The End of the TC Grandfather: What does it mean?

As of July 1, 2012, independent laboratories which have been billing Medicare for hospital patient services will no longer be able to do so.  While this does not affect the vast majority of such labs (they would have had to been doing this since 1999), the impact on those that have been doing this and the hospitals they serve is significant. 

The reason that the TC grandfather is ending is that CMS believes that they have been double paying for these services over the years.  The payment rates for hospital services were determined to include the technical component of laboratory services, so a   separate payment to an independent laboratory was, in essence a duplicate payment.  Eliminating the TC grandfather provision merely eliminates that duplicate payment.

For those labs that currently bill for hospital patient services under the TC grandfather, beginning in July they will have to seek compensation for their Medicare patients from the hospital itself.  For outpatients, the hospital will be able to bill under the APCs and receive a payment for the technical component (the national rate for an 88305, billed through the APC is $36.81 as opposed to the $69.78 currently paid from the physician fee schedule).  For inpatients, the situation is even worse as the hospital will receive no additional monies (the payment is included in the current DRG payment).

The hospitals and laboratories will, however, have to work out an agreement as a failure to have a payment structure in place will constitute a free service and run afoul of the Stark provisions.

Any provider who was billing under the TC grandfather should be discussing this issue with their hospital clients to ensure that they are ready for the July 1, 2012 transition.