for non-coverage of the pathology examination that may be associated with such a case. Don’t forget that intestinal bypass surgery is still considered not medically efficacious, so coverage may well be a problem with it.

• Apheresis (therapeutic apheresis). Therapeutic apheresis in its various forms is covered by Medicare for specific patient conditions too numerous to list here. Refer to section 110.14 of the Manual or chapters 3 and 13 of Pathology Service Coding Handbook for detailed information on the coverage criteria for this service. However, note that pathology profession leaders should engage CMS officials in a joint review of the currency of the specific coverage parameters, because some may be out-of-date; for example, at least one of the “treatment of last resort” conditions has undergone a complete transformation per current medical standards.

• Screening and diagnostic Pap tests. Medicare covers a screening Pap test once every two years, and a diagnostic Pap test is ordinarily covered without imposition of a frequency limit. A diagnostic Pap test by Medicare definition is one that’s ordered for a patient who (a) has been previously diagnosed with cancer of the vagina, cervix, or uterus that has been or is presently being treated; (b) has had a previous abnormal Pap test; (c) presents any current abnormal finding of the vagina, cervix, uterus, or adnexa; (d) presents any significant complaint referable to the female reproductive system; or (e) shows any sign or symptom that might, in the referring physician’s judgment, reasonably be related to a gynecological disorder. The ordering physician is expected to designate each Pap test as diagnostic versus screening when completing the lab requisition, and he or she should furnish history and/or current sign/symptom information supporting that designation. Laboratories are prohibited from unilaterally classifying patient Pap tests or inserting ICD-9 diagnosis codes; the ordering physician must supply that information.

The detailed Medicare coverage, ICD-9 diagnosis coding, CPT/HCPCS test coding, and related rules surrounding pathologist and laboratory services in conjunction with Pap smears are too numerous and complex to adequately explain in the limited space available here. One of the best analyses of the ground rules appears as Chapter 10 of Pathology Service Coding Handbook published by DLPadget Enterprises. Information is also available via the College of American Pathologists’ Web site, your Medicare Part B carrier Web site, and the CMS Web site—note that keyword search is required to pull up the various past articles that deal in some way with this topic when visiting the three named Web sites.

Local coverage determinations (LCDs), as the name implies, are developed and issued by individual Medicare contractors, the Part A fiscal intermediaries and the Part B carriers, to control payments to the hospitals, laboratories, physicians, and other providers under their jurisdiction. LCDs basically fill the gap when providers in a particular geographic area bill for services that Medicare doesn’t intend to cover unconditionally, but an NCD hasn’t been issued by CMS for that situation. Fiscal intermediaries and carriers are authorized to issue LCDs by section 522 of the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA 2000).

Experience indicates that LCDs for anatomic pathology services by far affect only esoteric and special study services—everyday procedures like cytology and bone marrow smear exams, gross and microscopic tissue examinations, frozen sections and intra-operative touch imprints, and common histologic special stains (e.g., iron, trichrome, giemsa, PAS) seldom are targeted for attention by an LCD. The esoteric and special study services most often found in the LCD list of fiscal intermediaries and carriers are flow cytometry immunophenotyping and ploidy, in situ hybridization, and immunohistochemistry.

An unscientific sampling of the LCD catalogs maintained by the Medicare contractors across the country indicates no two are exactly alike; for example, quite a few carriers include flow cytometry in their LCD list, but others don’t. Furthermore, there’s sometimes a fairly big difference in the scope of a particular procedure’s LCD per one carrier versus another; for example, the flow cytometry LCD for one carrier may include many more covered ICD-9-CM codes than that of another carrier. You can review your carrier or fiscal intermediary’s LCD catalog by logging onto its Web site and going to the local coverage determination page.

In general, providers must follow their contractor LCD policy statements in the same way and to the same extent as they must observe CMS’s NCDs. Notwithstanding, LCDs are subject to reconsideration requests by providers, and a formal appeal mechanism is accommodated in the law. It’s typically best that reconsideration requests be filed by more than one affected provider, and, ideally, the state pathology association, medical society, and/or hospital association will actively participate in the reconsideration request as well. One compelling reason for a carrier to change its LCD for a particular procedure is evidence that the current policy is too conservative compared to that maintained by numerous other carriers and to contemporary medical science and/or standards of medical practice.

As earlier indicated, the principal function of national and local coverage determinations by CMS and Medicare contractors is to distinguish covered from non-covered services. But don’t confuse the terms non-covered and non-billable, because frequently they’re not synonymous. All other things equal, a medical service that won’t be covered by Medicare due to implication of an NCD or LCD is billable to the beneficiary, provided he or she was notified in advance of the performance of the service that it likely wouldn’t be covered by Medicare, he or she consented to the service even though Medicare likely wouldn’t pay, and he or she signed an Advance Beneficiary Notice (ABN) attesting to these facts.

In the arena of histology and cytology laboratory professional and technical services, ABN forms most commonly are encountered in relation to Pap tests. They nonetheless apply in other situations, such as with flow cytometry testing when the diagnosis likely won’t match one of those on the carrier’s LCD. In general, you must have reason to believe that a particular medical service won’t be covered by Medicare for a given patient (i.e., “blanket” ABN signatures aren’t accepted by Medicare); the patient must be advised regarding possible non-coverage and must sign the ABN prior to the service being performed; and neither the beneficiary nor a secondary insurer may be charged for a service that’s not covered by a bona fide ABN, upon denial of the charge by the Medicare contractor. Laboratories should arrange to have signed ABN forms come directly to them for adjudication, rather than relying on referring physicians to retain the forms in a readily accessible manner.

The Medicare and U.S. Office of Management and Budget (OMB) approved ABN forms are being revised by CMS. Watch page http://www.cms.hhs.gov/BNI/01_overview.asp#TopOfPage on the CMS Web site for updates, particularly the subsidiary topics labeled “FFS-ABN.” The College of American Pathologists has been actively following this matter as well, and material regarding the expected new forms can be obtained from its Web site.

Private insurers invariably impose limits on the medical services and procedures they’ll cover under the policies they write with individuals and employers, just as is done by Medicare. They typically publish their coverage guidelines on a Web site, but sometimes hard copy manuals or bulletins are used instead. Whether or not a particular non-covered service in a specific instance can or can’t be billed to the insured person (patient) depends on several factors, including state law, the terms of the participation agreement you signed with the insurer (assuming such a document was executed), and the terms of the specific patient’s policy. A document comparable to Medicare’s ABN typically isn’t required by private insurers, but be alert for exceptions.

Unique Coverage Rules for Specific Services

Specific medical services are sometimes singled out by Medicare for unique treatment from a coverage standpoint. The coverage rule in these instances typically isn’t included among those in the Medicare National Coverage Determinations Manual; instead, it’s commonly buried in any of several more general policy manuals. Regardless, the Medicare coverage rule for several such services of frequent interest to pathologists and histology/cytology laboratories is summarized below, although the list isn’t necessarily all-inclusive. Unless otherwise noted, you may assume that Medicare’s policy per each service has been adopted by many managed care companies and private insurers.

• Anesthesia with minor procedures. Topical or local anesthesia administration with minor procedures such as fine needle aspiration and bone marrow aspiration/biopsy is deemed to be part and parcel with the surgical procedure, so it’s not separately chargeable. The anesthetic and any related supplies likewise cannot be charged separately from the surgical procedure. Anesthesia for minor procedures ordinarily is performed by the physician who conducts the procedure.

• Peripheral blood smear interpretations. Longstanding Medicare policy holds that review and interpretation of a peripheral blood smear is a covered physician service only when place of service 21 (hospital inpatient) applies, and then only if the smear exhibits an abnormality. CPT code 85060 may not be billed by a pathologist or a laboratory for a hospital outpatient or a non-hospital patient; the prohibition on billing in these instances extends to the beneficiary—an ABN notwithstanding—and to the beneficiary’s secondary insurer, if any. It doesn’t matter whether the peripheral blood smear is generated in conjunction with a complete blood count, a bone marrow case, or whatever. Knowingly and intentionally substituting limited clinical consult code 80500 or any other code for 85060 in an effort to circumvent this coverage limit would constitute fraud. Some Medicaid agencies have adopted this rule, but very few private insurers appear to differentiate coverage based on patient care setting.

• Specimen handling. Two CPT codes, 99000 and 99001, are provided specifically for handling and conveyance of laboratory specimens. However, Medicare doesn’t permit billing either code to a carrier, fiscal intermediary, beneficiary, or secondary insurer; most managed care companies, Medicaid agencies, and private insurers follow suit. Specimen handling and shipping are considered a cost of doing business, including the costs incurred when slides, blocks, and/or other material are sent to an outside pathology consultant.

• STAT processing charges. A separate charge or a surcharge (e.g., modifier 22) for STAT processing isn’t billable to a carrier, fiscal intermediary, beneficiary, or secondary insurer. It’s the rare private insurer that will cover such a charge.

• Specimen photographs. A separate charge or a surcharge (e.g., modifier 22) for specimen photographs included in the pathology report, whether of the gross specimen or of microscopic sections of the specimen, isn’t billable to a carrier, fiscal intermediary, beneficiary, or secondary insurer. Experience indicates private insurers don’t honor such charges either.

• Standby and availability charges. CPT provides a limited number of standby and on-call codes for use by physicians such as pathologists; refer to 99026-99027 and 99360 in particular, the latter for standby for frozen section or fine needle immediate study. However, be aware that Medicare doesn’t permit billing any of these codes to a carrier, fiscal intermediary, beneficiary, or secondary insurer.

• Medical autopsies. CPT codes 88000-88099 are provided for medical and forensic autopsy services. Medicare and private insurers don’t pay these codes, because the service doesn’t contribute to the diagnosis, care, or treatment of an individual patient—the patient is deceased. Once in a while the deceased person’s family or estate will agree to pay for an autopsy, but that’s an arrangement that must be negotiated case-by-case. Experience indicates the vast majority of medical autopsies become part of the overhead expense of the laboratory.

Synopsis and Projection

Pathologists and histology/cytology laboratories have unquestionably lost ground from an income-generation perspective due to coverage cutbacks by Medicare, and not infrequently by spillover effect to other payers as well. Much of the loss has occurred since 1996, with ever tighter controls on acceptable CPT/HCPCS coding via the NCCI. Additional losses are confined to particular geographic areas, when LCDs are too strict or out-of-date compared to accepted medical practice standards. The industry and profession are poised to incur potentially significant new losses in coming months as the drama known as the MUE system unfolds.

Pathologists, particularly through their state professional societies, and allied healthcare providers must be vigilant, proactive, and aggressive as regards LCDs and other local medical coverage issues that threaten their necessary financial performance. They must also remain supportive of the national leadership organizations such as the American Medical Association, the College of American Pathologists, the American Society for Clinical Pathology, and the Clinical Laboratory Management Association; support in this context includes notifying responsible leaders when their efforts don’t seem to be up to the task. Lastly, organized medicine must remain skeptical of the unilateral actions of payers and insurers undertaken in the name of “program integrity” that nonetheless amount to changes in fundamental coverage policies, because legal or legislative action as countermeasure may be appropriate.

As important as coverage issues are to pathology and laboratory income, payment rates mean the difference between a successful enterprise and one that’s merely hanging on. Changes in the rates of payment for anatomic pathology services projected to the end of this decade compared to the beginning will have a profound impact on the profession. This section explores where we’ve been, where we’re headed, and what you need to do to survive.

Medicare Physician Fee Schedule (MPFS)
Medicare today accounts for about 25 to 33 percent of the typical pathology practice’s histology and non-gynecological cytology procedure volume. The average workload percentage will increase by a material amount in the next five years or so as most people in the “baby-boom” generation receive their Medicare cards. The Medicare physician fee schedule by the end of this decade will directly determine the amount that’s paid for about 40 percent of all anatomic pathology procedures in this country.

Important as Medicare is as a primary payer, its influence spreads far beyond the bounds set by the aged and disabled population. Experience indicates most managed care companies and many private insurers have adopted the Medicare physician fee schedule as the basis for their payment systems—the constant dollar figure (the “conversion factor”) used to convert relative value units to a payment figure item-by-item likely is different than that used by Medicare, but the relative value units per medical procedure often are identical. When managed care companies and private insurers are added to the mix, it’s not unreasonable to assume that easily 75 percent of all anatomic pathology procedures will be paid at a percentage of the Medicare physician fee schedule by 2010.

So what’s happened to anatomic pathology procedure payment rates under the MPFS since 2001, and what’s likely to happen to them by 2010? Are pathologists and laboratories worse off today, or better? Is the future rosy or bleak?

The tables (1 and 2 below) show that your financial position today compared to the past and the future is better or worse—rosy or bleak—depending solely on whether you bill only the professional component of anatomic pathology procedures (for example, a hospital-based practitioner) or the global service—that is, the professional and technical components combined, as is commonly billed by independent laboratories for non-hospital patient services.

The dollar figures in Table 1 are the national-level allowed charges for each year, which assumes 1.00 as the geographic adjustment factor for the work, practice expense, and malpractice relative value units (RVU) elements. The conversion factor for 2007 and 2005 is $37.8975, in 2003 it was $36.7856 (starting March 1), and in 2001 it was $38.2581. The percent change column compares the 2007 rate to that in effect in 2001. The allowed charge figures from prior years have not been adjusted for inflation.

Table 1 shows that, for essentially all the high-volume anatomic pathology procedures, pathologists who bill only the professional component (e.g., hospital-based practitioners) have lost ground the past six years in terms of payment rate per item. For example, where such a physician received $44 “and change” from Medicare patients for something like a colon or prostate biopsy in 2001, this year (2007) he or she receives only $38. The loss in financial position is in the 10 to 15 percent range in absolute dollars, but it’s considerably greater when inflation is taken into account.

By all accounts, independent laboratories eligible to receive payment at the global rate have likely at least kept pace with inflation under the MPFS the past six years, and some may have gotten a bit of an income bump, depending on their specific procedure mix and volume. Absolute rates have increased in the 15 to 25 percent range on average, with billing code distribution weighing heavily on the actual number for any given laboratory. The remarkable increase in technical component allowances compared to 2001 more than offset the reduction in the professional.

Turning to the future, the RVU shown in Table 2 below are the non-facility column 2007 interim versus 2010 fully implemented numbers published by CMS in the December 1, 2006 Federal Register. The transition primarily affects the practice expense component of the total RVU. The percent change assumes the approximate 9 percent budget neutrality negative adjustment to the physician work RVU (i.e., an RVU-to-dollar conversion variable added to the MPFS formula in 2007) will continue year-by-year through 2010. The projected percent change also assumes no material change in conversion factor or other MPFS component not already published by CMS.

Table 2 indicates that physicians billing just the professional component of anatomic services (e.g., hospital-based pathologists) will incur another 8 percent or so payment rate cut by 2010, all other things equal. That means the allowance for an 8830526 diagnostic biopsy (e.g., colon, prostate) will be only about $35 in 2010 versus $38 today and nearly $44.50 in 2001. The decade will see pathologist professional component payment rates fall somewhere around 22 percent before adjusting for inflation.

Independent laboratories will continue to see their global service payment rates increase through 2010, perhaps on the order of 6 to 8 percent. The expected rate of increase likely will be just sufficient to keep pace with inflation.

Tables 1 and 2 paint a somewhat bleak financial picture for hospital-based pathologists and any others who customarily bill only the professional component of anatomic procedures. On the other hand, it’s easy to see why dermatologists, gastroenterologists, urologists, and other office-based physicians have become so interested in setting up in-office histology laboratories the past five years or so. If anything, that trend might be expected to gain momentum in light of the pending increases in technical component payment rates through 2010. In that sense, one might conclude that the efforts of laboratory industry leaders to optimize the technical component RVU for anatomic pathology procedures was too successful, at least without some counterforce on the ethics side of medicine.

Sustainable Growth Rate Factor

Payment rates through the Medicare physician fee schedule, as measured by the RVU conversion factor from year to year, should have increased 2½ to 3 percent per year from 2002 through 2007 according to data from the CMS and the Medicare Payment Advisory Commission (MedPAC). Instead, the conversion factor for 2007 ($37.8975) has actually fallen by about one percentage point compared to 2001 ($38.2581). The main culprit behind this wide disparity in economic fact versus “ought to be” is the Sustainable Growth Rate (SGR) formula that Congress enacted years ago as part of the Balanced Budget Act of 1997.

The SGR formula was set in place as a way to automatically limit the rate of increase in Medicare spending on physician, laboratory, and other services covered by the MPFS. Basically, the formula says that if volume and intensity of services for a given year increase by more than a target amount tied to per capita gross domestic product (GDP), payment rates for the next year are to be reduced to a level that will balance things out from a federal budget standpoint. In theory, the formula was to send a signal to the medical profession that practice style and patterns may need to change to live within Medicare budget goals.

Data released by MedPAC and reported in the March 19, 2007 issue of amednews.com (American Medical Association) indicates actual spending on physician and related MPFS services stayed below the SGR targets through 2001. However, the trend reversed itself starting in 2002, and the gap between SGR target and actual spending has increased by an ever greater amount each year since then. In particular, the $1.1 billion excess in 2002 increased to $7.3 billion in 2003, then to $17.7 billion, $28.7 billion, and $41.9 billion in 2004, 2005, and 2006 respectively.

The AMA and others argue that the SGR formula is flawed and that the difference between targeted and actual spending year-by-year is vastly overstated. The U.S. Government Accountability Office (GAO) in its February 2005 report Medicare Physician Payments: Considerations for Reforming the Sustainable Growth Rate System notes also that the 2004 and 2005 gaps are as large as they are due at least in part to the fact that when Congress granted a reprieve from a physician fee reduction in each of those years, it failed to adjust the cumulative spending target accordingly. That failure affects the 2006 and subsequent year cumulative targets as well.

The SGR formula directed that physician fees be reduced by 4.8 percent for calendar year 2002, and that decrease did, in fact, take place. The formula further projected that reductions of 5.7 percent for 2003, 4.4 percent for each of 2004 and 2006, 1.7 percent for 2005, and 5.0 percent for 2007 were necessary to maintain parity with the Medicare spending targets. However, due mainly to intense lobbying by the AMA and many specialty associations, Congress stepped in to prevent a cut in the MPFS conversion factor (CF) in each of those years; in fact, Congress authorized a 1.7 percent increase in the CF for 2003 and a 1.5 percent increase in each of 2004 and 2005, while the CF for 2006 and 2007 was held at the 2005 level.

CMS currently projects that a 9.9 percent cut in the 2008 MPFS conversion factor will be needed to comply with the SGR formula for that year. Additional cuts totaling something on the order of 40 percent will be needed to meet spending targets projected through 2017. These cutbacks come at a time when industry sources forecast that more than a 20 percent cumulative increase in Medicare rates in the next 10 years are needed just to stay even with average practice cost inflation, not to mention recouping prior year shortfalls. The Congressional Budget Office (CBO) estimates that about $218 billion additional dollars will be needed through 2017 just to keep physicians even versus the projected SGR formula cuts; if physicians are to be compensated for inflation alone over the same period, the budgetary impact explodes to something like $260 billion.

Key regulators, representatives of organized medicine, members of budget watchdog groups, and lawmakers alike agree that the current SGR approach to managing Medicare payments to physicians and others under the MPFS can’t continue. There’s no consensus now, however, on how to resolve the problem. A coalition of professional associations joined the AMA May 17, 2007,  in recommending to Congress that the SGR formula be repealed, with a new system patterned after that used to set Medicare payments to hospitals, skilled nursing facilities, etc. put in place. The recommendation focuses on MedPAC forecasting medical practice cost changes for the coming year and then advising Congress on the change in the MPFS conversion factor that’s needed.
There’s obviously very little that an individual pathology practice or laboratory can do to impact SGR reform, but communicating moral support to association representatives is always appreciated.

Physician Quality Reporting Initiative

Section 101 of the Tax Relief and Health Care Act of 2006 authorizes up to a 1.5 percent bonus payment to eligible physicians who participate in a voluntary quality reporting system and who successfully meet the quality standards established for their area of practice. The bonus is based on regular payments made to the physician or his or her employer under the Medicare physician fee schedule. The first bonus period under the act runs from July 1-December 31, 2007. Pathologists and laboratories aren’t eligible to participate in the program during its initial six-month run.

The quality measures that form the basis for the voluntary reporting system and bonus plan are being developed by an alliance of government and private participants. (Numerous measures are already in place, but more must still be developed.) The American Medical Association’s Physician Consortium for Performance Improvement is a major contributor from the private side. On June 1, 2007,  the AMA issued a press release that included mention of the first two pathology-related quality measures developed by the Consortium: key content specifications for breast and colorectal cancer pathology medical reports.

Eligible physicians report quality-related data by adding appropriate CPT Category II or HCPCS Level II G-codes to their claims; in other words, they report the regular CPT Category I codes that describe the specific medical services that were rendered and the regular ICD-9 codes for the diagnosis, but then they add one or more informational codes in the procedure section of the CMS-1500 claim to describe aspects of the patient encounter that are suggestive of the quality of the care that was rendered. Quality for these purposes often equals consistency with generally accepted standards of care for a particular illness, ailment, or condition.

Because the Physician Quality Reporting Initiative (PQRI) is brand-new, definitive information for pathologists and laboratories can’t be provided at this time. For example, we presume they’ll be eligible to participate voluntarily in the program starting in 2008, but that’s not, in fact, assured at the moment. Furthermore, as earlier mentioned, only two quality measures presently exist for the specialty, and details about even those aren’t available as of the date this section is being written.

An interesting article about Medicare’s overall pay-for-performance initiative, how quality measures are being developed for physicians in general and pathologists in particular, and the promises and doubts for blending quality and payment appears in the April 2007 issue of CAP Today, available for download from the College of American Pathologists’ Web site. (See “Baby steps to an iffy end: pay for performance.”) For detailed information about the PQRI program as it’s presently constituted, including access to the latest list of approved quality measures and the claim codes that apply, visit the PQRI page on CMS’s Web site—www.cms.hhs.gov/PQRI.

Forces outside one’s control—coverage standards and payment rate determinations by Medicare and managed care companies are prime examples—certainly have a big influence on practice and laboratory income. Nonetheless, three factors that have an immediate, pronounced impact on payment patient-by-patient are directly and exclusively managed by pathologists and their office staff: accurate, complete, up-to-date, and compliant internal policies and practices for ICD-9-CM diagnosis coding, CPT and HCPCS procedure coding, and medical report documentation can literally make or break the financial performance of a professional group or laboratory. We conclude this chapter with an analysis of the key challenges and opportunities you face in these three critical areas.

ICD-9-CM Diagnosis Coding

Federal law mandates that physicians and laboratories furnish a valid, pertinent ICD-9-CM diagnosis code with each patient claim filed with Medicare. (Virtually all Medicaid agencies, managed care companies, and private insurers require ICD-9-CM diagnosis codes with claims for their patients too.) The principal ground rules to be followed by pathologists and laboratories when billing Medicare Part B for inpatient, outpatient, and outreach patient anatomic pathology services (excluding Pap tests) are set forth below; these rules also apply when a hospital bills Medicare Part B for histology and non-gynecological cytology technical services for outreach patients (i.e., neither an inpatient nor a registered outpatient of the subject hospital; for example, a tissue biopsy referred for processing at the hospital). The information below shouldn’t be taken as all-inclusive. For detailed information on ICD-9-CM reporting for pathology services, see Chapter 2 of Pathology Service Coding Handbook (Chapter 10 for Pap test reporting rules) by DLPadget Enterprises.

• Use only the latest ICD-9-CM book. The official ICD-9-CM codebook (Volumes 1 & 2) changes every year, effective October 1. You should arrange to obtain the latest text with enough lead time to become familiar with the changes so you can start using it October 1. There’s no grace period for transitioning from the old to the new codebook: you must start reporting codes from the latest book—and only the latest book—on October 1.

• Report the most accurate ICD-9 code. Most ICD-9-CM codes provide a fourth or fifth digit (one or two digits to the right of a decimal point) to specify anatomic site, condition status, or other such detailed information. Select and report the ICD-9-CM code that most accurately describes the narrative diagnosis; report an “other,” “unspecified,” or similar fourth or fifth digit only when you can’t readily determine the more descriptive digit.

• Don’t report “uncertain” diagnoses. Don’t report an uncertain diagnosis as if it were confirmed. An uncertain diagnosis is one phrased as “suspicious for,”  “suggestive of,” “can’t rule out,” or the like. Whether a diagnosis phrased as “consistent with” is uncertain or not is a matter of current debate; the consensus appears to be that most pathologists don’t intend that that phrase connote uncertainty, so unless the physicians in your group tell you otherwise, it’s reasonable and appropriate to report a “consistent with” diagnosis as confirmed.

• Report the ICD-9 code for the definitive pathologic diagnosis. Medicare instructions direct that the pathologic diagnosis is to be reported on a claim for an anatomic pathology service payable via the Medicare physician fee schedule, provided the examining physician has issued a definitive diagnosis at the time the claim is filed. The referring physician’s clinical diagnosis should be reported only if a definitive pathologic diagnosis isn’t available (e.g., normal tissue).

• Strive to report the most significant diagnosis per major organ. It’s a common myth that pathologists and laboratories must report a diagnosis for each specimen present for a case. In fact the Medicare guidance anticipates that a diagnosis explaining the patient’s ailment or condition will be reported. Report only the most significant diagnosis per major organ system; for example, if one colon biopsy demonstrates dysplasia but three others are benign, report a diagnosis for the dysplastic biopsy alone.

The ICD-9-CM reporting rules for Pap tests generally differ from those for tissue biopsies and non-gynecological cytology specimens because the technical component of a Pap test is classified as a clinical test payable via the Medicare clinical laboratory fee schedule, not an anatomic pathology procedure paid under the MPFS. The key rules to observe when billing a Pap test are as follows:

• Report the referring physician’s clinical diagnosis as the “primary” diagnosis. A lab billing for the screening component of a Pap test (e.g., codes 88142, 88164, 88175, P3000, G0123) is to report the ICD-9-CM code for the referring physician’s clinical diagnosis as the primary diagnosis on the claim. If an abnormality is diagnosed at the lab, the ICD-9-CM code corresponding to the pathology identified should be reported as a secondary diagnosis on the claim. In other words, the reason the smear was submitted to the lab (i.e., the clinical diagnosis) is always the primary diagnosis so far as the screening component of a Pap test is concerned.

A Pap smear sent to a pathologist for interpretation due to an abnormality or atypia noted by the screener ordinarily is eligible for a separate professional charge, such as CPT 88141 or HCPCS G0124 or P3001. If the professional charge is billed by the pathologist instead of the lab, the definitive pathologic diagnosis should be reported as the primary on the physician’s claim. (This doesn’t affect the order in which the lab reports the diagnoses on its technical component claim however.) On the other hand, if the laboratory bills both the technical and the professional components (e.g., 88142 and 88141 or G0123 and G0124) on the same claim, the ordering physician’s clinical diagnosis should be listed as the primary, with the pathologic diagnosis listed as the secondary.

• Don’t supply a diagnosis from your laboratory records. Medicare is adamant that, as a clinical lab test, the primary diagnosis for a screening Pap test (e.g., CPT 88142, 88164 or 88175, or HCPCS code P3000 or G0123) must be supplied by the referring physician. Even if the lab has a more complete medical history on a patient, it can’t unilaterally use that information; it must communicate with the patient’s physician and get confirmation that it’s okay to use the data in its records.
• The referring physician must give a codable clinical diagnosis. It’s a myth that the referring physician must submit a literal ICD-9-CM diagnosis code with a lab test requisition. In fact, a narrative diagnosis is fine, provided it’s sufficiently descriptive to permit a knowledgeable coder at the lab to translate it to an accurate ICD-9-CM code at the fourth or fifth digit level, as applicable.

Pathology Report Documentation

The pathology report is the primary document used by Medicare, managed care, and private insurance auditors to verify the efficacy of charges billed for medical services to individual patients. Furthermore, it should be the key document used internally to determine the fee codes that are appropriate for posting to each patient’s account. Inattention to the pathology report as the most important source of patient-by-patient charge information produces an immediate and often dramatic loss of billed revenue (e.g., missed charges, down-coded services) and exposes the professional practice or laboratory to avoidable audit risk. The medical reporting principles and tips set forth below will help you minimize both lost revenue and audit exposure. Much of the information is reproduced or adapted from the article “How to audit-proof your medical reports: tips for pathologists” that appeared in the October 2003 issue of G-2 Compliance Report.

The background of a medical review auditor is often that of registered nurse, medical record technologist, or liberal arts or business administration major with some healthcare industry work experience. Few are trained in the laboratory sciences, and rarely is knowledge of the practice of pathology evident in their résumé.

Auditors audit from a stack of pathology reports and matching insurance claims, with their CPT book open to the pathology section. They look for words in the medical reports that match keywords and phrases in the CPT procedure descriptions: when the words and codes line up, the auditor is happy, but when they don’t, some type of retribution is exacted. The penalty may be denial of the charge altogether if the service doesn’t seem to be adequately demonstrated in the report, or the code may be changed to a lesser level service. If too many discrepancies are detected, the physician or laboratory may be referred for formal investigation.

A prime directive of an auditor is never pay for a service that isn’t reasonable or medically necessary. A service to be covered must contribute to the diagnosis, care, or treatment of the patient. Auditors carefully read physician reports to detect language indicating that services weren’t reasonable or necessary, and because they aren’t physicians, auditors usually interpret words and phrases in medical reports by their literal, denotative meaning, not according to the “word-of-art” sense intended by the pathologist.

This background on auditors and how they audit pathology reports leads to the following principles that should be rigorously adhered to by all physicians associated with a practice or laboratory.

• Don’t fall for the lazy-person’s myth that “everybody knows.” Never assume that an auditor knows that bone and other calcified material must be decalcified before slides can be prepared; include “submitted for light decalcification” or something equally telling in the specimen’s gross description. Realize that the phrase “iron stores are adequate” doesn’t prove that an iron stain was examined to reach that conclusion; state something like “adequate iron stores are demonstrated by an iron stain.” When in doubt, always state the obvious and “connect the dots.”

• Always apply the “ain’t documented, ain’t chargeable” philosophy. Make sure your report contains unambiguous mention of every specimen, service, and procedure that’s individually billable for a case. Lengthy narratives aren’t necessary: remember that auditors are looking for keywords that are readily traceable into the CPT book. For example, make sure the outcome of each fine needle pass that’s immediately evaluated for adequacy is individually recorded; specify the three pH levels that were evaluated by ATPase stain to support the three units of charge; and document the intra-operative, naked-eye specimen examination and medical conclusion in much the same way you demonstrate a frozen section diagnosis in the report. Never assume an auditor will be satisfied by a work order, requisition, accession log, special stain worksheet, or other intermediate document; always assume all your charges must be supported by the final report alone.

• Make ample use of actual CPT keywords in your reports. Work to use the exact same keywords that show up in CPT descriptors in your reports. If you do this, the auditor won’t be tempted to treat the LEEP cervical conization (88307) as a biopsy (88305), the small tibia biopsy (88307) as a fragment (88304), the smallish bowel nodule segmental resection for tumor (88309) as a biopsy (88305), the breast lesion requiring the microscopic examination of the surgical margins (88307) as a biopsy (88305), or the manual, semi-quantitative immunohistochemistry stain evaluation (88360) as a qualitative study (88342). Experience indicates that using CPT keywords at critical points in your medical report won’t interfere in any way with effective communication with surgeons, but it will minimize the chances of having to argue with an auditor over the appropriate level of service.

• Avoid medical necessity “red flags.” Certain “words-of-art” common to pathologists raise the specter of absence of medical necessity, service not actually performed, or similar ominous meaning to an auditor who’s reading the word or phrase in its literal sense. The potentially offensive and troublemaking words and phrases that should be avoided include non-contributory (e.g., simply say the stain was negative or was considered), normal (e.g., say the tissue was benign), no pathologic diagnosis (e.g., say grossly consistent with tonsil), and non-diagnostic (e.g., say scanty inflamed epithelial cells, non-diagnostic for … ).

Rigorous observance of the four principles outlined above will go a long way toward audit-proofing your medical reports. However, you’re encouraged to attend as well to the following tips, to the extent any may be applicable to your practice environment.

• Always demonstrate that a microscopic examination was performed. A detailed microscopic description of each specimen is no longer a regular feature of the medical report dictated by many pathologists. While that content in literal form isn’t a prerequisite to third-party payer coverage, pathologists sometimes have their 88302-88309 charges denied if their reports provide no evidence whatsoever that a microscopic examination was conducted. (Yes, this is yet another example of the “don’t assume everybody knows” principle!) To avoid controversy, include a telling statement such as “unless ‘gross exam’ is specified, the final diagnosis for each specimen is based on a microscopic examination of the tissue(s)” in an obvious place in your report (e.g., under a MICROSCOPIC section heading).

• If you’re a teaching physician, always include the requisite attestation. Medicare requires teaching physicians to attest in their medical reports that they performed or immediately supervised the “critical portion” of any billed procedure in which a resident or fellow actively participated. This coverage mandate can be fulfilled by incorporating in each report a standard phrase such as “by my electronic signature, I attest to having personally examined (gross or microscopic, as stated) each specimen and to having rendered or confirmed the diagnosis related thereto.” A separate attestation is needed for each adjunct service reported by another senior physician participating in the case (e.g., intra-operative rapid diagnosis, electron microscopy). Don’t forget the GC modifier on your claims.

• Include a concise list of processing steps in your report when applicable. Cytogenetics, molecular cytogenetics, and molecular diagnostics studies are properly reported with multiple CPT codes (e.g., culture, chromosome analysis, additional cells counted, interpretation), and multiple units of any one or more processing steps may be billable. These tests are so highly specialized, and the jargon in the typical report is so technical, that it’s virtually impossible for anyone who’s not formally trained in genetics or cytogenetics to determine or verify the appropriate charge codes for a particular study. Therefore, it’s highly recommended that a METHODOLOGY or PROCEDURES section be included in the report, where the test or study is described using CPT keyword nomenclature; for example, state “this test was performed by molecular isolation, enzymatic digestion, and nucleic acid probe (x4).”

• Always remember that “words mean things,” and you’ll typically “be taken at your word.” When selecting standard report headings, field labels, and the like, remember that you’ll be judged from an audit perspective based on the common literal meaning of words and phrases, not by what you personally may mean or intend to convey. Always think about the connotation of words when you use them in dictation, because auditors are very stingy when it comes to giving physicians the benefit of the doubt. Following are examples of inappropriate word usage that have gotten pathologists into trouble.

    - Prepared vs. examined: Non-gynecological cytology reports often have a PREPARATIONS section that lists the number and type of slides that were prepared for examination (e.g., 2 pap stained cytospin, 2 pap stained direct smear, cell block). This presentation provides no evidence that the individual preparations were actually examined by the pathologist and considered in the diagnosis. The evidentiary loop can be closed by heading the section PREPARED AND EXAMINED or by using a diagnosis line template such as “[specimen] (micro exam of slides as specified): [diagnosis]” or “[specimen] ([list of preparations]): [diagnosis].”

    - Review vs. interpretation: Clinical pathology reports and abnormal Pap smear reports often describe the pathologist’s interpretation as a “review.” That term from the perspective of an auditor most commonly refers to a quality control function, not to a physician’s diagnostic service. (Quality control is a non-billable “Part A” function.) Never use the word review when you actually mean interpretation—state interpretation. Along the same lines, don’t say result when you mean interpretation, because a result as that word is commonly understood isn’t a diagnosis and doesn’t require a physician’s medical judgment.

    - Consult vs. interpretation: A consultation is a special type of physician service according to Medicare and general insurance guidelines, and there typically must be a specific, written order from the patient’s attending physician for a consultation to be billable. Don’t refer to your work or report as a “consultation” unless the CPT descriptor associated with the code that will be billed includes that literal term as well (e.g., limited or comprehensive clinical pathology consultation; pathology consultation during surgery; consultation and report on referred slides). Your basic light microscopy examinations (e.g., tissues, non-gynecological cytology smears, bone marrow smears, peripheral blood smears) should be referred to as “interpretations,” and your diagnostic reports for hemoglobin and protein electrophoresis, immunofixation, and related “presumptive list” clinical lab tests are interpretations also.

    - Frozen section vs. intra-operative consultation: An intra-operative consultation can be performed by naked-eye examination, microscopic examination of a frozen section, or microscopic examination of a cytologic preparation (touch prep, imprint, squash prep). Each such service has a unique CPT code(s) associated with it. Don’t confuse matters by using FROZEN SECTION as the report heading for your intra-operative consultation diagnoses: it’s unlikely that 100 percent of your OR consults will, in fact, be conducted on frozen sections. Use a more generic term like INTRAOPERATIVE CONSULTATION.

    - Specimen adequacy vs. immediate study: The standard by which a statement on specimen adequacy is included in cytology reports creates the potential for conflict with acceptable documentation of pathologist fine needle aspirate (FNA) immediate studies. While both are specimen adequacy statements, only the latter is a separately billable service (88172). To avoid confusion, fine needle reports should have a distinct IMMEDIATE STUDY or RAPID IMPRESSION section that’s physically removed from the area where the CLIA-required statement on specimen adequacy is posted. Furthermore, the outcome of the pathologist’s immediate study work should be stated something like “the aspirates evaluated for adequacy by Dr. Pathologist at the time of the FNA procedure were pass #1 (inadequate) and pass #2 (adequate material present).”

    - Frozen block vs. section: Not too long ago a dermatopathologist narrowly avoided having to repay a lot of money to Medicare in relation to additional frozen section block charges (CPT code 88332). Both parties agreed that the accepted unit of service for frozen section codes 88331 and 88332 is the block (i.e., 88331 for the first frozen block per specimen, and 88332 for each additional frozen block from that specimen). Nonetheless, the auditor became concerned when she noted that the dermatopathologist used the words block and section interchangeably in his reports: she suspected—understandably so—that he might be billing code 88332 per slide rather than block, which would have dramatically inflated the number of legitimate billing units. The matter was ultimately resolved without formal action being taken or a refund being assessed, but the dermatopathologist learned the hard way that “words mean things,” and you can’t be sloppy about word choice when dictating reports.

CPT/HCPCS Procedure Coding Challenges

Surely no one reading this text fails to understand the basic relationship of CPT and HCPCS procedure codes to practice or laboratory income: bill the code, get the income; don’t bill the code or the allowed number of units, lose money. At least 75 percent (probably more) of insurance claims are paid based solely on CPT codes and units of service, fundamentally without regard to the amount charged.

Given the extraordinary importance of accurate, complete CPT reporting, it’s amazing the number of pathologists who take coding for granted: if you’ve got a CPT book, you know how to code. (It helps to stay at a Holiday Inn Express a couple nights a week too!) Think about it: if it were really that simple, why would you see so many ads offering pathology coding seminars, newsletters, consulting services, etc.? Experience indicates that pathologists and laboratories who shun ongoing coding education and resource assistance can easily forego as much as 8 to 12 percent in income compared to their more progressive, business-conscious peers. Ignorance is bliss—and usually very expensive too!

So where do you go to get expert, reliable CPT/HCPCS coding information and advice on a regular basis? Start here, with deepest apologies to anyone our panel has left out:

• Professional associations: Professional associations are excellent sources of up-to-date coding, regulatory, compliance, and other business information you need. They include the College of American Pathologists, the Clinical Laboratory Management Association, and the American Society for Clinical Pathology. The American Pathology Foundation is certainly an organization you should get to know, because it’s strictly oriented to the business side of the pathology profession. And practice administrators and other non-physician staff working for pathologists and laboratories should definitely check out the Pathology Management Assembly of the Medical Group Management Association for ongoing education and networking opportunities.

• Seminars, audio-conferences, etc.: Coding and related seminars, audio-conferences, and the like of importance to pathologists and their business office staff are offered on a regular basis by the aforementioned professional associations, plus private companies like The Coding Institute (Eli Research) and IOMA (Washington G-2 Reports). Audio-conferences are a particularly cost-effective way to educate several people from your company regarding a targeted topic.

• Dedicated pathology coding manual: There’s only one comprehensive manual currently available that focuses specifically on the CPT, HCPCS, ICD-9-CM and related coding and billing compliance needs of pathologists and histology/cytology laboratories: Pathology Service Coding Handbook, published by DLPadget Enterprises. An updated version of the electronic text is sent to subscribers once a quarter. The annual subscription includes six phone or e-mail mini-consultations with a pathology coding/compliance specialist.

• Publications: Three publications (two monthly and one bi-weekly) are recommended reading for pathology and laboratory business managers, compliance officers, etc.: G-2 Compliance Report, published by Washington G-2 Reports (IOMA); National Intelligence Report, also by Washington G-2 Reports (IOMA); and Pathology/Lab Coding Alert, published by The Coding Institute (Eli Research). The first two publications aren’t heavily oriented to coding, but they contain information of current compliance, regulatory, and related interest, so they’re “must reading” from that standpoint.

• Consultants: There are a few pathology coding specialists who provide consulting services on a project or ongoing basis as independent contractors. Your billing agent or attorney may be able to put you in touch with such a person, or you can check with your national professional association. Be sure to ask for and check out references before contracting with a consultant.

Coverage, Payment, and Coding Challenges

Preparing for Medicare’s PQRI