It is important for providers to furnish exact procedure codes that clearly indicate the services provided along with the diagnosis codes. These codes are the only means of identifying the tests and procedures to the relevant diagnosis. Medicare reimbursement rules for pathology medical billing are clearly mentioned along with the correct codes as there are two parts to Medicare in pathology billing – namely Medicare Part A that takes care of hospitalization costs of patients after the annual deductible is met for people above age 65, and Medicare Part B.
Permanently disabled people and those stricken with chronic kidney disease are also covered under Medicare Part A, where the added benefit is that they are covered automatically. However, payment for inpatients may depend on individual diagnosis, which decides the fee that is fixed. In pathology billing all laboratory tests will come under diagnosis-related group (DRG) payment.
Medicare Part B takes care of lab and x-ray tests only for eligible people, and also covers certain services that do not come under Medicare Part B. Eligible people need to sign up because Medicare Part B in pathology billing is voluntary which attracts an annual deductible of 20%. Several large insurance companies that are contractors who serve as carriers for Medicare take care of clinical lab procedures, the payment for which is made from lab fee schedules. Each state has a carrier, adding to a total of 57, though New York has 3 carriers and California has two. The pathology services not included in the lab fee schedule will be paid for as per the Physician Fee Schedule.
A couple of basic criteria need to be met for Medicare to approve any diagnostic service or test. Firstly, the service needs to figure in Medicare's coverage plans. Secondly, and more importantly, it has to be established that the service was a medical necessity because of the indications. Provided these two pathology billing criteria are met, payments for most of the lab tests are made subject to Laboratory Fee Schedule. The carriers publish their own fee schedules, with updates being made each year on the 1st of January.
Most tests are bound by national fee limitations, where the caps spell out the maximum amount that can be paid by a carrier for any test. The National Limitation (1998) amounts specified for any test would depend on 74% of the amount listed on the fee schedules of the carriers. The figure used to be 76%, and was subsequently reduced to 74% leading to a loss of about 2% for almost all laboratory tests coming under pathology billing.
All Medicare reimbursements for laboratory tests have to be billed directly. The laboratory or pathologist has to directly bill Medicare for any tests performed. It the test is required to be performed by any outside laboratory (referred by the physician) it is the reference laboratory that is eligible to bill Medicare for the test. There are a few exceptions though, like in cases where the referring lab is attached to a rural hospital.
Current Procedural Terminology (CPT) codes function as an important aspect of any Medicare claim in pathology billing. The code is what decides whether a particular test or procedure is eligible for payment, hence using CPT codes is mandatory. Medical Billing Companies other than Medicare use these codes for identifying the various medical procedures used during treatment. The American Medical Association (AMA) revises and updates CPT codes every year. Out of a total of 7000 codes 950 CPT codes are for lab tests and other pathology services.