Is There Widespread Medicare Fraud In Laboratory Test Billings?

Who spends the most money on clinical laboratory services? You, the taxpayer. The largest single purchaser of clinical laboratory services in the United States is the government. CMS, the agency within the Department of Health and Human Services responsible for administering health care programs, makes a huge investment annually in the lab services provided to Medicare recipients, as much as $8.2 billion and climbing annually. But how much of that money goes to waste due to fraudulent billing?

A recently published [1] study of Medicare Part B claims for lab services found that more than 1,000 laboratories exceeded predetermined threshholds for billing their services. As noted in the study, spending for lab services increased threefold from 2005 to 2010 when compared to the annual increases in Medicare enrollment. Why the difference?

The study's conclusions were based upon 13 different measures used to analyze laboratory billing patterns, which include issues such as billing an unusually high percentage of claims with ineligible or invalid ordering-physician numbers, as well as physicians billing an unusually high number of lab tests. Although the study revealed questionable billing practices throughout the United States, 13 percent of the labs that billed above threshhold were located in the states of California and Florida alone. Most concerning is that over 1,000 laboratories nationwide exceeded 5 or more of the billing threshholds.

  • The CMS report red-flagged a number of schemes indicative of fraudulent billing. These include perhaps the most obvious fraud - BILLING FOR SERVICES NOT PERFORMED - a practice which can be difficult to detect absent information coming from an insider who blows the whistle.
  • Also highlighted by CMS: " UNBUNDLING," which is the practice of billing separately items which are supposed to be included together in a single bill in order to inflate the reimbursement,
  • and, last but not least, " UPCODING," which involves the fraudulent submission of a higher reimbursed code than the one designated for the particular test.

CMS acknowledged in the report that it received as much as $1.5 billion for questionable claims in the year of the study (2010). Questionable claims often included fraudulent physician NPI numbers, compromised beneficiary numbers, and lab tests that did not appear to be connected to any physician services under Medicare Part B.


[1] The complete report, announced in August of 2014, is at https://oig.hhs.gov/oei/reports/oei-03-11-00730.asp.