With the CMS awarding contracts to Palmetto in recent years, labs have been experiencing yet another shift in the Molecular Diagnostic field.

Let’s get into what has happened with the recent Federal Medicare Contractor changes, and what it means for labs.

The Rundown

For a while, local Coverage Determinations (LCDs) have remained constant for Medicare Plans under Cahaba.

However, in 2017 Cahaba lost its MAC contract to Palmetto for Jurisdiction J.

This has affected all MCR recipients within Alabama, Georgia, and Tennessee, and adds to Palmetto’s conquest for contracts with MCR.

Palmetto had already acquired Jurisdiction M in 2015 which awarded them states Virginia, West Virginia, North Carolina, and South Carolina.

Therefore, all MCR part A and B members, as well as the hospice and home health recipients, now receive their services.

But how does this affect Labs? We are going to cover the three major areas affected by this change:

  1. Familial History
  2. Previous Claim Reviews
  3. Z-Coding

Familial History Diagnoses Are Taking A Hit

LCDs are almost completely identical between Cahaba and Palmetto.

However, the one difference (and a drastic difference at that), is Palmetto includes a much broader spectrum of diagnoses.

This means that the molecular diagnostic field is highly impacted by the wide range of new diagnosis possibilities.

Familial History Diagnoses (FHDx) pertain to most tests run on situations regarding hereditary risks with health issues.

For example, say you have a family history of breast cancer. You go to the doctor for a biopsy on a tissue sample, and the BRCA test ran because of that familial history.

These are proving much difficult to get paid than tests run on individuals already having the personal diagnosis.

Claim Recoupment Crusades By Palmetto

In addition to familial history crackdown, Palmetto is crusading to review all payments by Cahaba for potential recoupments.

All previous payments made by Cahaba that are reviewable are now under scrutiny by the new MCR contractor.

This means your lab could face potential recoupments of payment by Palmetto.

Be on the lookout for this processing trend in Jurisdiction M and J.

Z-Code Trends Further Complicate Billing Process

Z-Codes are now here to impede proper reimbursement.

A Z Code is an additional code used by Palmetto for Molecular Diagnostics.

Essentially, when a claim is sent over to the payers, some codes are unspecified.

The Z-Code is a code that you need to apply for that specifically describes a gene/test.

The application is technically the responsibility of the laboratory.

They send a description of the tests and its specifics which then is reviewed by Palmetto to determine whether it is reimbursable or not.

This determination is based on existing LCDs, information about the clinical utility, and any additional information provided through the Technical Assessment Process required for certain tests.

Procedural codes must be accompanied by a Z-Code for each use (since they don’t substitute the role of procedural codes).

Tier 1

These affect collection by

  • Standardizing code classification which means a Z code will now specify the gene potentially decreasing reimbursement
  • The effort needed to get the right Z code further complicates the billing process
  • Overall, reimbursement is tougher to receive

CPT’s need Z codes for processing. Line items on claims that are submitted after July 1st, 2018 without Z codes will be denied by Palmetto.

These codes will go into effect soon, so it’s wise to start the Z code application process now in order to minimize denials after their implementation.


Many experts, including us at Apache Health, hypothesize that Palmetto won the contract because they are extensively more financially stringent than Cahaba.

In line with this, the shift will likely include recoupment reviews on previous payments and further reimbursement complications.

A major trend we see happening is that Palmetto will continue its crackdown on Familial History CGx and move next to PGx.

Familiarize yourself with Z-Codes and their processing requirements to better prepare your lab for their enforcement in July.

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