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Study Questions Billing for Part B Laboratory Services

by | Feb 23, 2015 | Compliance Officers-lca, Essential, Lab Compliance Advisor

A July study of billing practices in the clinical laboratory industry conducted by the Health and Human Services Office of Inspector General (OIG) may drive laboratory compliance billing policy and audit focus for the coming years. The OIG’s Office of Evaluation and Inspections (OEI) performed the study reportedly due to concerns about increases in Medicare payments that did not align with increases in enrollment. According to the study, from 2005 through 2010 Medicare enrollment increased by 10 percent while lab spending increased by 29 percent. Medicare paid $8.2 billion for Part B lab services in calendar year 2010. Unfortunately, a study like this—by its own admission—is based solely on claims data and cannot be used to detect fraud and abuse or even criminal activity; it can only point out anomalies in the data that may require further scrutiny. The real value of this study will be demonstrated when the identified labs are reviewed and the claims data is evaluated against the actual billing activities of any given lab. It is unlikely the industry will ever be afforded the opportunity to know if the conclusions of this study really do predict labs that are more likely participating in fraudulent activities than […]

A July study of billing practices in the clinical laboratory industry conducted by the Health and Human Services Office of Inspector General (OIG) may drive laboratory compliance billing policy and audit focus for the coming years. The OIG’s Office of Evaluation and Inspections (OEI) performed the study reportedly due to concerns about increases in Medicare payments that did not align with increases in enrollment. According to the study, from 2005 through 2010 Medicare enrollment increased by 10 percent while lab spending increased by 29 percent. Medicare paid $8.2 billion for Part B lab services in calendar year 2010. Unfortunately, a study like this—by its own admission—is based solely on claims data and cannot be used to detect fraud and abuse or even criminal activity; it can only point out anomalies in the data that may require further scrutiny. The real value of this study will be demonstrated when the identified labs are reviewed and the claims data is evaluated against the actual billing activities of any given lab. It is unlikely the industry will ever be afforded the opportunity to know if the conclusions of this study really do predict labs that are more likely participating in fraudulent activities than not. Meantime, even though the OIG states very clearly that the study does not actually identify labs that are doing something improper but only labs that may require more scrutiny, the way the results are portrayed to the public and to Congress by the media and others makes it appear as if the lab industry is rife with fraud and abuse and that hundreds of labs are committing some kind of inappropriate billing of government programs. This is an unfortunate outcome at the least. The purpose of this article is not to rehash and re-report the results of the study. Anyone can read the report for themselves or read articles that summarize the information in the study. The purpose of this article is to point out the meaning and the potential impact this will have on the industry and to give compliance officers and laboratory administrators ideas about how to respond and use the information in the study to prepare for the additional scrutiny labs will be subject to as a result. A Very Brief Overview The study consisted of a review and analysis of 145.6 million Part B lab claims for services to 23 million Medicare beneficiaries from 94,609 individual labs representing allowed payments of over $7.25 billion. The study concluded that 1,032 of the labs reviewed exhibited questionable billing and should be subject to further review. The OIG also cited other reasons for performing the review, including other studies it has performed on lab billing going back to 2000. The report provides details of how the study was conducted, how the measures were applied, and how the conclusions were reached. It also provides examples, using unidentified actual labs, of problematic scenarios uncovered as a result of the study. It may be here that the industry can derive some benefit. If a lab analyzes its own billing data using the criteria detailed in the report, it can determine if its own billing data indicates questionable billing practices. Measures That Define Questionable Billing The heart of the study is the metrics or measures used to identify questionable billing. From the claims data reviewed, the OEI reviewers developed 13 measures that could be used to compare lab to lab. If any of the labs reviewed exceeded calculated thresholds for five of the 13 measures, that lab was considered as exhibiting a questionable billing pattern warranting further review. How the calculations were done is included in some detail in the study report. The 13 measures used were as follows:
  1. High average allowed amount per claim;
  2. High average number of claims per beneficiary;
  3. High average allowed amount per beneficiary;
  4. High average number of claims per ordering physician;
  5. High average allowed amount per ordering physician;
  6. High percentage of claims for beneficiaries with no associated Part B services with the ordering physician;
  7. High percentage of claims for beneficiaries living more than 150 miles from the ordering physician;
  8. High percentage of duplicate lab tests;
  9. High percentage of claims with invalid ordering physician numbers;
  10. High percentage of claims with ineligible ordering physician numbers;
  11. High percentage of claims with compromised beneficiary numbers;
  12. High percentage of claims with compromised ordering physician numbers; and
  13. Compromised lab provider number.
Industry Group Responds The American Clinical Laboratory Association (ACLA) cautions that the report’s methodology does not present a clear picture of industry billing practices. ACLA President Alan Mertz contends that several of the metrics used in the study may lead to erroneous conclusions about actual fraudulent activity and can represent legitimate and appropriate use of laboratory services. One of the questionable measures Mertz specifically addresses concerns physician office visits within six months prior to the lab services. He pointed out that many lab services are ordered on the same day or prior to an office visit. Further, for patients with chronic conditions like diabetes, lab tests are part of routine monitoring and may not be associated with an office visit. This single measure accounted for more than two-thirds of the questionable billing claims, said Mertz. Mertz questioned other measures, including one that suggests that billing is inappropriate if the patient lives more than 150 miles from the ordering physician. Mertz points out that in 2009, 5.3 million lab claims represented only 2.5 percent of total Medicare claims. Given that many Medicare patients travel or live in warmer climates in winter or seek out centers of excellence and specialists away from home, Mertz points out that this figure is not surprising and does not necessarily suggest questionable billing by the laboratory. “While lab services represent less than 2 percent of Medicare spending as noted in the OIG report, it remains important that clinical labs take seriously their responsibility as stewards of taxpayer dollars used to cover the expenses of caring for Medicare beneficiaries,” said Mertz, “It is just as important when studies are released that are aimed at identifying questionable, fraudulent, and even criminal activity with regard to Medicare billing, that they utilize appropriate measures and include all information necessary to provide a clear picture for policymakers and taxpayers alike.” How Should Labs Respond First and foremost, laboratory compliance officers and administrators must read the study report and objectively analyze what the OIG did and why these measures were considered to be questionable. It may be appropriate to create a similar audit to evaluate your own claims to make some kind of determination of where you stand in relation to the criteria outlined in the study. If your lab does actually exceed enough of the measures or exhibits one of the questionable billing scenarios identified by the OIG in the study, you can figure out why. At the very least, you may be able to develop creditable arguments for why your lab may be exhibiting questionable billing patterns. To combat negative public perceptions that are created by this study, labs should make an effort to publically comment on the study and point out its flaws and its relationship to the realities of the laboratory industry and marketplace. Finally labs must support efforts by professional associations and other labs in undoing the damage a report like this can do to an industry that is populated mostly by honest providers fulfilling a central role and providing essential services to physicians and others who care for Medicare beneficiaries. Takeaway: While this study may be perceived as negative for the laboratory industry, it does provide insight into how the government perceives labs, what it considers questionable billing, and what labs should use to benchmark their billings from a compliance standpoint. It could serve as a flashpoint for the industry to come together to overcome the negative perceptions generated by the study.

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