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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Clinical Laboratory Services Under Virginia's Medicaid Program for Calendar Years 1993 and 1994," (A-03-96-00202)

November 5, 1996

Complete Text of Report is available in PDF format (1M). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


This report provides the results of our review of the Virginia Department of Medical Assistance Services (State agency) reimbursements for outpatient clinical laboratory services under the Medicaid program. The objective of our review was to determine the adequacy of procedures and controls over the processing of Medicaid payments to providers in Calendar Years (CY) 1993 and 1994 for outpatient clinical laboratory services involving chemistry and urinalysis tests.

Our review disclosed that the State agency lacked adequate procedures and controls to ensure that chemistry and urinalysis tests were reimbursed in accordance with section 6300 of the State Medicaid Manual which requires State agencies to ensure that Medicaid reimbursements for clinical laboratory tests do not exceed amounts recognized by the Medicare program. The Medicare regulations require that laboratory tests, which are available as part of a multichannel chemistry panel or an all-inclusive urinalysis test, be bundled into and reimbursed at a lesser panel or all-inclusive fee rather than being reimbursed at higher individual test fees. The State agency did not have adequate controls to ensure that chemistry and urinalysis tests are bundled for reimbursement purposes.

We selected a stratified sample of 100 claims -- 50 chemistry claims for more than one individual test or panel, or for a panel and individual tests for the same recipient on the same date of service by the same provider; and 50 urinalysis claims for more than one urinalysis test for the same recipient on the same date of service by the same provider. We considered these claims to be potential payment errors because the probability existed that the claims should have been reimbursed at a panel or all-inclusive fee rather than a higher individual test fees.

We found that 99 of the 100 claims were overpaid since the 50 chemistry tests were available as part of an automated multichannel chemistry panel, and 49 of the 50 urinalysis tests should have been paid under an all-inclusive fee. We also found that for 24 of the chemistry claims and 28 of the urinalysis claims the State agency paid providers higher fees than the Virginia Medicare Carrier (MetraHealth Medicare, formerly the Travelers) clinical laboratory fee schedule prices.

In our opinion, the 99 overpayments occurred because the State agency: (1) did not have adequate edits to detect chemistry and urinalysis tests that should have been handled into a single automated multichannel panel chemistry test code or an all-inclusive urinalysis test code for reimbursement purposes; (2) did not consider for handling purposes all chemistry tests identified by the local Medicare carrier as being suitable for bundling; and (3) reimbursed some chemistry and urinalysis tests at fees higher than those established by the local Medicare carrier.

Projecting the results of our statistical sample over the population of similar claims using standard statistical methods, we estimate that the State agency overpaid providers $1,446,925 (Federal share $723,463).

We are recommending that the State agency: (1) implement a policy change that would clearly define and mandate the use of bundled services for chemistry and urinalysis tests; (2) install edits to detect and prevent payments for unbundled services and billings that contain duplicative tests: (3) recover overpayments for clinical laboratory services identified in this review; and (4) make adjustments for the Federal share of the amounts recovered by the State agency on its Quarterly Report of Expenditures to the Health Care Financing Administration (HCFA).

The State agency responded to a draft of this report and generally disagreed with our findings and recommendations. The State agency believes it is inappropriate to apply Medicare reimbursement guidelines to Medicaid claims. It also contested the potential amount of overpayments identified in our report and intends to analyze the 100 sampled claims using its Medicaid reimbursement policies to determine the potential amount of overpayments.