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The Department of Health and Human Services Office of Inspector General (OIG) recently issued findings from its study, Questionable Billing for Medicare Part B Clinical Laboratory Services,” which provides recommendations for the Centers for Medicare & Medicaid Services (CMS) to prevent fraudulent billing practices.

The purpose of the study was to look into questionable billing patterns for laboratory testing because Medicare payments for Part B laboratory services were $8.2 billion in 2010. Part B laboratory services are performed by independent laboratories, laboratories in physician offices, hospital reference laboratories for outpatient services, or other institutional laboratories. In order to be “reasonable or necessary” for purposes of billing Medicare, the laboratory services must be ordered by the treating physician or qualified practitioner.

The findings

The OIG found that in 2010 more than 1,000 out of 94,609 laboratories had unusually high billing for five or more of the measures that the OIG developed for indicating questionable billing for laboratory services. The measures looked at:

  • Higher than average payments or claims per beneficiary or ordering physician;
  • Claims for beneficiaries with no other associated Part B services with the ordering physician;
  • Claims for beneficiaries living more than 150 miles from the ordering physician;
  • Duplicate laboratory testing;
  • Invalid or ineligible ordering physician numbers; or
  • Compromised laboratory provider or beneficiary numbers.

For the laboratories with questionable billing associated with five or more measures, the normal thresholds most commonly exceeded involved:

  • Higher than average allowed amounts per ordering physician;
  • High percentage of claims with ineligible ordering physician numbers;
  • High percentage of claims with compromised beneficiary numbers; and
  • High percentage of duplicate laboratory tests.

Medicare allowed 23 million claims where the beneficiaries had no other associated Part B services within the preceding six months with the ordering physician, which cost the Medicare program $1.2 billion. The OIG said this could mean the laboratory billed for unnecessary services, although it is important to note that the OIG acknowledged it was not dispositive proof of fraud.

The OIG study found that more than half of all laboratories nationwide exceeded the average threshold for at least one measure of questionable billing, and 1,032 laboratories exceeded the threshold for five or more of the measures established by the OIG for questionable billing. Almost half of the laboratories that had unusually high billing rates based upon the OIG’s criteria were located in California or Florida. The OIG reported that $1.7 billion of the $8.2 billion paid by Medicare for laboratory testing was associated with questionable billing.

It is important to note that the study only identified laboratories that may require further review and trends that may indicate questionable billing practices, but the OIG did not independently determine whether the claims were actually inappropriate or fraudulent. The OIG did state that laboratories may have legitimate reasons for exceeding the threshold measures used in the study.

Recommendations

The OIG provided recommendations to CMS based upon the study findings. First, the OIG referred the laboratories exceeding five or more measures for questionable billing to the CMS to review the billing activities and take appropriate action. It was also suggested that CMS assess current program integrity strategies and their role in identifying questionable billing for laboratory services. CMS implemented edits at the beginning of 2014 that were designed to deny claims with ineligible ordering physicians, thus the OIG recommended that CMS ensure that the edits are working as planned. CMS responded in agreement to all three of the OIG’s recommendations. In fact, CMS highlighted that through the use of its Fraud Prevention System and other methods of analysis, 47 laboratories are currently under investigation.

A climate of heightened scrutiny

Medicare Part B enrollment increased by 10 percent between 2005 and 2010, yet spending for Part B laboratory services saw a 29 percent increase during the same time frame. As this report indicates, there continues to be heightened scrutiny of claims for Medicare payment of Part B laboratory services.

For more information, please contact:

Bridget C. Howard
216.348.5842
bhoward@mcdonaldhopkins.com
 
Richard S. Cooper
216.348.5438
rcooper@mcdonaldhopkins.com
 
Rick L. Hindmand
312.642.2203
rhindmand@mcdonaldhopkins.com
 
Jane Pine Wood
508.385.5227
jwood@mcdonaldhopkins.com

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McDonald Hopkins has a large and diverse healthcare practice, which is national in scope. The firm represents a wide variety of healthcare providers, facilities, vendors, technology companies and associations. Our diverse experience enables us to give our clients a unique perspective on the issues that may confront them in the rapidly evolving healthcare environment.

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