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On the Road to Herd Immunity, Labs and Payors Navigate Reimbursement Hurdles

  • Chief Customer Officer

Will I get paid for this? That’s not a question anyone wants to be posing when it comes to their work. Yet for most of 2020, amid the pandemic, it was one of the most pervasive questions from diagnostic laboratories to payors. While COVID-19 diagnostic testing volumes fluctuated dramatically, laboratories faced uncertainty in getting reimbursed for processing these tests. Then, in January 2021, CMS announced a highly anticipated adjustment to its payment policy for COVID-19 lab tests, finally creating reimbursement structure but piling on new challenges and pressure to meet turnaround time or risk financial penalty.

Under a new code known as U0005, the new CMS rule aimed to incentivize high throughput COVID test results while ensuring a 48-hour turnaround time – meaning test results are provided within two days of the specimen being collected, guaranteeing a clinically meaningful timeframe for all parties involved. Laboratories who meet this new turnaround time are reimbursed at $100 per test. If the turnaround time was not met, labs would only receive $75.

This new rule and structure offer clear parameters for the laboratories, along with confirmation they will be paid for the tests and information delivery back to clinicians and patients. Many payors have followed CMS’ lead on reimbursement. However, some health insurers have created their own policies that conflict with this standard. At best, this has added confusion for laboratories in an already challenging situation. At worst, these rogue payors threaten equal access to testing and availability of data that will be critical for understanding new variant strains of the virus, outbreak clusters and tracking towards herd immunity.  

Payor Misbehavior Creates New Hurdles

To maintain an efficient process and abide by CMS’ current policies, we are seeing that most labs will not bill the new U0005 code to payors who have not published that they will ensure payment, because they fear recoupment. One example is Blue Shield of California, who has instituted its own policy on COVID-19 testing reimbursement. Blue Shield has demonstrated the following behaviors:

  • Deciding that if there is no diagnosis for medical necessity attached to a specific claim, they will partially pay for the test but only if the patient is an essential worker, which is a difficult requirement to prove through administrative paperwork.
  • Discouraging reimbursement for back-to-work testing or testing for any clients that are asymptomatic but might have a COVID concern (unless they can prove the aforementioned essential worker requirement).

Complicating matters further, during the peak of the pandemic the federal government had confirmed that an ordering physician for a COVID test is only necessary for code U0005 and not the other two codes (U0003 and U0004). This was fixed in mid-March 2021, but for the first quarter of the year it resulted in unnecessary confusion and denials for many labs. In contrast, Medicare contractors request that U0003 and U0004 codes must be submitted at the same time as the U0005 code, which is not always possible. This arbitrary requirement leads to copious amounts of manual work for lab personnel as the required documentation is not able to be processed by the automated workflows that many labs use daily. The manual effort also creates significant room for error.

Forging ahead with disparate policies that discourage testing raises many questions and leads to concerns around whether adequate testing is being conducted. It also doesn’t address situations where certain individuals are exposed to COVID-19 but might be asymptomatic – a major problem in continuing to slow the spread of the virus. Ultimately, we expect to see these reimbursement variables lead to a larger decrease in testing and unanticipated costs for the patient, such as copays where none should exist.

A Path Forward

One year into the pandemic, we continue to hear about these federal and administrative hurdles that diagnostic labs must work around. For this reason, it is important to collaborate with a proactive partner that helps lab teams navigate through a constantly evolving environment.

The February 2021 executive order from the Biden Administration is a move in the right direction. By removing some of the medical screening barriers for COVID testing and strengthening requirements for health plans and insurers to cover diagnostic testing without cost sharing we are hopeful that through this order we are collectively forging a sustainable path forward.  

Until we reach herd immunity, COVID testing and the data collected from it is a crucial aspect of keeping our communities safe, which has been reiterated by many public health officials, scientists and policymakers. Looking ahead, if more payors were to behave like Blue Shield and testing is not conducted in a timely manner, nor getting adequately reimbursed, Americans will have difficulty proactively predicting variants, future outbreaks and a realistic timeline to herd immunity. By continuing to work together we will make strides to keep the industry honest and serve the larger purpose of eliminating COVID from our communities.


Stay informed on COVID-19 testing, testing supply needs, and payor billing requirements by visiting our COVID-19 Laboratory Resource Center.

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Published by XIFIN
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