The United States Department of Justice (“DOJ”) recently settled part of a qui tam lawsuit under the False Claims Act for alleged violations of the Medicare “14-Day Rule” for $388,667. From March 2012 to November 2023, a laboratory and health system allegedly delayed submitting physician orders for certain laboratory testing until 14 days after patients’ hospital discharge in an attempt to circumvent the Centers for Medicare & Medicaid Services (“CMS”) bundled coverage and billing rule for laboratory services furnished to hospital patients. This enforcement action highlights the importance of maintaining a billing compliance policy that captures the requirements of CMS’s laboratory date of service policy.
What is the 14-Day Rule?
The general rule is that the date of service (“DOS”) for clinical diagnostic laboratory tests is the date of specimen collection unless the physician orders the test at least 14 days following the patient’s discharge from the hospital (“14-Day Rule”). When the 14-Day Rule applies, the DOS becomes the date the test was performed, not the date of specimen collection. There is an exception to the rule for Advanced Diagnostic Laboratory Tests, tests that are cancer-related protein-based Multianalyte Assays with Algorithmic Analyses and tests described by CPT code 81490, where the DOS is the date of performance regardless of when the physician ordered the test. However, all of the following criteria must be met before the exception applies per 42 CFR 414.510:
- The test must have been performed following a hospital outpatient’s discharge;
- The specimen must have been collected from an outpatient during an encounter;
- It must have been medically appropriate to collect the sample;
- The results of the test could not have guided treatment provided during the encounter; and
- The test must have been reasonable and medically necessary for the treatment of an illness.
When the DOS is the date of specimen collection, the test is considered a hospital outpatient service for which the hospital must bill Medicare, and the performing laboratory must seek payment from the hospital. If the submission of physician orders was delayed, either by holding orders or canceling and resubmitting orders, the health system did not have to pay the lab for testing. As a result of the 14-Day Rule, the laboratory test was effectively unbundled from the hospital outpatient encounter, and the performing laboratory was required to bill Medicare directly. The DOJ, therefore, claimed the laboratory and health system knowingly caused the submission of false claims for reimbursement to Medicare. The enforcement of the False Claims Act in this case demonstrates the government’s desire to disrupt health care fraud and abuse.
Practical Takeaways
- Clinical laboratories should consider enhancing their compliance and billing policies to ensure tests that are subject to the 14-Day Rule are properly identified.
- Just because a laboratory test described above was performed does not guarantee that the DOS will be the date of performance. Guidelines need to be in place to ensure that each requirement is satisfied before billing the Medicare program.
- If Medicare is improperly billed, you should act quickly to correct the action.
If you have any questions or would like assistance in building a compliance policy, please contact:
- Laetitia Cheltenham at (919) 447-4968 or lcheltenham@hallrender.com;
- Regan Tankersley at (317) 977-1445 or rtankersley@hallrender.com;
- Nikkia Jacques at (919) 228-2407 or njacques@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
