The U.S. Attorney’s Office for the Southern District of Ohio has announced a settlement agreement to resolve False Claims Act allegations that a company providing laboratory services submitted false claims to Medicare when those diagnostic testing services were performed during patients’ inpatient hospital stay and thus already covered by the inpatient admission. This settlement offers little information about the facts or the law which triggered the investigation. But it does send an important reminder to any radiology group or imaging center that might perform tests for Medicare patients who may concurrently be registered hospital patients.

The settlement appears to be grounded on the rules that prohibit hospitals from unbundling billings for services to Medicare inpatients and certain outpatients.

The Social Security Act (SSA) § 1866(a)(1)(H) requires each Medicare-participating hospital to agree to furnish directly all covered non-physician services required by its inpatients and outpatients, or to have the services furnished under an arrangement.  Civil monetary penalties - up to $2,000 for each bill or request for items and services - can be imposed against any person who knowingly and willfully presents, or causes to be presented, a bill or request for payment for a hospital outpatient service under Medicare Part B that violates this “bundling” requirement.  

The government’s press release describes an earlier settlement in this investigation with the hospital where these patients receiving the laboratory services were inpatients, bringing the federal government’s total recovery in this matter to approximately $517,498. 

Imaging centers cannot take solace that only the hospital can be subject to allegations of false claims arising from a hospital's unbundling of the technical component of diagnostic testing services performed for Medicare patients who remain registered hospital inpatients or outpatients. 

The settlement agreement is a good reminder that Medicare's prohibition on unbundling can apply to any imaging services furnished by a separate radiologist-owned or free-standing entity to a Medicare patient if, at the time the services are rendered, that patient is a registered inpatient or were an outpatient of a hospital and in the midst of an ongoing treatment encounter such as in the hospital's emergency department or another hospital outpatient department.  

We recommend that there should be an "under arrangement" agreement with the hospital for imaging services furnished for Medicare inpatients or outpatients who are in the midst of a treatment encounter with physician members of the hospital medical staff who use the test results for the diagnosis and treatment of those hospital patients.