Background
The purpose of this notice is to inform providers of the methodology used when a Medicare claim contains more than one HCPCS Code for diagnostic lab automated panels. This Provider Notice will also explain why some claim payments are less than the sum of the covered rates for automated lab panels. All providers are reminded that the 1998 HCPCS Updates for Laboratory (Provider Notice 97-68) indicated those codes that MUST be included with the lab panels effective 01/01/98: 80049, 80051, 80054 and 80058.

Reduction Factor
A Reduction Factor is used in the claim calculations to reduce the covered fee allowance for those laboratory procedures that can be completed on automated multichannel equipment when multiple individual automated tests and an automated profile (or an organ and disease panel) that contains automated tests are billed for the same beneficiary and performed on the same day. When this situation occurs, the payment is based, in part, on the total of the automated tests performed LESS any duplicates. When used in any claim calculation, the Reduction Factor is system-generated and appears in the 'REMARKS' section (page 6) of the claim.

To fully understand this type of calculation, you must know which CPT codes were included in the automated panels that were deleted on 01/01/98 as well as those that were added on 01/01/98. It is also important to remember that although the CPT code books prior to 1998 listed the tests that could be used on automated multichannel equipment, they did not list the HCPCS codes involved.

Although now deleted, automated panel codes 80002 thru 80019 and G0058 thru G0060 consisted of the following twenty-two HCPCS codes: 82040, 82250, 82251, 82310, 82374, 82435, 82465, 82550, 82565, 82947, 82977, 83615, 84075, 84100, 84132, 84155, 84295, 84450, 84460, 84478, 84520 and 84550. These twenty-two HCPCS Codes are still considered to be automated tests.

Tests that can be and are frequently done as groups and combinations ('profiles') on automated multichannel equipment are less expensive to perform than tests that cannot be completed on automated multichannel equipment. HCFA never intended to overcompensate providers when the physician orders were for multiple lab panels containing both automated and non-automated tests and were to be performed on the same day. However, it was never HCFA's intent to penalize providers by simply excluding the entire allowable rate for any automated test(s) which is/are included in lab panels with non-automated tests. Reduction Factors were implemented to ensure equitable provider reimbursement when this type of situation occurs.

Example:
Assume that a single claim with one date of service includes HCPCS Codes 80051 and 80072. The charge for each test is $50.00. HCPCS Code 80051 is comprised of four automated tests (82374, 82435, 84132 and 84295). HCPCS Code 80072 also includes four tests (84550, 85651, 86255 and 86430). However, one of the four HCPCS Codes included in the 80072 is an automated test (84550). The 60% Rate for Code 80051 is $9.69 while the 60% Rate for the 80072 is $35.67. Because the payment is based, in part, on the total of the automated tests performed LESS any duplicates, the sum of $9.69 and $35.67 cannot be allowed on this claim and a Reduction Factor will be calculated.

A Reduction Factor for this claim would be electronically calculated as follows:

Step # 1: Add the 60% Rates for the both the 80051 ($9.69) and 80072 ($35.67). The total is $45.36.

Step # 2: Since there are a total of five automated tests on this claim, the 60% rate of $10.81 for the five automated tests (80005 for pricing purposes) is added to the fees for the three non-automated tests included in the 80072: $4.91 for 85651; $16.66 for 86255; and $7.85 for 86430. This total is $40.23.

Step # 3: The $40.23 is divided by the $45.36 to arrive at a Reduction Factor of .886904762.

Step # 4: The $9.69 for the 80051 is multiplied by the Reduction Factor and the resulting allowable fee becomes $8.59 for the 80051. The $35.67 for the 80072 is multiplied by the Reduction Factor and the resulting allowable fee becomes $31.64 for the 80072.

Billing:

Do NOT attempt adjustments to claims containing a Reduction Factor by inappropriately changing one (or more) HCPCS Codes to maximize reimbursement. Providers found to have a pattern of inappropriate adjustments will be subject to recovery and possible referral for Fraud and Abuse.

Questions:
If you have any questions regarding this bulletin, please contact the following: