On June 25, 2014, the U.S. Department of Health and Human Services Office of Inspector General (“OIG”) issued a special fraud alert titled Laboratory Payments to Referring Physicians, identifying “specific vulnerabilities with Medicare payments for lab services that need to be addressed to more effectively safeguard the Medicare program.” In 2010, the Centers for Medicare and Medicaid Services (“CMS”) paid out approximately $1.7 billion in “questionable” claims for clinical laboratory services under Medicare Part B.

Medicare is the single largest biller of clinical laboratory services in the United States. In 2010 alone, clinical laboratory service payments under Medicare Part B, which also reimburses providers for physicians’ services, outpatient care, and related claims, equaled $8.2 billion. Medicare spending for clinical laboratory services increased by 29% from 2005 to 2010.

OIG analyzed the 2010 Medicare payments for irregularities in accordance with 13 billing measures. Along with the average number of services ordered by specific physicians, these measures included the average billing per claim or per beneficiary, duplicate claims, and claims made using ineligible or invalid physician billing numbers. Of the approximately 94,600 laboratories evaluated, more than half met at least one questionable billing criterion.

Accordingly, OIG recommended that CMS:

  • Review the clinical laboratories identified as having questionable billing and take appropriate action;
  • Review existing program integrity strategies to determine whether CMS is effectively identifying program vulnerabilities associated with laboratory services; and
  • Ensure that existing edits prevent claims with invalid and ineligible order-physician numbers from being paid.

CMS responded that the clinical laboratories associated with questionable billing will be investigated. CMS also is using the Fraud Prevention System to identify possible fraudulent, wasteful, or abusive activities in connection with laboratory services. Lastly, CMS said that as of January 6, 2014 the agency has denied claims for Part B clinical laboratory services if the provider who ordered or referred the service was not enrolled in Medicare or had obtained “opt-out” status.