Abington Memorial Hospital: Laboratory Unbundling and a New Compliance Team

In the Abington Memorial Hospital laboratory fraud settlement, the Pennsylvania hospital paid $4,200,000 to resolve allegations that it unbundled, upcoded or double billed clinical laboratory services over nine years. The resolution also required a new compliance team. The response reached the people overseeing the billing, as well as the bill itself.

The hospital’s resolution appears in the HHS Office of Inspector General’s April to September 2005 Semiannual Report to Congress. The alleged practices concern different ways a claim can depart from the work behind it. A panel becomes separate charges. A performed test becomes a higher-paying code. A service becomes more than one bill. Understanding which happened means following the test through the hospital, from the physician’s order to the payment.

Abington’s case covered allegations across these practices, and each calls for a different comparison inside the claims.

Laboratory Unbundling Makes the Same Work Pay More

Laboratory unbundling separates a panel into individual charges that together pay more. The economics were already clear in the General Accounting Office’s 1998 examination of hospital billing: automated equipment could perform multiple tests on a blood sample simultaneously, reducing the laboratory’s costs. Medicare’s profile codes reflected that efficiency by paying less than the same combination of tests billed individually.

The work could stay the same while the reimbursement rose. When Medicare pays more for the same work, taxpayers cover the difference. A hospital billing review therefore has to connect the panel actually performed with the component codes submitted for payment. Looking at each code in isolation loses the relationship that made the tests a panel in the first place.

In the Meris Laboratories settlement announcement, the Department of Justice alleged that Meris routinely added medically unnecessary cholesterol and serum iron tests to automated panels and billed them separately, although physicians had not specifically ordered them.

Upcoding Puts a Higher Price on the Performed Test

Upcoding uses a code that pays more than the code describing the test actually performed. The comparison runs between the laboratory’s performance record and the code on the claim. A result can document that a test happened while the bill still describes a different, more expensive service.

That makes the connection between the laboratory and billing systems important. When a laboratory changes a test, the ordering and billing processes have to change with it. Otherwise, the service named on the claim can drift away from the service actually ordered and performed. For an insider, the useful detail is the specific mismatch and the decisions that kept it in place.

Double Billing Charges Again for Work Already Included

Double billing concerns the service represented more than once. The comparison needs to identify what the first charge already covered and what the additional charge purports to buy.

In its HCA settlement announcement, the Justice Department described allegations that a Florida hospital billed for a fetal biophysical profile that included a non-stress test, then submitted an additional claim for the standalone non-stress test.

For a laboratory billing concern, we examine the performed service, the claim’s unit of service and the payment history together. The question is what work the payer paid for, and how often the billing represented that work.

Why Hospital Laboratory Records Tell Different Stories

A hospital laboratory serves its own inpatients and registered outpatients. Its outreach business serves people referred from community practices, nursing homes and clinics who are not hospital patients. That distinction gives the claims their setting: the same laboratory can perform work arising from different patient relationships and billing routes.

The physician’s order, the laboratory’s specimen and result records, and the claim answer different questions.

Those records may also sit with different people. The ordering physician may hold the documentation explaining why the test was needed, while the laboratory holds the results and billing information. Someone who knows how the hospital connects those records can explain a discrepancy that is hard to see from the claim alone. That is why hospital laboratory experience matters in a healthcare fraud case: it supplies the meaning behind the codes.

A Settlement That Also Changed Compliance Oversight

Abington’s fiscal year 2005 civil resolution included a five-year corporate integrity agreement and an obligation to hire a new compliance team. The agreement extended the response beyond the payment and into oversight of the laboratory’s billing.

That requirement is the distinctive part of this case. Bringing in a new team addresses who will oversee the work going forward. For hospital staff who have seen audit findings or coding concerns circulate internally, the connection between those two parts is practical: what happened after the problem reached the people responsible for compliance?

The alleged conduct covered a sustained period. The useful inquiry is therefore broader than whether an individual claim used the right code. It includes how the process generated claims, how staff checked them and what happened when someone identified a mismatch.

What Laboratory Compliance Has to Reach

Laboratory compliance reaches the order form, the test menu, staff training, claims review and the response to identified problems. A team reviewing only finished claims sees the output of decisions already made elsewhere.

The Laboratory Medicine article Model Plan Helps Laboratories Fight Fraud, published in 1997, described OIG’s voluntary model for clinical laboratories. It called for written policies, a chief compliance officer, employee education, audits, investigation and correction of problems, an internal reporting channel and retained records. These were operational responsibilities, with someone assigned to maintain and monitor the policies.

The article also described a particularly useful connection between ordering and payment. Laboratories were advised to tell physicians what each profile contained, which codes would be used and how Medicare would be billed. A physician choosing a panel would then have a clearer view of what that choice set in motion. That is directly relevant to the distance between a laboratory’s test menu and the resulting charges.

The model also recommended retaining and analyzing test-use data by code. That brings a recurring billing pattern into view alongside individual claims. Training explains the policy. Reviewing the work shows whether the policy reached the claims.

Precision Toxicology’s 2024 corporate integrity agreement required review of client registrations, requisitions or order forms, and applicable test results.

What Evidence Is Needed to Prove Fraud?

For laboratory billing allegations like these, the evidence connects the physician’s order, the work performed, the claim and the payment with what the people responsible knew. We work with the insider to establish those connections and understand how the billing process produced the disputed charges.

That combination is more revealing than a code list alone. The person who understands the test menu may explain the panel. The person who handles claims may explain the billing units. The person who reviews audits may know when the discrepancy became an internal concern. We bring those views together to assess the health care fraud case. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Hospital Billed the Test

If your work puts you between laboratory results, claims and compliance decisions, talk with our whistleblower experts about the billing you have seen. We develop the case with you and bring in hospital billing whistleblower lawyers who understand how laboratory work becomes a government claim. We stay with you through the whole journey to build your strongest hospital laboratory whistleblower case.