Originally created 12/09/96

Billing quirk lets labs overcharge Medicaid, auditors say



ATLANTA - Medical labs that conduct blood and urine tests are taking advantage of a billing quirk to overcharge Medicaid millions of dollars every year, state and federal auditors have concluded.

Because the government will pay more for a series of individual tests than for a battery of those tests all done at once, auditors say laboratories routinely pad their payments by turning in separate bills for what was really one set of tests.

In Georgia, audit reports obtained by Morris News Service say $3.45 million was overpaid to providers over a two-year period and should be recouped.

Marjorie Smith, Georgia's Medicaid commissioner, said many testing laboratories are "walking the line" of legality in their billing practices.

"I believe there are companies out there that are training their employees to file claims bundled or un-bundled, whichever gets them the most money," Smith said. "In my mind, that is abuse. Whether that is fraud or not, I don't know."

The Georgia findings were part of a nationwide Inspector General's report issued Wednesday that covers 14 states.

The report found $27.4 million was overpaid to medical labs in those 14 states during 1992 and 1993. That's one-third of Medicaid's total spending for lab tests in the affected states.

In the future, $13.8 million a year could be saved by correcting the problem, which is known as "un-bundling," the report advised.

In addition to Georgia, the states surveyed were Alabama, Texas, North Carolina, Massachusetts, New Hampshire, California, Kansas, Louisiana, Ohio, Missouri, Washington, Wisconsin and Iowa.

The Inspector General, an independent arm of the U.S. Department of Health and Human Services, is studying 13 more states now to find out how prevalent the billing irregularities are, and how much money should be repaid to Medicaid.

Medicaid pays for medical treatment for handicapped and welfare-eligible poor people. About two-thirds of its money comes from federal taxpayer dollars, matched by one-third state money.

Auditors used computer records to find cases in which Medicaid paid for multiple blood or urine tests on the same patient performed on the same day.

Tests performed during one appointment are supposed to be billed as a single battery. Instead, the auditors found numerous instances of labs billing each test separately, as if the patient made three or four separate trips to the office.

In a sample case provided by auditors, a three-part blood chemistry test that costs $10.85 when performed all at once was worth $22.01 when the provider submitted three bills for three chemical tests.

Georgia Medicaid officials were notified as early as October of last year that federal inspectors had found a pattern of billing irregularities.

However, Smith at first dismissed the findings in a letter to the Atlanta-based regional Inspector General, saying state audits did not back up the claim of widespread overcharges.

When presented with new evidence in a January 1996 report, Smith acknowledged that a problem existed and wrote that the state was seeking to correct it by auditing Georgia labs individually.

So far, officials at the state Department of Medical Assistance, which runs Medicaid, have been unable to secure any repayments.

The Inspector General's analysis only looked at a random sample of claims and didn't identify which providers owed money to the state and how much, Medical Assistance spokeswoman Laura Marshall said.

Without that information, she said the department's outdated billing computers aren't able to determine which claims are suspect. The situation should be corrected next summer when the agency's new "Auto Audit" system comes on-line, Marshall said.

Georgia's state auditor is examining the Medicaid billings of several large-volume labs to check for the same pattern detected by federal inspectors of multiple bills for the same patient on the same day.

In the first such report, completed in January of this year, auditors determined that a SmithKline Bioscience lab in Tucker, Ga., overcharged the state $311,744 in fiscal year 1994-95 and should be ordered to pay the money back.

No money has been recovered from SmithKline yet, state auditors said.

A secretary at the company's Atlanta-area office referred inquiries to the national headquarters of SmithKline Beecham Corp. in Collegeville, Pa.

"We have made substantial progress toward resolving this situation with the government, but obviously with a pending investigation we cannot comment further," company spokesman Thomas Johnson said. He declined to elaborate.

Federal auditors acknowledged some inconsistency among state Medicaid policies may have led to unintentional overcharges, but said they were certain at least some of the claims were intentionally inflated.

The Inspector General's audit report urged a consistent nationwide ban on the "un-bundling" of lab tests that were performed on the same patient on the same day.

But the head of the U.S. Health Care Financing Administration, Bruce Vladeck, said states remain free to set their own policies as long as the expense for each lab test remains under federal Medicare caps. Medicare covers the elderly and some handicapped people.