Dialysis Laboratory Composite Rate Billing: Tests Already Inside the Composite Payment

Under dialysis laboratory composite rate billing, Medicare paid for routine laboratory tests inside the dialysis facility’s treatment payment, while allowing separate payment for certain other tests and medically justified additional testing. A second payment for an included test meant Medicare, and the taxpayers funding it, paid twice. If you handled dialysis orders, laboratory accounts or claims, you may know why a test appeared on a separate bill, how often it ran and who decided to bill it that way.

The money followed the billing category. A test could be part of the treatment payment, a separately payable service, or an extra test whose payment depended on the patient’s medical record. The laboratory result alone could not tell the whole story.

How Should Laboratory Tests Be Bundled for Medicare?

For historical dialysis claims, bundling depended on the test, its frequency and the payment rules for the service date. The composite rate covered routine services whether the dialysis facility’s own staff or an independent laboratory performed the testing.

The HHS Office of Inspector General’s audit of Caritas St. Elizabeth’s Medical Center explains the distinction. Tests included at the specified frequency belonged in the treatment payment. Additional tests above that frequency could be separately payable with medical justification. Certain tests outside the composite rate were separately billable, also subject to frequency limits.

An outside laboratory’s involvement therefore did not remove a test from the bundle. The relevant payment belonged to the dialysis facility even when someone else performed the work. For an insider, that makes the facility’s paid treatment claim just as important as the laboratory’s separate charge.

Dialysis Laboratory Tests Included in Historical Composite Rate

The Inspector General’s test list identifies the services and frequencies used to review the hospital’s claims for 2004 and 2005. It gives a concrete picture of what the treatment payment already covered.

Aluminum and ferritin occupied a different category: each was separately billable once a quarter. Testing more often required medical documentation. For extra testing, a diagnosis of end-stage renal disease alone did not supply the justification. The patient’s illness, symptom or other clinical reason mattered.

The distinction becomes clear in the hospital’s blood counts. The Inspector General found that complete blood counts, included monthly, were generally performed weekly without medical justification for the extra frequency. Ferritin presented the reverse starting point: it was separately billable, but the hospital also billed it beyond the permitted frequency without supporting documentation.

The ferritin finding exposed a gap inside the hospital’s billing operation. Officials told the Inspector General that the Patient Financial Services Department did not track how often the test was billed to Medicare. We see a basic failure there: a frequency-limited benefit, billed without tracking the frequency. The recurring claim could keep going while the patient’s medical record supplied no reason for the extra testing.

The AMCC Rule Looked at the Tests Performed

The historical automated multi-channel chemistry rule assessed the mix of covered tests for a particular service date. The audit applied the 50% rule: when at least half of the covered chemistry tests were included in the composite rate, the submitted chemistry tests received no separate payment. When fewer than half were composite-rate tests, the submitted AMCC tests were separately payable.

The audit listed the other chemistry tests used in that calculation: total and direct bilirubin, cholesterol, creatine kinase, quantitative blood glucose, GGT, serum sodium, ALT, triglycerides and uric acid. Those tests had to be considered alongside the composite-rate chemistry tests performed on the same date.

The denominator mattered. A claim showing only the separately billable components could conceal the composite-rate tests performed alongside them.

At Caritas St. Elizabeth’s, the Inspector General found that a billing clerk inadvertently and repeatedly submitted three noncomposite chemistry tests, despite the hospital’s policy against billing Medicare for AMCC tests during the audit period. The composite-rate tests made up the majority of the chemistry work actually performed. Because the hospital billed only the noncomposite tests, the submitted claim showed a different mix, and Medicare paid it.

The claim had lost the tests that explained why the payment was wrong.

This is why a laboratory billing review reaches beyond the paid lines. The order and the complete list of tests performed show the mixture the payment rule was supposed to evaluate. Reading only the separate claim would repeat the omission that let the payment through.

What the Caritas Audit Found

The Inspector General found payment errors in 95 of 100 sampled beneficiary quarters and estimated $61,628 in overpayments for 2004 and 2005. The findings covered hematology tests already included in the composite payment, chemistry claims that failed the test-mix rule, and ferritin testing beyond the allowed frequency without medical justification.

The audit paired paid composite-rate claims with outpatient laboratory claims using service dates. Auditors then examined treatment dates, physician orders, all tests performed, progress notes, billing records and remittance information. The comparison reached from the clinical work to the actual payment.

The Inspector General attributed the billing problems to insufficient controls, including written physician orders and correct billing policies. Hospital officials said they had corrected the complete-blood-count policy during the audit, and the hospital agreed with the findings and recommendations.

The billing clerk, the laboratory and the treatment team each saw part of the transaction. The audit brought their records together. We would want to understand the same connections, including what the billing policy said and what actually happened when the claim went out.

Dialysis Cases Put the Ordering Relationship in View

The historical dialysis cases reach beyond a facility’s individual billing errors to allegations about laboratory referrals and panel design. They show why the company directing the orders belongs beside the company submitting the laboratory claim.

Dialysis Holdings and Split Chemistry Panels

Federal fraud reporting for fiscal year 2003 records Dialysis Holdings’ $4,102,098 resolution. The government alleged that it conspired with a clinical laboratory to generate thousands of unneeded referrals and split automated chemistry panels to avoid a Medicare rule intended to control laboratory costs.

The allegation joined the clinical and financial decisions: which tests were referred, and how the panel became claims. That is the distinction an employee responsible for orders or billing could recognize. A panel’s components and the instructions for billing them belong in the same account of the alleged scheme.

Fresenius and National Medical Care

Federal fraud reporting for fiscal year 2000 records $385 million in civil payments by Fresenius Medical Care Holdings for National Medical Care’s conduct. The civil settlement addressed allegations involving blood laboratory testing within a broader health care matter.

What the Order and the Claim Reveal

The ordering clinician, the performing laboratory and the payer occupy different positions in laboratory medicine. An independent laboratory may receive the test request while the clinical explanation remains in the treating practitioner’s chart. For a dialysis claim, that separation can leave the person submitting the bill without the record explaining why an extra test was needed.

A useful historical perspective comes from Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in 1997. Its account of the Inspector General’s voluntary model compliance plan describes uniform requisitions with space for each test’s diagnosis, explanations of profile components and how they would be billed, and review of standing orders for continued validity.

The paper places the requisition and the laboratory profile beside the billing process. That is where a recurring dialysis order becomes especially revealing. A standing order shows what was requested over time. A profile description shows which components the ordering practitioner understood it to contain. The claim shows what Medicare was asked to pay for those components.

There is a commercial relationship behind the order, too. The HHS Office of Inspector General’s 1994 Special Fraud Alert identified laboratory pricing at dialysis centers among arrangements raising inducement concerns. The alert emphasized that physicians generally choose the laboratory and that referral decisions should serve the patient’s interests.

We work through those relationships with you: who selected the laboratory, what the practitioner ordered, what the laboratory performed and what Medicare paid.

The employee who knows how an order became a claim can bring something the claim itself never says. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

The Dialysis Prospective Payment System Changed the Payment Framework

The transition to the end-stage renal disease prospective payment system began in 2011. The Centers for Medicare & Medicaid Services’ January 2012 fact sheet described a blended transition for facilities that had not elected full payment under the new system. Its schedule moved those facilities to full payment under the new system in 2014.

During the transition, the agency continued to describe separately billable laboratory tests under the composite-rate portion of the blended payment. Those tests were paid through the Clinical Laboratory Fee Schedule at specified frequencies. The payment system and service date therefore belong beside the test name when examining an older claim.

For a present-day concern, we work through the payment rules for the actual service date with you. Your facility’s orders, claims and payment records give us the starting point for examining what happened in your operation.

Your Knowledge of the Orders Can Make the Case

If you have seen standing orders drive unnecessary testing or chemistry panels split into separate claims, speak with our whistleblower experts about what happened inside your dialysis operation. We work beside you to turn your knowledge of the orders, the billing decisions and who directed them into your strongest healthcare fraud whistleblower case. We bring in healthcare fraud whistleblower lawyers who understand laboratory billing and remain your partners throughout the case.