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POL Medicare Compliance:

Five Steps To A Practical Program For Your POL

by Dr. Sheila Dunn

Reprinted with Permission from Washington G-2 Reports, Physician Office Testing November 1997

In today's federal enforcement climate, compliance is the "hot" topic for all laboratories doing business with Medicare/Medicaid. Key elements of a compliance program were unveiled earlier this year in a model plan from the HHS Office of Inspector General (POT, Mar. '97, p. 1). The model highlights at least a dozen potentially fraudulent practices which expose a lab to stiff penalties and possible exclusion from Medicare/Medicaid.

An effective compliance program, the government emphasizes, should be customized to each lab. But the OIG's model is based on probes of independent labs which operate apart from the ordering physician. Physician office labs (POLs) and other point-of-care testing labs, however, are in direct contact with the ordering physician, who often personally specifies which tests to perform. To complicate matters, the ordering physician may even own or direct the lab.

So, how extensive should your POL compliance plan be? Are all components of the OIG's model needed? Which are overkill? This article examines which components make sense for the unique circumstances of point-of-care testing labs.

Rating Your POL's Risk
Uncle Sam expects any lab compliance program to have written policies and procedures. This also makes good business sense for managing all lab issues, especially methods of billing and pricing. Regardless of whether the Feds ever get involved, it's prudent to standardize, for risk management and efficiency purposes, billing practices for both lab and non-lab procedures.

How extensive your written compliance plan becomes will depend on your calculated risk (Figure 1).

Step 1: Designate Chief Compliance Officer
This individual not only helps develop compliance policies, but also administers and enforces them. In a POL, the most likely candidate is the lab director. But this depends on how involved he/she is. If minimally, then another person, like the practice administrator, is probably more suitable.

Step 2: Write Compliance Policies
Start with a simple mission statement that includes your commitment to compliance. Emphasize your "zero tolerance" for fraud and abuse. Encourage employees to report potential problems, and specify how they can do so in confidence and without fear of retribution. Spell out how you will follow-up to investigate a complaint and resolve any problems.

Write down how lab tests are ordered and billed, with attention to these issues:

  • Medical necessity: Stipulate that only medically necessary tests are ordered and billed to Medicare, that ordering physicians assign ICD-9 diagnosis codes which accurately reflect the patient's condition, and that lab personnel are forbidden to substitute codes from previous dates of service (except under verified standing orders) or from "cheat sheets."
  • Test requisitions: Include a copy of all these forms. Specify which tests are included in panels/profiles and the Medicare payment for these tests.
  • CPT code review: State how often CPT and HCPCS procedure codes are verified for accuracy. Make code review part of your quality assurance program.
  • Test pricing: Indicate that tests are priced to reflect the cost of performing them and that none are provided free (or at or below cost) as a professional courtesy to referring doctors. Include a copy of your price list showing that the maximum discounted charge for any test is above that test's cost. Also, state that you don't bill for calculations or for tests ordered but not performed. Finally, explain how your practice bills for tests performed by reference labs.
  • Chemistry panels/profiles: Show that your POL gives ordering physicians the option of selecting panel/profile tests individually. If tests are added to panels, the panel price must increase to reflect the additions, and the overall price must never be below cost.
  • Standing orders: Get these in writing and confirm them every six months at a minimum.

Step 3: Make Compliance Part Of The Job
Compliance should be part of your written code of conduct for all employees, along with disciplinary action that will be taken, appropriate to the violation. There should be no doubt that adherence to compliance is a condition of being employed and promoted. State this clearly in job descriptions, reiterate it in performance reviews. Have a form employees can sign, attesting that they will adhere to your POL's compliance code.

Step 4: Train Employees
POLs in small, low-risk facilities should, at a minimum, discuss the compliance program at staff meetings and be sure all employees know how to identify and report compliance problems. Larger facilities may require more comprehensive classroom-type sessions. For new hires, compliance training should be part of orientation; for all staff, it should be conducted periodically during the year, but especially when major changes occur (billing codes are updated; Medicare revises lab payment policies; new laws impact lab operations, etc.)

Document the training provided. This can be done via minutes of the meetings, attendance rosters, and having employees sign a form attesting that they have participated.

Step 5: Conduct A Compliance Audit
A checklist like the one in Figure 2 is a good format for documenting your compliance review. Alternatively, these items may be incorporated in your routine quality assurance procedures.

If your POL accepts specimens on referral, provide clients with annual written notices that state your Medicare medical necessity policies, the individual components of every test profile (including CPT codes and Medicare fee caps), how you bill Medicare for each profile, and the availability of a clinical consultant to assist in ordering tests. Ask referring physicians to return a signed copy of the notice acknowledging they received it.

In light of CPT and Medicare changes coming next year, now is an ideal time to do a compliance audit. Include from Figure 2 audit suggestions that apply to your POL. Some can be inserted in your current monthly quality assurance activities, but some are more appropriately performed annually.

Figure 1. Rate Your Lab Risk
(Return To Text)

Factor 	                          Low             High
Size, volume, 
complexity of testing
Lab ownership: 
ordering physician(s)?
Operations: sales/marketing 
(e.g., offering custom panels?), 
business ties with other providers, 
vendors; shared lab situation
Clientele: your own 
patients vs. referrals; 
long-term care patients; 
Medicare/Medicaid patients, etc.
Compliance history 
(prior offenses, problems?)
Future business plans

Figure 2. Sample Audit Checklist Items
(Return To Text)

Mark Yes, No, or Not Applicable. If you answer "No" to any item, explain how the problem was investigated and corrected.

_____ Advance beneficiary notices were appropriate and used correctly (check a representative #).

_____ Denied claims were submitted properly (check # denied because of incorrect coding/billing or on medical necessity grounds).

_____ No increases occurred in lab claim denials (check with billing department for any trend of increasing denials: # checked_____; #, % denied_____).

_____ Billing errors were discussed with appropriate staff.

_____ Tests ordered but not performed were not billed (check "Specimen Rejection Log" against actual claims).

_____ No lab tests were double-billed (check sample of claims to verify).

_____ All standing orders were confirmed in writing within the last 6 months.

_____ OIG fraud notices were included in the compliance manual and retained for at least 5 years.

_____ OIG fraud notices were communicated to applicable employees.

_____ All current employees have documented compliance training.

Examine (#) lab chargemasters/superbills/test requisitions:

_____ Tests priced correctly

_____ Correct CPT codes assigned

_____ Each test in a panel accurately identified

_____ Individual ordering of tests available

_____ ICD-9 codes included

Examine (#) patient charts:

_____ Tests ordered were relevant to the patient's condition

_____ Tests ordered were necessary for patient care

_____ Results are documented for all tests ordered

_____ Caregiver acted appropriately on the lab test results

_____ All tests were coded, billed properly

_____ No business relationships include inducements in return for Medicare/Medicaid tests (see Figure 3)

_____ Any reported compliance issue has been investigated and remedied; written evidence of this is kept for at least 5 years.

Figure 3. What To Avoid From Referral Labs
(Return To Text)

    • A free phlebotomist who performs additional duties (e.g., clerical work, taking patients' vital signs, performing POL tests)
    • Bonus payments or rebates based on volume of Medicare/Medicaid referrals
    • Free supplies (like blood collection tubes) or equipment not used solely for specimens sent to the referral lab
    • Free testing for managed care patients in return for Medicare/Medicaid referrals
    • Hazardous waste pickup and disposal unrelated to referral lab purposes
    • Free computers or fax machines for purposes unrelated to referral lab services
    • Professional courtesy, free method verification or split-sample testing
    • Free consulting services

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