Medicare is the largest payor of clinical lab services in the nation. Clinical lab services include everything from blood counts to urinalyses, and every letter of the alphabet in between. Lab services are performed by hospitals, independent labs, physicians, or other institutions.
Medicare Part B (which covers lab services) has had increased enrollment over the past few years, but the amount billed to Part B over the past few years has increased at a much higher rate. In other words, the amount of lab services billed to Part B has increased disproportionately to the increase in enrollment. Any number of factors could contribute to this: defensive practice of medicine, more reliance on laboratory testing, more labs…
Regardless, the higher billing amounts in lab services has now won the prestigious award of “Increased CMS Scrutiny!” (sarcasm, people). And the crowd goes wild!!!!
Mid-2014, the U.S. Office of Inspector General (OIG) published a study entitled, “Questionable Billing for Medicare Part B Clinical Laboratory Services.” OIG determined that Medicare allowed $1.5 billion to be paid for claims with questionable billing. It recommended that CMS: (1) review the labs identified with questionable billing and take appropriate action; (2) review program integrity strategies and determine whether such strategies are adequate; and (3) ensure that claims with invalid and ineligible ordering-physician numbers are not being paid.
In normal and expectant government time frames, the “dinosauric beast” has now determined, a little over a year later, that laboratory service claims warrant enhanced scrutiny. And a little over 85 years after its discovery, we finally determine that Pluto isn’t a planet.
CMS zoomed in their lens of scrutiny on lab services multiple times over a decade ago. Each “CMS zoom” resulted in millions and millions of money given to the federal government, which perpetuates the feds to zoom more and more…it’s easy money.
For example, in 2000, OIG issued Project LabScam, which resulted in substantial settlements against Laboratory Corporation of America Holdings, SmithKline Beecham, Met/Path, Damon, Roche, and Allied.
In 2002, OIG found that Medicare incorrectly paid $7.4 million for lab services with invalid ordering UPINs and $15.3 million for lab service claims with inactive ordering UPINs.
What does this mean to providers of lab services today?
It means you need to be prepared for an audit.
When I was young, one of my favorite games was “Red Rover.” Children would grasp arms and form a straight line facing the other team, which was doing the same. I would yell, “Red River, Red Rover, send Holly right over!” At which time, little Holly would be released from her line and prepare to run, full speed, into my line of little kids’ arms. Inevitably, once we saw where Holly was running, we would tighten up our grasps on one another’s arms to prepare for the impact.
Similarly, in preparation for upcoming audits, lab service providers need to tighten up.
The best way to be certain of your risks in a potential audit is to hire a professional consultant or an experienced attorney to review a large sample of your documents. This allows an outsider to provide an unbiased opinion as to your risk. You may have the best billing manager in the world, but, when it comes to a self audit, he or she already believes that his or her documentation is stellar and that the organization of such documents is self evident. Having an outsider audit your records is worth its weight in gold and the best way to tighten up pre-audit.
The second best way to be certain of your risks in a potential audit is to self audit. Even if you hire a consultant or an attorney for a one time, third-party audit, you still want to self-audit multiple times a year. Every now and then you need to kick the old tires.
How do you self audit?
FYI: My general explanation of how to self audit will be appropriate for all health care service provider types. I will describe some more detailed ways to self audit that will be specific to lab services.
In order to self audit, I teach the IAKA method, not to be confused with IKEA.
- Identify common risks
- Audit a sample of your documents
- Keep record of each step of your audit, including findings
- Act on the findings.
What are the common red flags in your industry?
For lab services, common red flags may be high 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 lab tests.
Here’s an area to look into that you may not otherwise consider in a self audit: what percentage of your lab clients live outside 100 miles? This may sound hoaky, but I had a lab service client flagged because 92% of the clients resided over 150 miles away. There was a perfectly reasonable explanation for such anomaly, the lab was located in a large, prestigious hospital in a rural area and people came from miles away to the hospital, but the statistic still flagged it.
Another specific item to review is, on average, how much does each physician bill in the laboratory? Do you have 4 physicians who bill, on average, $60,000+ per ordering physician? Because, for an independent lab, that would be very high.
For the actual self audit, you want to break up the audit into two categories: standards and procedures and document compliance.
For standards and procedures, you are reviewing whether you are properly orienting new hires, the specific training you implement, your criminal background check procedures, HIPAA training, your license renewal processes, your certification renewal processes, etc.
For document compliance, you are reviewing for physician signatures and dates.
NOTE: It is not required, but it is extremely prudent to print the name of the signator underneath all signatures. I have seen auditors ding providers on “physicians not being licensed/credentialed” because the auditor could not read the name of the physician.
You are also reviewing for medical necessity, eligible ordering-physician numbers, distance the client is to the lab, amount prescribed to that particular client, amount prescribed by that particular physician, whether that test prescribed for the same client within a 12 month period, coding compliance, etc.
It is imperative that you keep meticulous records while you conducting the audits. You want to be able to show an auditor that you caught a mistake and that you implemented a plan of correction to remedy the mistake going forward. And that, in actuality, you remedied the mistake going forward. This documentation is essential for possible defenses to alleged potential overpayments, false claims, and, even, alleged criminal actions. Your documentation skills could be the difference between paying millions in penalties, or, in the extreme case, jail.
I got ahead of myself in the prior section by saying that you need to document the way in which you fix the mistake. But I cannot emphasize it enough. Acting on your findings is important, obviously, but documenting the actions is more important. Ever hear the saying, “If it isn’t documented, it didn’t happen?” Take that as gospel.
Be prepared. Be proactive. Be ready. Tighten up!
Extrapolated audits are no fun, unless you work for a recovery audit contractor (RAC). You get a Tentative Notice of Overpayment (TNO) that says the auditor reviewed 100 dates of service (DOS), found an overpayment of $1,000, so you owe $1 million dollars. Oh, and please pay within 30 days or interest will accrue…
North Carolina’s 2nd recovery audit contractor (RAC) is ramping up. HMS had a slower start than Public Consulting Group (PCG); the Division of Medical Assistance originally announced that HMS would be conducting post-payment reviews last October 2012 in its Medicaid Bulletin. NC’s 1st RAC, PCG came charging out the gate. HMS has been a bit slower, but HMS is active now.
HMS is performing post-pay audits on inpatient and outpatient hospital claims, laboratory, specialized outpatient therapy, x-ray and long-term care claims reviews.
According to the December 2013 Medicaid Bulletin, the findings for the first group of automated lab reviews were released in early November 2013. Additional lab reviews are expected to be completed and findings released by late December 2013. The post-payment reviews are targeting excessive drug screening.
And specialized therapy service providers, you are next on the list!
How will the providers know the results of an HMS post-payment review? Same way as with PCG. You will receive a Tentative Notice of Overpayment (TNO) in the mail with some crazy, huge extrapolated amount that you supposedly owe back to the state.
If you receive a TNO, do not panic (too much), take a deep breath and read my blog: “You Received a Tentative Notice of Overpayment, Now What?”
Remember, most of the post-payment reviews that I have seen have numerous auditing mistakes on the part of the auditor, such as the auditor applying the more recent clinical coverage policies rather than the clinical coverage policy that was applicable to dates of services audited.
DMA Clinical Policy 1S-4 “Cytogenetic Studies“, for example, was recently revised February 1, 2013. Obviously, an auditor should not apply the February 1, 2013, policy to a service provided in 2012…but you would not believe how often that happens!
So what can you do to be prepared? Well, realistically, you cannot be prepared for audit ineptness.
But you can be proactive. Contact your insurance policy to determine whether your liability insurance covers attorneys’ fees for regulatory audits. It is important to be proactive and determine whether your insurance company will cover attorneys’ fees prior to undergoing an audit. Because if you find out that your liability insurance does not cover attorneys’ fees, then you can upgrade your insurance to cover attorneys’ fees. I promise, it is way better to pay additional premiums than get hit with $25,000+ bill of attorneys’ fees. Plus, if you wait until you are audited to determine whether your liability insurance covers attorneys’ fees and you realize it does not, then the insurance company may not allow you to upgrade your insurance. The audit may be considered a pre-existing condition.
So…proactiveness is imperative. But you can always move to West Virginia…
In a survey of 18 states conducted by the National Conference of State Legislatures (NCSL) and published August 29, 2013, NCSL determined that 10 states use extrapolations with the RAC audits, 7 do not and 1 intends to use extrapolations in the future. (No idea why NCSL did not survey all 50 states).
Delaware, Maryland, New Hampshire, Pennsylvania, Vermont, West Virginia, and Wisconsin do not use extrapolations in Medicaid RAC audits.
So moving to West Virginia is an option too…