Wake Up Sleep Labs! OIG is Concered About Questionable Billing Practices

Is your sleep lab clinic being audited? Call the health lawyers at Liles Parker for help.

(October 24, 2013): Over the next year, sleep lab / sleep medicine practices and clinics should expect to receive increased scrutiny from both the Department of Health and Human Services, Office of Inspector General (OIG) and from program integrity contractors working for the Centers for Medicare and Medicaid Services (CMS). These contractors may include Zone Program Integrity Contractors (ZPICs), Recovery Audit Contractors (RACs) and other "specialty" contractors hired by the agency to audit these types of claims.

Are your sleep study tests being handled properly? Do your medical necessity, documentation, coding and billing practices fully compliant with Medicare’s requirements? Even if you believe that your sleep study practices are fully meeting all applicable statutory and regulatory mandates, we strongly recommend that you conduct an internal review to verify your adherence to the rules.

I. Introduction to the Sleep Lab Billing Issue

In recent years, OIG has noted a significant rise in Medicare’s spending on sleep study testing services by physician practices, clinics and hospitals. This unexpected rise, coupled with the agency’s mounting concerns about fraud and abuse, prompted OIG to conduct an in-depth review of sleep study services and reimbursement issues. As OIG’s October 2013 report reflects, the agency analyzed Medicare claims from hospital outpatient departments and non-hospital providers, including independent diagnostic testing facilities and physician-owned sleep laboratories.

According to the report, almost $17 million in Medicare claims for polysomnography services did not meet one or more of the three requirements for Medicare reimbursement. Many of these incorrect claims:

  • Used inappropriate diagnostic codes;
  • Were billed under same-day duplicate claims; or
  • Were submitted for payment using an invalid national provider identifier (NPI).

Overall, the report also reflected that many providers exhibited patterns of “questionable billing.”

Based on these findings, OIG made four recommendations to CMS. Since CMS concurred with these recommendations, providers that administer sleep study services should expect increased CMS audit actions in the near future.

II. What is Polysomnography?

Polysomnography is a type of sleep lab study that is used to diagnose medical conditions that affect an individual’s sleep, such as “sleep apnea,” and is typically used and to evaluate the effectiveness of continuous positive airway pressure (CPAP) devices.[1] During a polysomnography, a patient sleeps while connected to sensors that measure and record biophysical changes that occur during sleep, such as brain wave activity, eye movement, and airflow.[2] If the polysomnography demonstrates that an individual has sleep apnea, a provider may prescribe a CPAP device for treatment. Polysomnography services may be performed in hospital outpatient departments or nonhospital locations, such as independent diagnostic testing facilities and provider-owned sleep laboratories.

Providers may conduct a diagnostic service and fit / titrate the CPAP device (if necessary) in two separate visits. Alternatively, providers may perform both of these services during a single visit. This is known as a “split-night service.” Split-night services are generally conducted when a diagnosis of sleep apnea can be made within the first few hours of the polysomnography service and the provider still has time to fit and titrate the CPAP device that same night. However, if the provider is unable to make the diagnosis early in the polysomnography service, the patient may need to return at a later date for an additional polysomnography service to fit the CPAP device.

III. Qualification and Reimbursement Requirements for Polysomnography under Medicare

From the outset, how providers are reimbursed under Medicare for polysomnography services depends on where the service is performed. Generally, if it is performed in a hospital outpatient department, Medicare pays under the Outpatient Prospective Payment System.[3] On the other hand, if polysomnography services are performed by a non-hospital provider, Medicare will reimburse the provider under the Physician Fee Schedule.[4]

More importantly, Medicare will only cover polysomnography services that are deemed “reasonable and necessary.”[5] Medicare also will not reimburse a provider for duplicate claims, (i.e., multiple claims submitted for a single service performed).[6] Furthermore, for polysomnography tests, CMS requires a valid order from the provider who evaluates or treats the beneficiary.[7][8]

Once a beneficiary has qualified for this type of service and it has been provider, the health care provider must submit the claim to Medicare for reimbursement. Polysomnography service claims are processed by one of the fifteen different Medicare Administrative Contractors (MACs). In addition to guidelines and regulations promulgated by Medicare, MACs may specify additional coverage requirements through local coverage decisions (LCDs).[9] LCDs include details such as utilization guidelines, permissible CPT codes, and diagnosis codes that support medical necessity.[10] In fact, all LCDs for polysomnography services list sleep apnea diagnosis codes which support the medical necessity of diagnostic polysomnography. More importantly, all of these LCDs specify that routinely performing repeat services is not medically necessary, and that providers must have documentation that justifies the necessity of repeat tests. However, out of the fifteen MACs who process polysomnography claims, only nine had LCDs that apply to some or all of the polysomnography claims processed in 2011.

Health care providers typically bill Medicare for polysomnography services using three CPT codes.[11] Additionally, polysomnography services consist of two components: the administration of the test (i.e., the technical component) and the provider’s interpretation of the test (i.e., the professional component). Generally, providers bill the technical and professional components separately if each component is performed by a different provider. However, if a provider bills for the two components together, it is known as a “global service.” Finally, CMS requires an appropriate diagnosis code for payment for polysomnography services.[12] Providers must list the condition that justifies the service as the primary diagnosis code.[13][14]

IV. Why OIG Conducted a Review of Sleep Lab Billing Practices

Notably, OIG based its decision to perform an analysis of polysomnography services on two factors. First, the agency had seen a noticeable increase in Medicare spending on sleep lab services. From 2005 to 2011, Medicare spending for polysomnography services rose from $407 million to $565 million, a 39% increase. In 2011 alone, Medicare paid over one million claims for these sleep lab services.[15]

Second, OIG has also become more concerned with fraud and abuse for healthcare-related claims. As to polysomnography services, fraud investigators and sleep medicine professionals have identified specific vulnerabilities regarding these sleep lab services and the government is now targeting these problem areas. For example, in January 2013, one health care provider agreed to pay more than $15 million to settle allegations of false polysomnography claims billed to Medicare and other governmental payers.

V. How OIG Conducted its Review of Sleep Lab Claims

In order to conduct its analysis, OIG reviewed all Medicare payments for polysomnography claims submitted for payment in 2011. This included all paid claims for the technical component of polysomnography and global polysomnography services.[16] These claims came from hospital outpatient departments and non-hospital providers, which include physician-owned sleep laboratories and independent diagnostic testing facilities.

To further narrow its data set, the agency identified polysomnography claims that did not meet one or more of three Medicare requirements. These sleep lab claims were: (1) submitted with inappropriate diagnosis codes, (2) for the same service date as other polysomnography claims for the same beneficiary, or (3) submitted with invalid national provider identifiers (NPIs).

OIG then identified providers who exhibited patterns of “questionable billing.” In particular, it identified those providers that had unusually high percentages of questionable billing relative to other providers. To do so, OIG used eleven measures of questionable billing, which included the three Medicare requirements above and eight additional measures. All of these measures can represent services that were not medically necessary, not rendered, or otherwise inappropriate.

The additional eight measures were developed in consultation with fraud investigators and sleep medicine professionals within and outside of OIG. The agency based these measures on Medicare coverage and billing requirements for polysomnography services, measures used in OIG questionable-billing studies for other Medicare services, and consultations with fraud investigators and sleep medicine professionals within and outside of the agency. The eight additional measures of questionable billing include:

  1. Shared beneficiaries;
  2. Unbundling a split-night service;
  3. Double-billing for the professional component;
  4. Repeated titrations;
  5. Missing professional component;
  6. Titration with no corresponding treatment device;
  7. Missing visit with ordering provider; and
  8. Repeated polysomnography services.

Notably, OIG emphasized that the eleven measures of questionable billing it used does not provide conclusive evidence of fraudulent. Instead, the measures were intended to simply identify questionable billing scenarios of the basis of the data set. The agency recognized that additional investigation would be needed to determine whether a provider had, in fact, knowingly submitted incorrect or fraudulent Medicare claims for these services.

VI. OIG’s Findings Regarding Sleep Lab Billing Practices

The OIG’s report reportedly found that inappropriate payments for polysomnography services were more widespread than initially assumed. Health care providers who perform sleep studies should recognize the specifics that OIG identified and tailor their compliance programs accordingly.

From the outset, OIG found that Medicare inappropriately paid $16.8 million for polysomnography services that did not meet one or more of three Medicare requirements. The majority of these improper claims came from payments for services with inappropriate diagnosis codes. Notably, the agency did recognize the possibility that Medicare may have paid claims with inappropriate diagnosis codes because claims processing edits to prevent inappropriate payments – which are used by the MACs to process claims – did not exist or were ineffective. The report indicated that past reviews conducted by the government work had found that MACs do not always use edits to enforce LCD requirements, including those related to diagnosis codes.[17]

In addition, 85% of claims with inappropriate diagnosis codes – or roughly $14 million of the $16 million paid for these claims – came from hospital outpatient departments. The results were surprising because only 53% of all polysomnography claims in 2011 came from hospital outpatient departments. From the report, it appears that HHS-OIG placed much of the blame for this problem on the MACs. The agency noted that inappropriate payments might have been averted if the MACs had effective electronic edits that automatically denied claims or suspended them for manual review.

Furthermore, the report reflects that 180 providers exhibited patterns of questionable billing for polysomnography services in 2011. While this represented only 3.7% of the overall population of the providers analyzed, current polysomnography should take notice of what OIG was looking at in the data.

Most of the 180 providers who exhibited the questionable sleep lab billing patterns submitted an unusually high percentage of claims for beneficiaries with another polysomnography claim on the same day. This is a questionable practice because beneficiaries can undergo only one polysomnography service in a day, as the process requires an overnight stay. Thus, current providers should recognize that frequent billing of same-day duplicate claims raises questions about the legitimacy of a provider’s services in the eyes of OIG.

The OIG also determined that nearly half of the 180 providers had an unusually high percentage of beneficiaries who had polysomnography claims from one or more providers. The agency noted that this may be due to providers using the same compromised beneficiary numbers as other providers to fraudulently bill for services not rendered. Providers must therefore be on the lookout for stolen beneficiary numbers and ensure that their internal compliance measures are not allowing these numbers to be used in fraudulent billing schemes.

The report further noted that the many providers with questionable billing patterns had an unusually high percentage of diagnostic polysomnography claims with a titration claim for the same beneficiary on the following day. The OIG believes that these providers may be performing split-night services but are submitting separate claims for diagnostic and titration services (i.e., unbundling the split-night service). This is problematic because unbundling inappropriately increases a provider’s reimbursement – it generates payment for two separate services instead of a single service. While there are situations in which a provider may have to perform a separate diagnostic and titration service on consecutive nights, it is generally an unusual circumstance.

Finally, the report highlighted that some questionable billing providers had an unusually high percentage of claims for beneficiaries with no evidence of a visit with the ordering provider in the preceding year. Under Medicare guidance, an in-person evaluation is required to determine whether polysomnography services are warranted.[18] The report noted that sleep medicine professionals contend that polysomnography should be performed within a year after the in-person evaluation; as a result, the 180 providers scrutinized may be performing these services without a valid order. This would make their services not medically necessary.

VII. Recommendations Made by the OIG

As OIG noted in its report, nearly all of the nearly $17 million in inappropriate payments made by Medicare could have been prevented. In fact, more effective claims processing edits, particularly prepayment edits to deny claims with inappropriate diagnosis codes, was its primary prevention course of action. The OIG made four recommendations to CMS to prevent and /or reduce future inappropriate payments for polysomnography services.

  1. Implement claims processing edits or improve existing edits to prevent inappropriate payments;
  2. Recover payments for claims that did not meet Medicare requirements;
  3. Consider using measures of questionable billing from this study to identify providers for further investigations; and
  4. Take appropriate action regarding providers that exhibit patterns of questionable billing.

Upon its review of HHS-OIG’s concerns, CMS concurred with each of the agency’s recommendations. CMS plans to re-review its systems and investigate their accuracy and effectiveness. It has also planned to investigate, and recover if necessary, payments that did not meet Medicare’s requirements.

VIII. Final Remarks

So what does this report mean for providers who perform sleep study services? Well, based on CMS’ concurrence with OIG’s recommendations, including its plans to actively respond to the report’s results, these providers should expect greater scrutiny of their polysomnography services. This is likely to come in the form of increased and focused audits performed by CMS contractors. While CMS did not address when review and recoupment efforts would begin, we would expect that affected sleep medicine physicians and clinics should begin to receive audit letters from CMS contractors shortly.

As a result, polysomnography providers must take a proactive approach now to review their current billing practices and strengthen their compliance policies and procedures. Providers will then be ready if – and when – they become subject to an audit and will be able to effectively resolve any issues before they lead to legal problems and / or potentially large monetary penalties. As a final point, should you find that your sleep study claims are problematic, don't neglect to report and return any monies that may be owed to Medicare within 60 days. Otherwise, your failure to do so could take what would otherwise be a mere overpayment and transform it into a violation of the False Claims Act.

Healthcare Lawyer

Robert W. Liles, JD, MBA, MS, serves as Managing Partner at Liles Parker, Attorneys, a health care boutique law firm with offices in Washington, DC, Houston, TX, San Antonio, TX and Baton Rouge, LA. Should you have any questions regarding an audit of sleep lab claims conducted at your clinic, please give us a call. For a complimentary initial discussion regarding these issues, please call us at: 1 (800) 475-1906.

  • [1] CPAP devices are the most common treatment devices used to help individuals who have obstructive sleep apnea breathe more easily during sleep. A CPAP machine increases the air pressure in a patient’s throat so that the airway does not collapse when the individual breathes in.
  • [2] The Centers of Medicare & Medicaid Services (CMS) considers the overnight stay to be an integral part of a covered diagnostic test. CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 70(B).
  • [3] 42 C.F.R. § 419.21.
  • [4] § 419.22.
  • [5] 42 U.S.C. § 1395y(a)(1)(A).
  • [6] CMS, Reminder to Stop Duplicate Billings, Medicare Learning Network Matters No. SE0415. Available at http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/downloads/SE0415.pdf.
  • [7] 42 CFR § 410.32(a).
  • [8] CMS, Medicare Benefit Policy Manual, Pub. No. 100-02, ch. 15, § 70(A).
  • [9] CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 13, § 13.1.3.
  • [10] 42 CFR § 400.202.
  • [11] Diagnostic services are billed under CPT code 9508 or 9510; Titration/fitting services are billed under 95811; and Split-night services are billed under 95811.
  • [12] CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3, §
  • [13] CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 25, § 75.5
  • [14] Id., ch. 26, § 10.4.
  • [15] Office of Inspector General (OIG) analysis of polysomnography claims from National Claims History data.
  • [16] CPT codes 95808, 95810, 95811.
  • [17] See, e.g., OIG, Inappropriate Medicare Payments for Transforaminal Epidural Injection Services, OEI-05-09-00030, April 2010; OIG, Medicare Payments for Facet Joint Injection Services, OEI-05-07-00200, September 2008.
  • [18] CMS, Medicare Benefit Manual, Pub. No. 100-02, ch. 15, § 70.