OIG posts its Semiannual Report to Congress

In its Semiannual Report to Congress, the Department of HHS Office of Inspector General (OIG) today announced significant audit, investigation, and evaluation accomplishments for FY 2009. OIG reported savings and expected recoveries of $20.97 billion for all of FY 2009.

The following areas pertaining to laboratories were identified in the report:

• End Stage Renal Disease: Separately Billed Laboratory Tests for Medicare Beneficiaries Medicare claims paid by an intermediary for laboratory tests that dialysis facilities provided to end stage renal disease (ESRD) beneficiaries did not always comply with Medicare ESRD payment requirements. Under the composite rate method of paying for dialysis services provided to ESRD beneficiaries, CMS specifies the laboratory tests that are included in the composite rate and the frequencies at which the tests are reimbursable as part of that rate. For 270 of the 360 beneficiary quarters that we sampled, dialysis facilities incorrectly billed and were reimbursed $11,000 for ESRD-related laboratory tests. Based on our sample results, we estimated that the intermediary overpaid dialysis facilities $3.9 million for laboratory tests provided to ESRD beneficiaries during CYs 2004?2006. We recommended that the intermediary coordinate with CMS and other involved

  Medicare contractors to (1) conduct postpayment medical record reviews of claims submitted by dialysis facilities that separately billed ESRD laboratory tests to identify and recover overpayments estimated at $3.9 million and (2) educate dialysis facilities about Medicare ESRD billing requirements related to the types of errors identified in our review. The intermediary agreed with our recommendations but noted that it no longer has jurisdiction over 2 of the 12 contracts covered by our review. We modified our recommendations accordingly and provided a copy of our report to the other contractor. (A-01-07-00522)

• Laboratories: Variation in the Clinical Laboratory Fee Schedule In 2007, 97 percent of lab tests had at least one carrier rate that varied from the national limit amount (NLA). However, 83 percent of all carrier rates were at the NLA and 89 percent of laboratory test claims were paid at the NLA. Medicare Part B payments for laboratory tests are determined by fee schedules originally established by carriers in 1985. These carrier fee schedules are collectively known as the Clinical Laboratory Fee Schedule. Each laboratory test has a congressionally mandated NLA that caps payments at a percentage of the median carrier rate. Currently, the NLA for laboratory tests is 74 percent of the median carrier rate for each laboratory test. In establishing the Clinical Laboratory Fee Schedule in 1985, carriers used laboratory charge data that may not have reflected laboratory tests’ costs. Since then, methods used to update carrier rates have incrementally added to the variation in carrier rates. As a result, carrier rates in 2007 were inconsistent both across carriers and within each carrier. The variation did not appear to reflect geographic differences in cost. Carriers pay different rates for the same laboratory test, so Medicare payments also vary. Medicare paid over $3.4 billion for laboratory tests in 2007. Medicare payments would have been $3.5 billion if all tests had been paid at the NLA or $2.4 billion if the NLA had been reduced to 50 percent of the median carrier rate. Setting all carrier rates at 73 percent of the median carrier rate would have eliminated variation without a change in overall Medicare payments. Based on these findings, we recommended that CMS seek legislative authority to establish a new process for setting accurate and reasonable payment rates for laboratory tests. In its comments to our report, CMS stated that it did not concur with our recommendation to seek legislation that would allow it to set accurate and reasonable payment rates for lab tests. However, CMS stated that it would consider the recommendation and that it was committed to improving payment policies for lab tests and to refining methodologies for establishing new payment rates. CMS explained that the President’s budget for fiscal year 2010 does not include any proposals to amend the payment methodology for clinical laboratory tests. We encourage CMS to pursue legislation that would allow it to set accurate and reasonable payment rates for lab tests. (OEI-05-08-00400)
• Laboratories Potential Improper Medicaid Payments for Outpatient Clinical Diagnostic Laboratory Services for Dual-Eligible Beneficiaries. We determined that Medicaid programs in 8 of 11 selected States spent a total of $1.3 million in potential improper payments for clinical diagnostic laboratory services that were provided on an assignment-related basis to dual eligibles in FY 2005 and 2006. Dual eligibles are beneficiaries who are enrolled in Medicare Part A and/or Part B and also entitled to some Medicaid benefits. Over half of the potential improper payments we identified corresponded to five Current Procedural Terminology codes. One of these codes accounted for almost 30 percent of the potential improper payments we identified. State Medicaid programs should not pay for any portion of outpatient clinical diagnostic laboratory services that were provided on an assignment-related basis to dual eligibles who are enrolled in Medicare Part B. This memorandum report had no recommendations. Our results demonstrated that opportunities exist to educate State Medicaid programs that they should not pay for any portion of outpatient clinical diagnostic laboratory services provided to dual-eligible beneficiaries. CMS did not have any comments on this memorandum report.(OEI-04-07-00340)