Explanation of Adjustment Calculation:						
"With the packaging of laboratory services into the 2014 hospital OPPS payment rates, it was assumed that unrelated laboratory services would be packaged and that there would be minimal unrelated laboratory tests billed outside of OPPS.  However, based on an analysis of outpatient laboratory claims in 2014, there was a significant increase in these services.  This spending is permitted through an exception to the CY 2014 final rule laboratory packaging policy, and is assumed to be the result of a change in provider billing patterns for the same mix of laboratory services.  

Per CMS guidance, on January 1, 2014 providers used bill type 14x to bill for unrelated laboratory services. On July 1, 2014 CMS directed providers to use bill type 13x, with a modifier L1, to indicate unrelated laboratory tests for separate payment (see Transmittal 2971, May 23 2014, July 2014 Update to the Hospital Outpatient Prospective Payment System). Utilization of laboratory services under bill type 14x increased beginning on January 1, 2014. This utilization switched to bill type 13x with a modifier L1, starting July 1, 2014.  Since this spending was packaged into the OPPS payment rates, hospitals received duplicate payment for these unrelated laboratory services under OPPSboth packaged payment and separate payment at CLFS payment rates.  Therefore, we are proposing an adjustment to the 2016 OPPS rates so that they reflect the actual impact of the laboratory packaging policy.

In order to quantify the increase in unrelated laboratory spending resulting from the change in billing patterns, we tabulated spending on 2014 outpatient laboratory claims processed as of May 31, 2015 by bill type. This data was assumed to be fully complete for 2014, so no adjustment was necessary for completion. The impact was quantified by adding the estimated increase in the laboratory spending using bill type 14x from 2013 to 2014, and the laboratory spending using bill type 13x coded with an L1 modifier.  This amounted to roughly $1.0 billion. 

The adjustment factor of 2.0 percent was calculated by taking the ratio of the increase in unrelated laboratory billing of $1.0 billion to total OPPS claims in 2014, which is roughly $49.9 billion.  The data used to determine this is 2014 OPPS services and includes the Medicare payment amount and the beneficiary cost sharing.  It was tabulated as of 2/28/2015 and totaled approximately $49.1 billion.  This data was assumed to be 98.4 percent complete so an adjustment was made, resulting in an estimated total of $49.9 billion.

Laboratory claims were tabulated from Medicare Integrated Data Repository (IDR) Outpatient claim line payments associated with laboratory Healthcare Common Procedure Coding not packaged under the OPPS. These included National Claims History (NCH) claim type code 40 claims, with bill types 12x, 13x, and 14x.  Hospital OPPS claims were tabulated from IDR Outpatient NCH claim type code 40 claim lines having a valid OPPS Ambulatory Procedure Classification on bill types 12x, 13x and 14x. Both sets of services were aggregated on an incurred calendar year basis using claim through dates.  (Please note that given Maryland hospitals are exempt from the OPPS under the Maryland All Payer Model Agreement, these outpatient hospital and laboratory claims were excluded from the analysis.)
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Adjustment Input Quantities						
CY2014 OPPS Spending As of2/28/2015	" 49,100 "					
Completion Factor	98.4%					
CY2014 OPPS Spending Completed	" 49,900 "					
Unrelated Lab Billing Shift	"1,000"					
Update Adjustment	2.00%					
						
						
