Re: Who bills Medicare for referral tests

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From:"D. Hammer" <> (by way of histonet)
To:histonet <>
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When a patient is admitted for a procedure, lets say for example, a
Cholestectomy. Medicare has assigned a DRG (Diagnostic Related Group) to
that procedure.  It pays the Hospital a lump sum for the entire procedure,
from the bed, to the surgery, to the lab tests, to the tests referred out
to another institution, to the gauze and Kim wipes.  It also assumes that
any tests done within 72 hours of admit are included, such as CBC's or any
other pre surgery testing.

When the hospital sends a specimen to a referral lab, they are
purchasing tests they don't have inhouse or need further work up.  These
tests, in Medicare's mind are paid for in the DRG. (just like the Kim
Wipes)  Medicare does not care how much energy or money you spend on
patient care, they only pay what they have set for the DRG.  That is the
impetus for doing things differently to cost less, and keep the same
quality. (quite a challange after awhile, especially improving quality as

Thus, when a specimen is referred out to another lab, the Hospital has
to be billed as, in Medicare's mind, they have paid for the service
already and will not pay again.

If, in fact, the lab which the specimen was referred to bills Medicare
before the orriginating Hospital does, they may pay the lab in error and
then disallow payment to the Hospital who will lose the entire payment of
the DRG, while the lab collects a small portion for their procedure.  This
is illegal and is fraud, even if unintentional.

I hope this helps to understand why labs who have recieved referral
specimens must bill the institution it came from.

Specimens referred to another lab from Outpatients can be billed to
Medicare. I will just say, that I have decided our Lab will bill the
Hospital for all Medicare Pt. referrals, whether inpatient or out
patient. It is almost always impossible to determine their status of when
the specimen was removed.  Some referrals come with historical blocks or
slides along with a recent procedure.  It could be a mix of inpatient and
out patient material.

Besides, Medicare is setting up APG's for outpatients which is essentially
the same way of payment as the DRG's for inpatients.  The same ruling
will probably apply shortly there after.

By billing the Hospital for both in and out pt. I hope to keep both
institutions out of a fraud claim.

If anyone has a better or different approach, I would appreciate hearing
about it?  Confirmation would help ease my mind as well. :)

Thanks, Don

Don Hammer, Administrative Director            UNIVERSITY OF WASHINGTON
Hospital Pathology, Box 356100                     MEDICAL CENTER
1995 NE Pacific St.
Seattle Washington, 98195                  ~Where Knowledge Comes To Life~
(206) 548-6401 Fax: (206) 548-4928

On Mon, 23 Nov 1998, Priscilla wrote:

> I've been wading through the quote from the national intelligence
> report about how to bill for referral tests.
> I don't understand why the hospital should be the one to bill Medicare when
> they will eventually receive a bill from the reference lab for the full
> price of the test.  Most of the time the reason a test is sent out is
> because that particular test is not ordered frequently enough to have the
> overhead of keeping reagents required for the test or to justify a
> technicians time to run.   Hospital laboratorys don't  order the testing
> whether done in house or referred.  A physician orders the tests.  Why
> should the hospital be put in a position to pay full price on a test that
> someone else has ordered, someone else has run and be reeiembursed at a
> fraction of the cost of the test, sometimes even lower than it costs to run
> the test, not even including the cost of packaging raw material to be sent
> to the lab? (Of course, I don't think anyone should have to be reeiembursed
> in that manner, even reference labs.)
> In the paragraph that talks about the 70/30 rule--how is that percentage
> decided?  On an average from the previous year?  And how would a person
> know when that ratio has been exceeded?
> In the paragraph that talks about the lowest of three possible rates:  Who
> is the carrier lab?  What is meant by the national limitation amount and
> who sets that?  What is meant by median?  I believe the provider would be
> the referring lab.
> I hope I don't bore with these questions, but a person will never learn if
> he or she doesn't ask the questions.
> Cheers!  Priscilla in Central Wyoming

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