Review of Clinical Laboratory Services Under West Virginia's Medicaid Program for Calendar Years 1993 and 1994

EXECUTIVE SUMMARY:

This report provides the results of our review of the West Virginia Department of Health and Human Resources (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 tests.

Our review disclosed that the State agency lacked adequate procedures and controls to ensure that chemistry 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, be bundled into and reimbursed at a lesser panel fee rather than being reimbursed at higher individual test fees. The State agency did not have adequate controls to ensure that chemistry tests are bundled for reimbursement purposes.

We selected a stratified sample of 100 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. We considered these claims to be potential payment errors because the probability existed that the claims should have been reimbursed at a panel fee rather than at higher individual test fees.

We found that all 100 claims were overpaid since the chemistry tests were available as part of an automated multichannel chemistry panel. We also found that for 18 of the chemistry claims the State agency paid providers higher fees than the West Virginia Medicare carrier (Nationwide Mutual Insurance Company) clinical laboratory fee schedule prices.

In our opinion, the overpayments occurred because the State agency: (1) did not have adequate edits to detect chemistry tests that should have been bundled into a single automated multichannel panel chemistry test code for reimbursement purposes; (2) did not consider for bundling purposes all chemistry tests identified by the local Medicare carrier as being suitable for bundling; and (3) reimbursed some chemistry 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 estimated that the State agency overpaid providers $1,378,601 (Federal share $1,047,789).

We recommended that the State agency: (1) implement a policy change that would clearly define and mandate the use of bundled services for chemistry tests, (2) install edits to detect and prevent payments for unbundled services; (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 concurred with three of our four recommendations. The State agency did not agree to recover overpayments for clinical laboratory services identified by our review because it did not agree with our audit process. We have summarized the State agency's response along with our comments after the Conclusions and Recommendations section of this report.