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Report (OEI-03-11-00730)

Questionable Billing for Medicare Part B Clinical Laboratory Services

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Medicare is the largest payer of clinical laboratory (lab) services in the nation. From 2005 to 2010, Part B Medicare enrollment increased by 10 percent, while spending for lab services increased by 29 percent. In 2010, Medicare payments for all Part B lab services totaled $8.2 billion. We conducted this study to identify questionable billing patterns among Medicare lab services.


We based this study on an analysis of Part B claims for lab services with dates of service in 2010. Labs submit claims for each lab service provided for Medicare beneficiaries. Each claim contains information about the lab provider, the ordering physician, the beneficiary, and the lab service. We developed 13 measures to describe labs' billing patterns and to identify labs with questionable billing patterns. We calculated and analyzed the distribution of the measures for each lab. We then calculated a statistical threshold for the 13 measures and determined whether a lab's billing was unusually high for each measure. Additionally, we calculated the total number of claims and total allowed amount associated with certain measures of questionable billing.


In 2010, over 1,000 labs exceeded the thresholds (i.e., had unusually high billing) for 5 or more measures of questionable billing for Medicare lab services. For example, a lab might have an unusually high percentage of claims with ineligible and/or invalid ordering-physician numbers, or an unusually high allowed amount per ordering physician. Almost half of the labs that exceeded the thresholds for five or more measures of questionable billing-compared to 13 percent of all labs-were located in California and Florida, areas known to be vulnerable to Medicare fraud. Some labs that exceeded the thresholds for fewer than five measures also exhibited billing that may warrant further review. Medicare allowed $1.5 billion across all labs for claims associated with questionable billing.


There may be some labs that have legitimate reasons for exceeding certain thresholds. However, collectively, these findings call for stronger oversight of labs and identify specific issues with Medicare payments for lab services that need to be addressed to more effectively safeguard Medicare. Therefore, we recommend that CMS (1) review the labs identified as having questionable billing and take appropriate action, (2) review existing program integrity strategies to determine whether these strategies are effectively identifying program vulnerabilities associated with lab services, and (3) ensure that existing edits prevent claims with invalid and ineligible ordering-physician numbers from being paid. CMS concurred with all recommendations.

Correction Notice

This report was originally issued on July 8, 2014. OIG discovered that the report contained computational errors. We have corrected those errors and issued the corrected report on August 15, 2014 - please use this version. The earlier report stated that Medicare allowed $1.7 billion for questionable claims for laboratory services in 2010 - the correct amount is $1.5 billion. The earlier report also stated that the number of laboratory service providers that exceeded the thresholds for five or more measures of questionable billing was 1,032 - the correct number is 1,025.

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