The correct way of using Modifier L1.
Modifier L1 Separately payable lab test was implemented in 2014 by the Centers for Medicare & Medicaid Services (CMS) as part of the July Outpatient Prospective Payment System (OPPS) package updates (CMS 2014). Under the 2014 OPPS packaging edits, if a laboratory service with status indicator A Services furnished to a hospital outpatient that are paid under a fee schedule or payment system other than OPPS is on the same claim as a service with status indicator Q1, Q2, or Q3, the laboratory service is denied and bundled into the payment for the other service. Modifier L1 bypasses this bundling edit, indicating the laboratory service is unrelated to the other ancillary services provided on the same day. ?Unrelated? is defined as:
- Ordered by a different practitioner than the practitioner who ordered the other hospital outpatient services; and
- For a different diagnosis than the other hospital outpatient services (CMS Pub. 100-04).
- Implementation of status indicator Q4Conditionally packaged laboratory tests has revised the instances where modifier L1 may be used.
The functions of the Q1-Q4 edit set are based on CPT(R)/HCPCS Level II status indicators. Most laboratory services are assigned status indicator A. The edit looks to see if there are any other ancillary services on the same date of service with a status indicator Q1, Q2, or Q3. If one of these services is included on the claim with the same date of service, the laboratory service is flipped to status N Items and services packaged into APC rates and bundled into the line item with the status indicator Q Packaged services subject to separate payment under OPPS payment criteria.
Status indicator Q1 codes are STVX-packaged codes. These codes are packaged when billed on the same date of service with any other code with a status indicator of S, T, V, or X:
- Indicator S codes are significant procedures, not subject to the multi-procedure discount.
- Indicator T codes are significant procedures subject to the multiple procedure discount.
- Indicator V codes include clinic or emergency department visits.
- Indicator X codes are ancillary services.
When not packaged, these codes are paid separately under an Ambulatory Payment Classification (APC). APCs are a method of paying facilities for outpatient services provided to Medicare patients. Each APC is composed of services that are similar in clinical intensity, resource utilization, and cost.
Codes with a status indicator of Q2 T-packaged codes are packaged only if they are billed on the same date of service with any other status indicator T codes. Otherwise, they are separately payable under a separate APC. If you report more than one STVX or T-packaged code without a separately payable service into which it would otherwise be packaged, CMS makes separate payment only for the highest paying service, and packages all others into that code. Status indicator Q3 May be paid through a composite APC-based on composite-specific criteria or separately through single code APCs when the criteria are not met codes are subject to payment as part of a composite rate when all criteria for that composite are met. Otherwise, Q3 services become separately payable if assigned to a separate APC, or packaged into other services.
For 2016, CMS implemented status indicator Q4. This status indicator designates packaged APC payment for codes billed on the same claim as a HCPCS Level II code assigned status indicator J1, J2, S, T, V, Q1, Q2, or Q3. Status indicator Q4 identifies outpatient bills (TOB 13x) where there are only laboratory HCPCS Level II codes on the Clinical Laboratory Fee Schedule (CLFS), automatically changes their status indicator to A, and pays them separately at the CLFS payment rates. When status indicator Q4 applies, modifier L1 may only be used to identify laboratory tests ordered for a different diagnosis and by a different provider unrelated to the other OPPS services on the claim.