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Laboratory Billing Compliance Firm

Are You Doing Enough to Survive a Lab Billing Audit?

Lynette Byrd
Attorney Lynette S. Byrd
Healthcare Team Lead
Former Federal Prosecutor

For toxicology and clinical laboratories in the United States, maintaining compliant billing practices is essential to maintaining eligibility for Medicare, Medicaid, and other government health care programs, and it is a requirement for billing private insurers as well. When it comes to both government and private billing, non-compliance can have steep consequences, including recoupments, denial of pending payments, pre-payment review, loss of eligibility, and potentially even civil or criminal prosecution.

Government entities such as the Centers for Medicare and Medicaid Services (CMS) and private insurers conduct audits to determine whether laboratories (and other providers) are complying with their billing rules and requirements. While laboratories that take the necessary steps to establish, maintain, and document compliance can escape these audits unscathed, those that do not can face substantial penalties.

20 Questions for Laboratory Owners and Executives: Will Your Lab Survive a Billing Audit?

Is your toxicology or clinical laboratory prepared to respond effectively and affirmatively demonstrate compliance in the event of a government or private health care insurance billing audit? If your answer to any of the following questions is, “No” (or, “I don’t know”), then you will want to be sure to address the associated compliance concerns promptly:

1. Does your lab have (and adhere to) Medicare and Medicaid billing compliance policies and procedures?

Medicare and Medicaid are essential revenue sources for many laboratories, and each has its own unique set of billing regulations. If your lab bills Medicare, Medicaid, or both, it should have comprehensive policies and procedures that address to each relevant program’s rules and requirements.

2. Does your lab have separate policies and procedures for private insurance billing compliance?

Just as Medicare and Medicaid each have their own rules and requirements, private insurers set their own rules with regard to billing compliance as well. When billing private insurers, whether directly or through managed health care organizations, laboratories must have policies and procedures in place to ensure compliance with these companies’ guidelines as well.

3. Does your lab take adequate measures to confirm the medical necessity of ordered tests?

When processing orders for tests, laboratories cannot simply assume that all ordered tests are medically necessary (a requirement for reimbursement from any payor). According to the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), “there are steps that [laboratories] can and should take to help maximize the likelihood that they only bill [Medicare] for tests that meet the reimbursement rules.” These steps include, “advis[ing] physicians that when they instruct the laboratory to seek Medicare reimbursement for tests ordered, they should only order those tests that they believe are medically necessary for the diagnosis and treatment of their patients.”

4. If your lab uses a third-party billing administrator, are its billing practices compliant?

For laboratories that engage third-party billing administrators, handing off responsibility does not assign liability for billing mistakes. As a result, even if a lab does not conduct its billing in-house, it must still undertake proactive measures to ensure compliance.

5. Are you aware of the rules and restrictions imposed by the Stark Law and Anti-Kickback Statute?

Under the Stark Law and Anti-Kickback Statute, laboratories can (and often do) get into trouble for paying or accepting unlawful payments made with Medicare or Medicaid-reimbursed funds. The first step toward avoiding this issue is to understand what prohibitions exist and when they apply.

6. Do your lab’s financial relationships with physicians or other providers meet the requirements for “safe harbor” protection?

While financial relationships with physicians and other providers can prove risky, the associated risks can be managed by proactively ensuring “safe harbor” protection. The Stark Law contains various safe harbors, and the regulations under the Anti-Kickback Statute establish a number of specific exceptions to the law’s prohibitions.

7. Are your lab’s billing policies and procedures up-to-date?

One of the most-common issues that leads to billing compliance issues for laboratories is the failure to keep their billing compliance policies and procedures up-to-date. Laboratories must review and update their policies and procedures regularly in order to ensure ongoing compliance.

8. Does your lab have a billing compliance officer?

Due to the significant risks of non-compliance, all laboratories should have a designated billing compliance officer. Among other duties, the compliance officer should be tasked with reviewing the currency of the lab’s compliance documentation and examining potential compliance deficiencies on an ongoing basis.

9. Has your lab conducted an internal billing compliance audit within the past year?

Another important measure for avoiding liability in Medicare, Medicaid, and private insurance audits is to conduct periodic internal audits. These audits should be overseen by the lab’s compliance officer, and they should be conducted in a structured manner to allow for comprehensive identification of any billing errors.

10. Can you give a confident assessment of your lab’s billing compliance?

It’s a simple question that should have a simple answer: Are you confident in your lab’s billing compliance efforts? If your answer is, “No,” this should speak for itself.

11. Does your lab have policies and procedures for addressing identified billing issues?

When evaluating laboratories’ compliance efforts and assessing penalties, a key factor in many audits is whether and to what extent any previously-identified billing issues have been proactively addressed. In order to demonstrate a good-faith commitment to compliance, labs should have policies and procedures in place to systematically uncover and remedy billing mistakes.

12. Are your lab’s billing personnel (or your lab’s third-party billing administrator’s personnel) all adequately trained?

In addition to policy and procedure adoption, policy and procedure implementation is critical as well. Training is a key aspect of implementation for billing and other forms of compliance.

13. Does your lab’s billing department or third-party billing administrator have a history of systematic billing mistakes?

While all billing mistakes should be identified and corrected, systematic billing mistakes are of particular concern when facing a compliance audit. Systematic issues are generally viewed as exhibiting a lack of commitment to compliance, and this can lead to particularly unfavorable consequences.

14. Does your lab’s contract with its third-party billing administrator include appropriate legal protections (or are you taking adequate steps to mitigate risk with regard to your lab’s internal billing personnel)?

In order to mitigate the risks associated with using third-party billing administrators, laboratories should ensure that their contracts contain adequate legal protections. Among others, these include audit and inspection rights and an obligation to indemnify.

15. Does your lab generate and store documentation of billing compliance on an ongoing basis?

During a billing compliance audit, comprehensive documentation of compliance is among the most-effective tools for avoiding recoupment liability and other penalties. This includes not only documentation of the lab’s policies and procedures, but of its ongoing compliance efforts as well.

16. Could you quickly assemble your lab’s compliance documentation if asked to do so by Medicare, Medicaid, or private insurance auditors?

In order to aid in the defense of a billing compliance audit, the laboratory’s compliance documentation must be readily available. This does not necessarily mean that your lab should provide all of its documentation on demand, but it does mean that your lab should be capable of producing documents as necessary.

17. Is your lab’s compliance documentation customized to its particular operational and legal risks (or are you relying on an off-the-shelf “compliance program”)?

In order to be effective, billing compliance policies and procedures absolutely must be tailored to each laboratory’s individual risks and needs. Off-the-shelf “compliance programs” are not adequate to serve this purpose, and they can potentially do more harm than good.

18. Does your lab’s billing compliance program address the key issues outlined in the Department of Health and Human Services Office of Inspector General (HHS-OIG) Model Compliance Plan for Clinical Laboratories?

The Model Compliance Plan for Clinical Laboratories is a document published by HHS-OIG that outlines the major areas of concern for laboratories when it comes to Medicare and Medicaid billing compliance. A thorough billing compliance program will address each of these areas of concern in a way that is specific to the lab’s operation and management.

19. Does your lab have a documented protocol for responding to billing compliance audits?

In addition to adopting policies and procedures to ensure billing compliance, laboratories should adopt policies and procedures for responding to billing compliance audits as well. Executing a structured and systematic response mitigates the risk of miscues and affords the greatest opportunity to guide the audit toward a favorable outcome.

20. Does your lab have outside billing compliance counsel available to intervene in the event of a billing audit?

While laboratories can (and should) take various internal response measures when faced with a billing compliance audit, it is also essential to rely on the advice and representation of outside billing compliance counsel. By working closely with your laboratory’s outside billing compliance counsel during the audit process, you can ensure that you are making informed decisions and that your lab is not at risk for facing unwarranted penalties.

Schedule a Complimentary Consultation with a Senior Health Care Compliance Attorney or Consultant at Oberheiden P.C.

Do you have questions or concerns about the sufficiency of your laboratory’s billing compliance program? To discuss your lab’s needs with our laboratory billing compliance firm, call us at 888-680-1745 or inquire online today.

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