Kusserow’s Corner: OIG Finds Questionable Lab Billings

The HHS Office of Inspector General (OIG) issued a report on its review of questionable billing patterns among Medicare lab services involved examining labs claims submitted for each lab service provided for Medicare beneficiaries. The OIG noted that Medicare is the largest payer of clinical laboratory (lab) services in the nation, with Medicare spending for lab services increased by three times the level of increases in Medicare enrollment. Medicare payments for all Part B lab services well exceed $8 billion a year. Each claim contains information about the lab provider, the ordering physician, the beneficiary, and the lab service. The OIG developed 13 measures to describe labs’ billing patterns and to identify labs with questionable billing patterns. It calculated and analyzed the distribution of the measures for each lab and determined whether a lab’s billing was unusually high for each measure, as well as calculating the total number of claims and total allowed amount associated with certain measures of questionable billing.

For the period studied (2010), the OIG found over 1,000 labs exceeded the thresholds (i.e., had unusually high billing) for five or more measures of questionable billing for Medicare lab services. For example, a lab might have an unusually high percentage of claims with ineligible and/or invalid ordering-physician numbers, or an unusually high allowed amount per ordering physician. Almost half of the labs that exceeded the thresholds for five or more measures of questionable billing were located in California and Florida, areas known to be vulnerable to Medicare fraud. Some labs that exceeded the thresholds for fewer than five measures also exhibited billing that may warrant further review. The OIG also found that Medicare allowed $1.7 billion across all labs for claims associated with questionable billing. The OIG conceded that there may be some labs that have legitimate reasons for exceeding certain thresholds; however, collectively the findings call for stronger oversight of labs and identify specific issues with Medicare payments for lab services that need to be addressed to more effectively safeguard Medicare. The OIG recommended that CMS:

  1. Review the labs identified as having questionable billing and take appropriate action;
  1. Review existing program integrity strategies to determine whether these strategies are effectively identifying program vulnerabilities associated with lab services; and
  1. Ensure that existing edits prevent claims with invalid and ineligible ordering-physician numbers from being paid. CMS concurred with all recommendations.

In recent blogs, I reported on a number of clinical lab enforcement actions. One example was the Massachusetts-based Calloway Labs case where they had a very large large settlement where they routinely billed using an improper code designation without knowledge of providers. In that case, two top executives pleaded guilty to providing kickbacks and bribes to managers of group homes for recovering drug addicts. I also recently reported on the OIG fraud alert concerning physicians and clinical labs.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2014 Strategic Management Services, LLC. Published with permission.