Reimbursement

Laboratory Testing

In June 2025, the U.S. Department of Health and Human Services Office of Inspector General (OIG) announced a new item in its Work Plan: “Medicare Payments for Clinical Diagnostic Laboratory Tests in 2024.” This annual review, mandated by the Protecting Access to Medicare Act of 2014 (PAMA), focuses on analyzing the top 25 laboratory tests by Medicare expenditures for the previous calendar year. For clinical laboratories and healthcare providers, this announcement signals the need to pay close attention to billing practices, compliance programs, and potential audit risks.

This post is the first in a series dedicated to Colorado’s Medicaid finance and payment systems, challenges faced by those programs, and opportunities for expansion.

The Colorado Healthcare Affordability and Sustainability Enterprise (CHASE) oversees Colorado’s hospital provider tax and the use of those taxes to support Medicaid supplemental payments. CHASE uses the largest portion of those taxes to generate payments targeting the cost shortfalls from treating Medicaid and uninsured patients. Broadly speaking, federal regulations (see 42 C.F.R. §§ 447.272, 447.321) allow each class of institutional providers to be paid for Medicaid services (on a fee-for-service basis) to a level that approximates what could have been paid under Medicare payment principles. This is known as the Upper Payment Limit (UPL). For the past several years, CHASE has limited these payments to less than the full amount permitted by federal law out of concerns about potential overpayments and statewide recoupment risks. The Colorado Hospital Association (CHA) is currently advocating for CHASE to increase payments to 100% of the UPL—i.e. “the full UPL.”

As the novel coronavirus outbreak continues, the federal government and commercial health insurers have taken significant steps to increase Americans’ access to treatment and testing. In the past week, the federal government and private insurers have issued a number of guidance documents expanding coverage and payment requirements in an effort to minimize the spread of the virus. As with any changes in coverage and reimbursement, healthcare providers offering telehealth services should carefully review these changes and take steps to ensure that all regulatory and coverage requirements are met prior to submitting claims for reimbursement.

I. Medicare

On March 6, 2020, the bipartisan Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 (“Coronavirus Appropriations Act”) was signed into law authorizing federal spending to combat the ongoing coronavirus outbreak in the United States. This Act, among other things, gives the United States Department of Health and Human Services’ (“HHS”) secretary the authority to temporarily waive certain Medicare requirements for telehealth services.

The Centers for Medicare and Medicaid Services (“CMS”) currently reimburses a limited set of telehealth services provided to Medicare beneficiaries subject to certain criteria under section 1834(m) of the Social Security Act. Generally, the patient receiving telehealth services must be located at one of eight “originating sites”, which include hospitals, physicians’ offices, and rural health clinics. In addition, the originating site must meet certain geographic requirements which have essentially limited the availability of telehealth to patients in rural areas. These requirements have long posed a hurdle to the expansion of telehealth despite the industry’s demand for lessened restrictions. However, with the rapid spread of the coronavirus and the possibility of facing large scale isolations and quarantines, lawmakers have signaled their willingness to expand access to telehealth to fight against this public health crisis.

Within the Coronavirus Appropriations Act is the Telehealth Services During Certain Emergency Periods Act of 2020, which sets forth the waiver authority for the secretary of HHS regarding the certain telehealth requirements. Under the Telehealth Services During Emergency Periods Act, the secretary is authorized to temporarily waive the originating site and geographic requirements for telehealth services provided to Medicare beneficiaries located in an identified “emergency area” during an “emergency period” when provided by a qualified provider. To qualify for the waiver, the provider must have treated the patient within the previous three years or be in the same practice (i.e., as determined by tax identification number) of a practitioner who has treated the patient in the past three years. The bill also lessens the telecommunications requirements by allowing Medicare beneficiaries to receive telehealth services via their smartphones (i.e., telephones that allow for real time, audio-video interaction between the provider and the beneficiary). Because the federal government has declared a nationwide public health emergency as a result of the coronavirus, the waiver will apply across the country until there is no longer a nationwide public health emergency.

Players in the healthcare industry continue to identify ways to use technological innovations to decrease overhead expenditures and increase bottom lines.  AI software to automatize EHR documentation in place of human input, mobile apps and portals to grant patients immediate access to their medical records, and blockchain technology to accelerate claims adjudication are some examples. In particular, commercial health insurers have employed various cost containment measures to minimize non-claim expenses. One measure involves the use of virtual credit cards, or VCCs, in lieu of traditional payment methods to reimburse providers for services rendered to plan enrollees. A VCC is linked to the payer source’s credit card account but generates a new 16-digit single-use number each time the physical card’s 16-digit number is used. Payers send providers the number with instructions to access and process these payments electronically.

Senate Bill 1264, which recently passed during the 86th Texas legislative session, places restrictions on certain out-of-network providers regarding the practice known as “balance billing” and establishes a process through which health plans and providers may resolve payment disputes. The bill is effective September 1, 2019 and applies to services and supplies provided on or after January 1, 2020.

I.  Balance Billing and SB 1264

The term “balance billing” refers to when a healthcare provider bills a patient for the difference between the reimbursement provided by the patient’s health insurance and the amount charged by the provider. SB 1264 places restrictions on balance billing by out-of-network (OON) providers of emergency services, facility-based services provided at an in-network healthcare facility, and lab and diagnostic imaging services that are related to an in-network service. The law disallows these providers from billing a patient for an amount greater than the applicable copayment, coinsurance, and deductible under the health plan based on the initial amount determined to be payable by the plan, or if applicable, a modified amount determined under the plan’s appeal process.

Hospitals are not happy with CMS’ recent changes to hospital outpatient payments.  Two hospital associations and three hospitals claim in a federal lawsuit filed December 4, 2018, that CMS had no authority to change the payment scheme for off-campus provider-based departments (PBDs).  The change took effect January 1, 2019, and is estimated to reduce payments to hospitals by $380 million in the first year of a two-year phase-in period.

The plaintiffs, including the American Hospital Association and the Association of American Medical Colleges, are seeking judgment that the payment change is unenforceable as well as preliminary and permanent injunctive relief.  The complaint against US Department of Health and Human Services Secretary Alex Azar was filed in the U.S. District Court for the District of Columbia.

The plaintiffs’ assert that the reduced payments threaten patient access to care and harm the providers’ ability to meet the health care needs of their patients, including some of the most vulnerable populations. 

With the global telehealth market projected to more than quadruple in value over the next five years, even slow-moving government payors have responded to the pressure to expand reimbursement options for telemedicine services. But reimbursement woes continue to top the list of concerns voiced by providers, and the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”) is keeping a watchful eye on reimbursement-related growing pains. On April 30, 2018, OIG released a report that identifies the impact of some of these growing pains on Medicare claims payments.

Hurricane Harvey. On August 26, 2017, the Secretary of Health and Human Services (HHS) issued a waiver of certain compliance requirements, retroactive to August 25, 2017, for providers in areas of Texas affected by Hurricane Harvey.  A similar waiver was issued August 28, 2017, for providers in Louisiana, retroactive to August 27, 2017.  Along with these waivers, the Secretary of HHS issued disaster declarations for the states of Texas and Louisiana pursuant to section 319 of the Public Health Service Act, and the President issued disaster declarations for the states of Texas and Louisiana pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

On July 13, the Centers for Medicare & Medicaid Services (“CMS”) put out its 2018 Medicare Hospital Outpatient Prospective Payment System Proposed Rule. The Rule proposes, among other things, to dramatically reduce Medicare Part B reimbursement of drugs procured by hospitals at 340B prices—from the current rate of Average Sales Price (“ASP”) plus 6 percent to ASP minus 22.5 percent.  By CMS’s estimate, this could result in savings to the Part B program of $900 million and a corresponding cut to the 340B hospitals which currently receive those payments (and ostensibly use them in furtherance of the 340B program’s goal of assisting safety net providers in stretching their scarce resources).  

On May 23, 2017, Texas Governor Greg Abbott signed Senate Bill (SB) 507, expanding the current law dealing with “balance billing.”

Balance billing occurs when an insured patient receives care from a physician, hospital or other healthcare provider, who is not part of a patient’s health plan provider network. The out-of-network provider then bills the…