Knowledge Base Article

In recent years, sleep studies have become big business in healthcare. But is your facility performing these services for the appropriate reasons and meeting the Medicare requirements? Don’t snooze – the OIG is watching!

In October the OIG published a report of their findings on Questionable Billing for Polysomnography Services. The OIG conducted this review because of increasing numbers of services and concerns about potential false claims. Claims for polysomnography services increased 39% from 2005 to 2011, resulting in an increase in Medicare spending of almost $160 million. Also, there was a recent settlement of over $15 million related to fraudulent billing of these types of services. According to the report, in 2011 Medicare paid nearly $17 million for polysomnography services that did not meet one or more of three Medicare requirements.

The most significant finding was for claims submitted with an inappropriate diagnosis code based on Local Coverage Determinations (LCDs). This accounted for over $16M of the improper payments. Also surprising is the fact that 85% of the claims that did not have an appropriate diagnosis code were from hospital outpatient departments. Of the fifteen Medicare Administrative Contractor (MAC) jurisdictions in the audit, eight had LCDs for hospital outpatient sleep study services. Interestingly, Cahaba GBA does not have a local coverage policy and Palmetto GBA only has a Part B policy. However, both Novitas JH and JL have Sleep Study LCDs as well as First Coast, Noridian, CGS, and WPS.

According to Novitas’ policies, the covered indications for sleep studies include narcolepsy, sleep apnea, and parasomnia (excludes typical, uncomplicated and non-injurious parasomnias when the diagnosis is clearly delineated). The policies also include a number of conditions for which sleep studies are not covered, for example chronic insomnia.

Other conditions of coverage include:

• The center is under the direction and control of a Physician/Medical Director. Diagnostic testing does not require direct supervision if the data is interpreted by a physician.
• Patients are referred to the sleep disorder center by the beneficiary's treating physician, and the center maintains a record of the physician's orders and referral.
• The need for diagnostic testing is confirmed by medical evidence, e.g., physician histories and examinations (for example including the sleep history; and exams of the respiratory, cardiovascular, and neurological systems) and any applicable laboratory/diagnostic tests, all documented in the patient’s clinical records.

Concerns from the OIG report beside inappropriate diagnoses include:

• Statutory prohibitions on self-referral specify that Medicare patients receiving polysomnography services at hospital outpatient departments must be ordered by a provider who does not have a financial relationship with the hospital.
• Same-day duplicate claims
• Unbundling of a split-night service - For example, if a provider begins a diagnostic service at 9 p.m. and can make a diagnosis of sleep apnea early on, the provider may then begin the titration at midnight or later and complete a split-night service. In this scenario, a provider should submit a single split-night claim.
• Although occasionally appropriate, frequently performing separate diagnostic and titration services on consecutive nights is unusual.
• Lack of evidence of a visit with the ordering provider during the preceding year. An in-person evaluation is required to determine if polysomnography services are needed and the study should be performed at least within a year of the evaluation.

Although your specific area may not have a local coverage policy, it is wise to be aware of the acceptable requirements for sleep study testing. And watch carefully for new policies for your area – MACs tend to imitate each other.