One month from today, the law that permits independent laboratories to
bill and receive payment from Medicare Part B for the technical
component of certain anatomic pathology, cytopathology, and
surgical pathology services ("TC Services") provided to
patients of "covered hospitals" will expire.
Medicare pays hospitals a per-discharge amount for inpatient
services pursuant to the inpatient prospective payment system.
Similarly, outpatient services are reimbursed on a per-procedure
basis under the outpatient prospective payment system. For both
inpatients and outpatients, the payment received includes most
services provided to the patient.
Payments for inpatient services include all clinical laboratory
services as well as TC Services. Clinical laboratory services and
TC Services provided to outpatients are separately billable, but
the hospital, rather than the independent laboratory, must submit
claims for those services to Medicare.
In 2000, Congress enacted the Grandfather Clause to prevent the
Centers for Medicare
& Medicaid Services from ceasing to pay independent
laboratories separately for TC Services furnished to patients of
hospitals who had an agreement with an independent laboratory for
the provision of those services as of July 22, 1999 (referred to as
"covered hospitals" in the statute). The original
legislation applied to services furnished to a covered hospital
through 2002, but Congress has since extended the provision many
times. The current extension runs through July 1, 2012, but
Congress is not expected to grant additional extensions due to
concerns about Medicare paying twice for the same services and
about CMS's ability to determine with certainty which hospitals
qualify as "covered hospitals." In addition, eliminating
the protection would reportedly save $50 million per year.
Although the American Clinical Laboratory Association, the
College of American
Pathologists, and others continue their lobbying efforts,
chances for an additional extension appear bleak. Covered hospitals
and the independent laboratories with which they do business should
therefore begin to prepare for this substantial change in their
business relationship. Independent laboratories will have no choice
but to look to those hospitals previously covered by the
Grandfather Clause for payment for TC Services provided to their
patients becuase the laboratories can no longer bill Medicare.
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