This week, the Centers for Medicare & Medicaid Services (CMS) announced (see announcement here) that it is exercising enforcement discretion until January 2, 2019 for its new Medicare laboratory billing rule on the date of service exception. This agency action allows hospitals to continue to bill for affected advanced diagnostic laboratory tests (ADLTs) and molecular pathology tests until the hospitals and those laboratories that would otherwise be responsible for billing under the new rule have developed a billing system that enables the performing laboratory to bill for the tests. CMS made its enforcement discretion decision in response to industry feedback, which suggested that additional time was needed to meet the new rule’s July 2, 2018 implementation date.

Under the Medicare program, with certain exceptions, hospitals are required to bill for services provided to beneficiaries during a hospital outpatient encounter. And, in general, the date of service on a hospital’s Medicare claim for clinical laboratory tests is the date of specimen collection. Under a new rule that went into effect on January 1, 2018, the date of service on a claim for certain ADLT and molecular pathology tests that are excluded from the hospital outpatient prospective payment must be the date the test was performed. Under this new date of service exception, the performing laboratory must bill for tests that meet the following conditions:

1. The test was performed following a hospital outpatient’s discharge from the hospital outpatient department;

2. The specimen was collected from a hospital outpatient during an encounter (as both are defined in Medicare regulations);

3. It was medically appropriate to have collected the sample from the hospital outpatient during the hospital outpatient encounter;

4. The results of the test do not guide treatment provided during the hospital outpatient encounter; and

5. The test was reasonable and medically necessary for the treatment of an illness.

A list of laboratory billing codes that may be subject to the exception is available on the CMS website (see link noted above).

During the enforcement discretion period, either the hospital or the laboratory may bill for the test that is otherwise subject to the new rule. If the hospital bills, the laboratory would seek payment for the test it performs from the hospital. Affected entities should continue to work with their Medicare contractor and coordinate with each other to ensure bills are submitted and paid correctly.