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Note from Hugh

Medicare Weekly Update, October 30, 2007

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Hospitals should take a close look at the OIG audit report discussed below relating to laboratory tests furnished by a Boston hospital for patients covered under Medicare's end stage renal disease (ESRD) program.  I have been concerned for many years that some hospitals do not have adequate internal controls in place to ensure that they are not separately billing Medicare for lab tests that Medicare considers to be included in the ESRD composite payment rate.

As discussed in the Boston audit report, hospitals must take proactive steps to ensure that:

• The hospital is not separately billing for lab tests that are considered to be included in the composite rate, unless the tests fall outside of the applicable ESRD frequency limits.
• Medical necessity exists (and is documented) when the hospital separately bills for lab tests that fall outside of the applicable ESRD frequency limits.
• The hospital is complying with the so-called "50% Rule" for panel tests. Under the 50% Rule, the hospital may not bill separately for any tests in a panel if more than 50% of the tests in the panel are included in the ESRD composite rate payment.

While the overpayment that resulted from the Boston audit was relatively small (about $62,000), should the Department of Justice decide in the future to start pursuing these types of cases under the civil False Claims Act, other hospitals could be faced with very large civil fines.

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