Duplicate Lab Billing for Hospital and SNF Patients: When Another Payment Already Covers the Test

Inpatient laboratory duplicate billing fraud occurs when a laboratory knowingly bills Medicare Part B separately for a test already covered by a hospital’s Part A inpatient payment. The same payment problem reaches patients in a covered skilled nursing facility stay. The test can be real, the specimen processed and the result delivered. The question is who was supposed to pay the laboratory. If you work in hospital billing, a skilled nursing facility business office or a reference laboratory, the patient’s status and the facility’s contract may explain a claim that looks perfectly ordinary on its own.

What Medicare Part A and Part B Pay For

Medicare’s hospital inpatient payment includes laboratory work within the payment for the stay. Separately payable clinical laboratory tests run through Part B’s Clinical Laboratory Fee Schedule. The Medicare laboratory payment law expressly separates that fee schedule from tests a provider performs for its own inpatient.

That division follows the patient and the payment arrangement. Sending a specimen outside the hospital does not turn an inpatient test into a separately payable laboratory claim. When a hospital or skilled nursing facility obtains testing under an arrangement, the payment goes to the facility. The performing laboratory bills the facility for its work.

Hospital laboratory work also includes registered outpatients and outreach patients. Outreach laboratories test specimens for people who are neither admitted inpatients nor registered hospital outpatients. In its report on clinical laboratory payment, the Medicare Payment Advisory Commission separates those channels and excludes tests bundled into hospital inpatient and outpatient payments from its fee-schedule figures.

For a billing insider, the useful distinction is the patient behind the specimen. A hospital’s name on the order does not tell the whole payment story. The admission, the service and the arrangement with the outside laboratory belong together.

SNF Consolidated Billing and the Separate Laboratory Claim

A nursing facility bundled laboratory service billed separately to Medicare seeks a second payment for a test covered by the resident’s Part A stay. The SNF consolidated-billing question starts with that covered stay and the services included in its payment.

Midwest Medical Laboratory was alleged to have billed Part B for beneficiaries already in a Part A skilled nursing facility stay. It puts the otherwise abstract payment issue inside an ordinary billing operation: the laboratory claim and the facility stay described the same patient’s care through different payment channels.

We see the absurdity in asking taxpayers to buy a test already included in what they bought for the stay. Same test. Second bill.

The order still matters. For a recurring test, the individual resident’s order and clinical reason belong beside the billing history. The laboratory guidance described in Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in 1997, recommended monitoring standing orders for continued validity. Later government guidance called for periodic review, a fixed term and renewal. That history makes the resident’s order useful evidence alongside the payment record: what testing continued, why, and under whose instructions.

When the Part A Discount Buys Part B Referrals

A facility contract can connect the bill the nursing home pays with the referrals the laboratory wants. In the complaint against Vista Clinical Diagnostics, a whistleblower alleged that reduced Part A prices bought referrals of Part B business:

The complaint set a 30% discount on the facility’s Part A laboratory services against Part B referrals billed at the full fee-for-service amount. Under the contract it quoted, Vista would bill the facility for Part A laboratory services when a per diem applied and bill Medicare Part B directly for the Part B business.

In that alleged exchange, the facility saves on its own bill by steering business the laboratory can bill to Medicare. The discount buys access to the taxpayer’s money. For someone who negotiated the contract or assigned the accounts, the link between those two promises may be the most revealing part of the deal.

Can a Test Be Billed by Another Lab?

A send-out can leave one laboratory performing a test and another billing for it. We examine the performing laboratory, the referring laboratory and the facility’s arrangement together to understand why the claim went out under a particular name.

A laboratory’s test menu reflects its equipment, staffing and volume. Low-volume assays, tests requiring different instrumentation and work needing subspecialty interpretation move to reference laboratories. The result identifies the laboratory that did the work. The claim shows who asked to be paid.

When an Independent Laboratory Bills Inpatient Specimen Testing Directly to Medicare

For testing covered by a hospital’s inpatient payment, the outside laboratory’s bill belongs with the hospital. The Justice Department’s 2020 settlement announcement about Bio-Reference Laboratories described allegations that the laboratory billed federal programs for tests on hospital inpatients that should have been billed to the hospitals.

The $11,500,960 settlement also covered allegations of software donations tied to referrals.

A laboratory employee may recognize the send-out and the result immediately. A hospital employee may recognize the admission and the facility account. We connect those views to the claim and the billing decision. The test result answers what the laboratory did. The facility records answer whose bill it was.

Sutter and the Test Performed Elsewhere

The Justice Department announced a $13,091,452 settlement with Sutter Health and Sutter Bay Hospitals in 2022 over allegations involving bills for toxicology screening tests performed by others. That allegation concerns the identity of the provider behind the claim. A test performed by another entity leaves a performing laboratory and its work to trace.

The distinction is concrete for anyone who handles specimens. The send-out record and the outside laboratory’s report can identify the actual testing. The submitted claim shows which entity sought payment.

Pass-Through Billing Uses the Hospital’s Rate

In its 2020 criminal charging announcement about rural hospital pass-through billing, the Justice Department alleged that laboratory work performed elsewhere was billed under hospitals’ provider numbers and higher negotiated rates for patients never treated there.

In the scheme described in that criminal announcement, the hospital identity allegedly supplied the higher billing rate. The patient’s relationship to the hospital and the location of the testing explain why the provider number mattered. An insider who knows where the specimens came from can connect that operational fact to the commercial story on the claim.

How Should Laboratory Tests Be Bundled for Medicare?

Laboratory billing must account for services already included in a facility payment and components already included in a panel. A separate charge for an included panel component seeks more payment for the same testing.

The General Accounting Office’s 1998 report on hospital billing explained the historical panel mechanism. Automated equipment could perform multiple tests on one blood sample at lower cost. A profile code generally paid less than the same combination of tests billed separately. Billing the components individually could therefore produce an overpayment for work performed as a profile.

That is a different place to look in the billing records. The inpatient problem turns on a facility payment that already covers the service. Panel unbundling turns on a code that already covers the component. In each, the extra claim asks for payment for work already included elsewhere.

The HHS Office of Inspector General’s account of Abington Memorial Hospital described allegations of laboratory services unbundled, upcoded and double billed. The hospital paid $4,200,000. The combination matters because a review limited to repeated claim lines would leave the panel and code choices out of view.

HCA’s 2015 settlement supplies a parallel in fetal testing. The United States and Florida alleged that one hospital billed a fetal biophysical profile including a non-stress test and then billed a standalone non-stress test as well.

The $2,000,000 settlement also covered allegations of unordered or unnecessary lipid testing. An HCA employee brought the qui tam case, and the announcement stated a 20% share of the settlement for that employee.

How to Detect and Deter Laboratory Fraud?

Duplicate laboratory billing comes into view when the facility stay, the laboratory contract and the claim are set side by side. Comparing the billing instructions staff receive with the laboratory’s written policy also shows where controls need attention. If those records tell conflicting stories, our whistleblower experts work through them with you:

• The admission or covered-stay record, identifying the patient’s status when the service belonged to the facility’s care.
• The order and requisition, identifying the test requested and the treating provider’s instructions.
• The facility contract and invoice, showing the laboratory arrangement and who was supposed to pay.
• The specimen and send-out records and the performing laboratory’s report, showing where the work went and what came back.
• The submitted claim and payment records, showing who billed, what service was described and which payment covered it.

The clinical documentation and the billing documentation can sit with different health care organizations. The ordering provider maintains the medical-necessity record. The billing entity maintains the information received from that provider and documentation that its claim accurately reflects it. That division explains why a laboratory claim file can tell only part of the story.

The Laboratory Medicine article described an earlier effort to close the same gap: explaining to ordering physicians which components made up a profile, which codes the laboratory used and how it would bill Medicare. Those connections remain useful questions for an insider. What did the clinician request, what did the laboratory perform, and what did the billing operation turn it into?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When You Know Whose Bill It Was

If you can see the facility stay, the laboratory contract or the billing instructions behind a separate Medicare claim, speak with our whistleblower experts about the payment that already covered the test. We work beside you to build your laboratory fraud case around the patient, the testing and the decisions that sent the bill to Medicare. We bring in healthcare fraud whistleblower lawyers who understand hospital and skilled nursing facility laboratory payment, and stay with you through the case.