EXECUTIVE SUMMARY:
This report provides you with the results of the subject review. The objective of our review was to determine whether laboratory tests (lab tests) billed separately under Medicare's end stage renal disease (ESRD) program were reimbursed in accordance with Medicare regulations and guidelines. We found that a significant control weakness exists in the Medicare payment system that allowed hospitals and independent laboratories to be reimbursed separately for lab tests even though payment for these tests was already included in each facility's composite rate. Based on a statistical sample, we estimate that $6.3 million out of $12.8 million was improperly paid to hospitals and independent laboratories for separately billed lab tests performed for ESRD beneficiaries during Calendar Year (CY) 1994. We are recommending (1) an education program for ESRD providers and independent laboratories explaining proper ESRD billing practices, (2) monitoring of providers' billing for lab tests outside the composite rate for possible post-payment reviews, and (3) recovery of the estimated overpayments.
In response to our draft report, Health Care Financing Administration (HCFA) officials concurred with our recommendations and have proposed and/or implemented corrective actions to address the issues.