Payment for Clinical Diagnostic Lab Tests

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) mandated that, effective July 1, 2009, clinical diagnostic laboratory services furnished by a CAH be paid on a reasonable cost basis without regard to whether the patient is physically present in the CAH or in a skilled nursing facility or a clinic (including a rural health clinic) that is operated by a CAH at the time the specimen is collected.

Currently, patients must be physically present in the CAH at the time the specimens are collected. In order to implement the statutory change, CMS has proposed that a CAH may receive reasonable cost-based payment for outpatient clinical diagnostic laboratory tests furnished to an individual who is an outpatient of the CAH. CMS, however, is still defining “outpatient” to mean a person who is registered at the hospital or that CAH records as an outpatient and receives services directly from the hospital or CAH. CMS has proposed to define “receives directly from the CAH” to mean that either the patient must be receiving outpatient services in the CAH on the same day the specimen is collected, or the specimen must be collected by an employee of the CAH. The individual would not have to be physically present in the CAH at the time the specimen is collected.

Optional Method of Payment for Outpatient Services

The Proposed Rule would change reimbursement under the “optional method” or “Method 2” for CAH outpatient services to reduce reimbursement to “reasonable cost” rather than 101 percent of reasonable costs under 42 C.F.R. § 413.70(b)(3)(ii)(A). CMS has proposed this change because section 1834(g)(2)(A) of the Social Security Act uses “reasonable cost” reimbursement instead of 101 percent of reasonable costs.

MedPAC Recommendations

In its March 2009 “Report to Congress: Medicare Payment Policy,” MedPAC recommended that “Congress should increase payment rates for the acute inpatient and outpatient prospective payment systems in 2010 by the projected rate of increase in the hospital market basket index, concurrent with implementation of a quality incentive payment program.” CMS believes that an update equal to less than the market basket will motivate hospitals to control their costs consistent with MedPAC’s recommendation.