Medicare Part B Payments Made by National Heritage Insurance Company for Outpatient Laboratory Services Provided During Inpatient Stays in Calendar Year 2005

The objective of our audit was to determine whether the National Heritage Insurance Company (NHIC) made inappropriate Part B payments for outpatient laboratory services provided to Medicare beneficiaries during inpatient stays at prospective payment system hospitals during calendar year (CY) 2005. NHIC made inappropriate Part B payments for these services. Based on our statistical sample, we estimate that NHIC paid laboratory suppliers $292,524 for the technical component of laboratory services provided to hospital inpatients during CY 2005.

We recommend that NHIC recover the $13,101 in overpayments for the sampled services, review our information on the additional 13,650 services estimated at $279,423 and work with the laboratory suppliers to recover any overpayments, reemphasize to laboratory suppliers the need for internal control systems to prevent improper billing, and adjust its existing prepayment edits to identify and deny payments for all laboratory services billed with the inpatient hospital place of service code. NHIC agreed with our finding and recommendations.