In general, Medicare allows only the provider that actually performs a test or service to submit a claim for payment. As is often the case with the complex rules and regulations that govern federally funded health care programs, the general rule stated above has many exceptions. The rules and regulations that govern which providers may submit claims are known as the Medicare prohibition of reassignment, or more commonly Medicare’s direct billing rules. The direct billing rules include exceptions for both clinical laboratories and pathologists, however the rules only apply when certain conditions are met.
Exceptions that Apply to Clinical Laboratories
Exceptions that apply directly to clinical laboratories may be found in the Medicare Claims Processing Manual (CMS Pub 100-04), Chapter 16, §40.1. Those provisions state that clinical laboratories may submit claims to Medicare for tests sent out to other reference labs if any one of the following requirements is fulfilled:
The referring lab is located in or is part of a rural hospital;
The referring lab is wholly-owned by the reference lab, or the referring lab wholly owns the reference lab, or both the referring lab and the reference lab are wholly-owned by a third entity; or
No more than 30% of the clinical diagnostic tests for which a laboratory receives requests annually may be performed by another laboratory, other than an ownership related laboratory.
Also, relevant provisions of the Medicare Claims Processing Manual state that only one laboratory may submit a claim to Medicare for a particular test or procedure. If the referring laboratory intends to bill for the test, it is the responsibility of the referring laboratory to ensure the reference laboratory does not also submit a claim to Medicare for the procedure.
The above rules apply only to hospital and independent laboratories, not physician office laboratories. Physician office laboratories may not bill Medicare for any testing referred to other labs.
The "70/30" Rule
The Medicare Claims Processing Manual includes the following example concerning how a laboratory should calculate whether or not it qualifies to bill for referred testing under the 70/30 rule:
" A laboratory receives requests for 200 tests, performs 139 tests, and refers 61 tests to a non-related laboratory. All tests referred to a non-related laboratory are counted. Thus, 30.5 percent (61/200) of the tests are considered tests referred to a non-related laboratory and, since this exceeds the 30 percent standard, the referring laboratory may not bill for any Medicare beneficiary laboratory tests referred to a non-related laboratory."
At one time, relevant provisions also stated that each CPT code counts as a single test. For example, an electrolyte panel would count as 1 test because the laboratory submits one code (80051) even though the laboratory actually performs 4 tests. However, CMS removed that language many years ago from the provisions that discuss the 70/30 rule. The language disappeared around the time CMS converted from Paper Based Manuals to Internet Only Manuals. At this time, CMS offers no further guidance concerning how to count tests for compliance with the 70/30 rule.
In absence of such guidance, laboratories must determine on their own the best way to determine how much their testing is performed in-house as opposed to sent to outside reference laboratories. Whatever measure a laboratory chooses to use to calculate the percentage of tests it sends out, that method should be reasonable and consistently applied.
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