Billing Steps for Clinical Diagnostic Laboratory Tests Subject to Anti-Markup Rules

A. General Principles of Medicare Anti-Markup Rules Diagnostic Tests

Understanding the complexities of billing for **clinical diagnostic laboratory tests** is crucial for preventing denials and ensuring proper reimbursement. When a physician or other supplier bills for the technical component (TC) or professional component (PC) of a **clinical diagnostic laboratory test** performed by an independent entity—meaning the billing entity and the performing entity do not share a practice—the payment is subject to the **Medicare anti-markup rules diagnostic tests** limitation. If a physician or other supplier’s bill or a request for payment includes a charge for a **clinical diagnostic laboratory test** which the physician or other supplier did not personally perform or supervise, then payment for the test may not exceed the lesser of:

• The performing physician’s net charge to the billing physician or other supplier (net any discounts);

• The billing physician’s actual charge; or

• The fee schedule amount that would be allowed for the test if the performing physician or other supplier billed directly.

For payment to be made, the physician who acquires the TC or PC of a **clinical diagnostic laboratory test** from an outside source must identify the performing physician or other supplier on the claim. (The billing physician or other supplier should maintain a record of the performing physician or other supplier’s **NPI** in the clinical record for auditing purposes.)

The billing physician or other supplier must also indicate on the claim that the test is subject to the anti-markup payment limitation.

Consult official guidelines for electronic claims submission on how to show this on electronic claims.

If using the CMS-1500 paper claim form for clinical lab services:

• In Item 20, check “yes” to indicate the test is subject to the anti-markup payment limitation and enter the amount the performing physician or other supplier charged.

• Crucially, in Item 21, ensure accurate and specific ICD-10 diagnosis codes are reported. These codes must directly support the medical necessity for each laboratory test performed, aligning with the ‘Indications’ found in relevant NCDs and LCDs. Proper documentation of medical necessity is essential for successful **medical necessity lab test billing**.

• In Item 32, enter the name, address, and NPI of the performing physician or supplier. If the performing physician provides the service outside the A/B MAC (B) jurisdiction where the billing physician is located, the billing physician must submit its own NPI with the name, address, and ZIP code of the performing physician or other supplier. This is a key requirement for **Medicare anti-markup rules diagnostic tests**.

No payment may be made to the physician without this information unless the statement “No anti-markup tests are included” is annotated on the claim.

NOTE: Understanding the separation of Technical Components (TC) and Professional Components (PC) is key in **CMS-1500 clinical lab billing requirements**. The TC covers the resources, equipment, and personnel involved in performing the test, while the PC covers the physician’s interpretation and report. If the billing physician performs only the TC or the PC and acquires the other component from an outside source, both components must be reported as separate line items (e.g., with modifiers -26 for professional component and -TC for technical component) if billing electronically, or on separate claims if billing on paper (**CMS-1500**). Global billing, where both components are billed under a single code, is only permitted when the billing physician or other supplier performs *both* components of the **clinical diagnostic laboratory test**.

Effective for claims submitted with a receipt date on and after October 1, 2015, the billing physician or supplier must report the name, address, and NPI of the performing physician or supplier in Item 32a of the CMS-1500 claim form (or its electronic equivalent) on anti-markup claims, even if the performing physician or supplier is enrolled in a different A/B MAC (B) jurisdiction. (See §10.1.1.2 for more information regarding claims filing jurisdiction.)

Medical Necessity and Coverage Limitations for Clinical Laboratory Tests

A critical aspect of **preventing denials for lab test claims** is understanding and adhering to medical necessity criteria and frequency limitations outlined in National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs). Billing for tests that do not meet these requirements can lead to claim rejections. Here are key considerations for common **clinical diagnostic laboratory tests**:

• Glycated Hemoglobin/Protein Tests (NCD 190.21): These tests are generally medically necessary for monitoring diabetes management. However, Medicare typically limits coverage to no more than once every three months for controlled diabetics, or once a month for pregnant diabetics. Testing beyond these frequencies requires strong, documented medical justification to avoid denials.
• Thyroid Testing (NCD 190.22): Thyroid Stimulating Hormone (TSH) tests are covered for diagnosing and monitoring thyroid dysfunction. However, routine screening in asymptomatic individuals is generally not covered. Frequency of testing depends on the patient’s condition and treatment plan, but excessive testing without medical justification will be denied.
• Lipid Testing (NCD 190.23): While medically necessary for diagnosing and managing hyperlipidemia and assessing cardiovascular risk, routine lipid panel screening in asymptomatic individuals without specific risk factors is generally not covered by Medicare. Covered indications include follow-up after an abnormal screening, monitoring treatment effectiveness, or for individuals with known cardiovascular disease.
• Tumor Marker Assays (e.g., CEA, AFP, hCG, CA 125, CA 15-3/27.29 from NCDs 190.25, 190.26, 190.27, 190.28, 190.29): These markers are primarily covered for *monitoring* disease recurrence or response to therapy in patients with a confirmed cancer diagnosis. They are generally *not* covered for initial cancer diagnosis or routine cancer screening in asymptomatic individuals. Specific NCDs detail appropriate use and frequency limits for each marker to ensure **medical necessity lab test billing**.

Always consult the specific NCDs and LCDs relevant to your jurisdiction for the most accurate and up-to-date coverage guidelines.

Stay Current with Regulatory Updates

It is critical to note that CMS regulations, National Coverage Determinations (NCDs), and coding guidelines are subject to frequent updates. For example, while some rules had an effective date of October 1, 2015, NCDs like 310.1 (Cardiac Catheterization) have seen updates as recently as April 2024. Healthcare providers must always consult the most current official CMS manuals and National Coverage Determinations for the latest guidance to ensure compliance and avoid **preventing denials for lab test claims**. A valuable resource is the CMS Medicare Coverage Database, which provides comprehensive information on **Medicare coverage principles**.

B. Unassigned Claims with Required Documentation

A physician or other supplier may not bill an individual an amount in excess of Medicare’s payment, except for any deductible and coinsurance, for the TC or PC of a **clinical diagnostic laboratory test** that is subject to the anti-markup payment limitation. A/B MACs (B) must notify physicians and other suppliers that they must indicate when a **clinical diagnostic laboratory test** was acquired, identify the performing physician or other supplier, and show the amount the performing physician or other supplier charged. The notification must inform physicians and other suppliers that they are prohibited by §1842(n)(3) of the Act from billing or collecting an amount in excess of Medicare’s payment, except for the deductible and coinsurance. Excess amounts collected from the beneficiary must be repaid.

C. Unassigned Claims without Required Documentation

A physician may not bill a beneficiary:

• If the bill does not indicate who performed the test; and

• If the bill indicates that a separate physician or other supplier performed the test, it does not identify the performing physician or other supplier or does not include the amount the performing physician or other supplier charged.

The A/B MACs (B) notify the physician when a non-assigned claim for the TC or PC of a **clinical diagnostic laboratory test** subject to the anti-markup payment limitation is received from either the physician or a beneficiary except when the physician submits an assigned claim and the beneficiary submits an unassigned duplicate claim. They use the following sample letter.

Dear Doctor:

We have received an unassigned claim for **clinical diagnostic laboratory tests** furnished to the patient (Beneficiary Name), on (Date of Service). You are prohibited by §1842(n)(3) of the Social Security Act from billing or collecting any amount unless you indicate that “No anti-markup tests are included” or, if the **clinical diagnostic laboratory test** was acquired, you indicate who performed the test and what the physician or other supplier charged you. Some or all of the required information is missing from your patient’s claim. If you have collected any amount from your patient, it must be refunded. This claim may be resubmitted if the required information is included.

D. Beneficiary Information Regarding Unassigned Claims

The A/B MACs (B) must notify the beneficiary that the physician is prohibited from:

• Billing the beneficiary when the necessary documentation is not supplied; and

• Billing or collecting an amount in excess of Medicare’s payment, except for the deductible and coinsurance, when the required documentation is submitted.

Common Denial Reasons for Clinical Diagnostic Laboratory Test Claims

Despite careful preparation, claims for **clinical diagnostic laboratory tests** can still face denials. Understanding common pitfalls can help in **preventing denials for lab test claims**:

• Lack of Documented Medical Necessity: This is a primary reason for denials. If the diagnosis codes in Item 21 of the **CMS-1500** do not align with the medically accepted indications for the test as defined by NCDs/LCDs, the claim will likely be denied. Ensure that patient records clearly support the necessity of the ordered tests.
• Testing Performed Too Frequently: Exceeding the frequency limitations set by NCDs or LCDs without compelling, documented medical justification will result in denials. For instance, billing for a Glycated Hemoglobin test every month for a well-controlled diabetic will be denied.
• Incorrect Performing Provider Information: Missing or inaccurate information for the performing physician or supplier in Item 32 (or its electronic equivalent) is a common administrative error.
• Missing National Provider Identifier (NPI): The **NPI** of both the billing and performing providers is crucial for claim processing. Omissions lead to rejections.
• Failure to Apply Anti-Markup Limitation Correctly: Not indicating that a test is subject to the anti-markup rule or incorrectly reporting the performing physician’s net charge can lead to payment reductions or denials under **Medicare anti-markup rules diagnostic tests**.
• Billing for Non-Covered Screening Tests: As noted, many routine screening tests (e.g., lipid panels for asymptomatic individuals, tumor markers for initial diagnosis) are not covered by Medicare.

Proactive internal audits and a thorough understanding of NCDs are essential to mitigate these risks.