2017 OPPS proposed rule: CMS tweaks packaging logic, deletes modifier

July 8, 2016
Medicare Web

CMS proposes aligning its conditional packaging modifiers and deleting a much-maligned modifier for separately payable laboratory tests in the 2017 OPPS proposed rule, released July 6.

Some conditional packaging status indicators are currently based on the date of service, while others package based on the claim’s from and through dates, meaning packaging crosses all dates encompassed in those fields (FL6) of the claim. For CY 2017, CMS proposes to change its packaging logic for all conditional packaging status indicators so that it occurs at the claim level.

“CMS’ proposal doesn’t come as a huge surprise since the agency has made it clear that it wants to create larger bundles of services for which a single payment is made,” says Jugna Shah, MPH, president and founder of Nimitt Consulting, Inc. “If finalized, the proposal will allow the agency to ensure items and services provided during outpatient hospital visits that span more than one day are packaged rather than paid for separately.”

The proposal would change the logic for status indicators Q1 and Q2, which currently package items or services provided on the same date of service as those assigned status indicator S, T, and V.

CMS also proposes deleting modifier –L1 (separately reportable laboratory test), which had been operationally burdensome and confusing to report, led to a billion dollar CMS miscalculation, and was subsequently replaced in functionality with status indicator Q4. With few uses left, CMS is looking to discontinue use of the modifier.

CMS writes:

Packaging of other ancillary services in the OPPS is not dependent upon a common diagnosis with the primary service into which an ancillary service is packaged. Therefore, we do not believe that this should be a requirement for laboratory test packaging.

As a result, if CMS finalizes its proposal, all laboratory tests that appear on a claim with other hospital services would be packaged, even if ordered by a different provider for a different diagnosis than the other services.

One circumstance that led to the introduction of modifier -L1 is CMS’ existing billing rules that a reference lab specimen sent to the hospital for testing by a community physician office, which is usually billed on a Type of Bill (TOB) 141, has to be added to any OPPS claim for the same day and billed on a TOB 131.

Since the test has to be added to the same claim per CMS’ billing rules, the only way to achieve separate payment for the unrelated test is to append modifier -L1. It does not seem appropriate to package unrelated reference lab tests that happen to be added to an OPPS claim, says Valerie Rinkle, MPA, lead regulatory specialist and instructor for HCPro, a division of BLR, in Middleton, Massachusetts.

For example, a patient had a skin lesion biopsied in a dermatologist office in the morning and it was sent to the hospital for testing. Later that day, the patient sprains his ankle and is seen in the ED. The unrelated lab test is required to be added to the ED claim and modifier -L1 is used to communicate that it was not a related test.

If CMS allowed hospitals to bill the reference lab tests on the separate TOB 141 claim even when the patient is seen at the hospital that same day, then these tests would be paid separately. Under this new proposal, all reference lab tests that happen to occur on the same day as an OPPS visit would be packaged and no longer separately payable.

“Hospitals with significant reference lab work may want to evaluate this policy to determine its impact on this line of business,” says Rinkle. “Is CMS’ premise correct that it is burdensome for hospitals to append this modifier? Why can’t CMS change the billing rule, because packaging unrelated ancillary services seems very different from CMS’ other OPPS packaging based on the incidental, supportive, and adjunctive relationship to primary services. “

The agency is creating new packaging exceptions for certain types of tests, however. With molecular pathology tests already excluded from packaging, CMS noted in last year’s OPPS final rule that the agency would be willing to consider other tests for exclusion in the future.

After considering commenter suggestions, CMS is proposing to expand the packaging exception to all advanced diagnostic laboratory tests (ADLT). ADLTs have been defined as a test that is offered and furnished only by a single laboratory and not sold for use by a laboratory other than the original developing laboratory (or a successor owner) and meets one of the following criteria:

  • The test is an analysis of multiple biomarkers of DNA, RNA, or proteins combined with a unique algorithm to yield a single patient-specific result
  • The test is cleared or approved by the FDA

Once a test has been designated an ADLT under the Clinical Laboratory Fee Schedule (CLFS), CMS would assign it status indicator A (separate payment under the CLFS).

For more information, see CMS' fact sheet. and yesterday's coverage. Comments are due by September 6 and a final rule is expected by November 1.