Department of Health and Human Services 
OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
 
Q B
UE  STIONABLE  ILLING FOR 
 
P
  OLYSOMNOGRAPHY 
 
S
ERVICES 
 
Daniel R. Levinson   
Inspector General  
 
October 2013 
OEI-05-12-00340   
EXECUTIVE SUMMARY:  Questionable Billing for Polysomnography Services, 
OEI-05-12-00340 
 
WHY WE DID THIS STUDY 
 
Increased Medicare spending on polysomnography (a type of sleep study), along with growing 
concerns about fraud and abuse, prompted the Office of the Inspector General (OIG) to conduct 
this study. From 2005 to 2011, Medicare spending for polysomnography services rose from  
$407 million to $565 million, an increase of 39 percent.  In addition, fraud investigators and 
sleep medicine professionals have identified specific vulnerabilities regarding polysomnography 
services. In January 2013, a provider agreed to pay $15.3 million to settle allegations of false 
polysomnography claims billed to Medicare and other Federal payers. 
 
HOW WE DID THIS STUDY  
 
We analyzed Medicare payments for polysomnography claims for 2011.  The claims were from  
hospital outpatient departments and nonhospital providers, such as physician-owned sleep 
laboratories and independent diagnostic testing facilities.  We identified polysomnography 
claims that did not meet one or more of three Medicare requirements.  We also identified 
providers with patterns of questionable billing using 11 measures of questionable billing, which 
included the 3 Medicare requirements and 8 additional measures developed in consultation with 
fraud investigators and sleep medicine professionals within and outside of OIG. 
 
WHAT WE FOUND 
 
Medicare paid nearly $17 million for polysomnography services that did not meet one or more of 
three Medicare requirements. Payments for services with inappropriate diagnosis codes 
composed a majority of these payments.  Eighty-five percent of claims with inappropriate 
diagnosis codes came from hospital outpatient departments.  Inappropriate payments might have 
been averted with effective electronic edits that automatically deny claims or suspend them for 
manual review. 
 
Further, 180 providers exhibited patterns of questionable billing for polysomnography services.  
Most of these providers submitted an unusually high percentage of claims for beneficiaries with 
another polysomnography claim on the same day, which is questionable because beneficiaries 
can undergo only one polysomnography service in a day, as the process requires an overnight 
stay.  
 
WHAT WE RECOMMEND  
 
To strengthen safeguards for polysomnography services, we recommend that the Centers for 
Medicare & Medicaid Services (CMS) implement or improve claims processing edits and 
consider using measures of questionable billing from this study to identify providers for further 
investigation.  We also recommend that CMS take appropriate action regarding inappropriate 
payments and providers that exhibited patterns of questionable billing.  CMS concurred with all 
four of our recommendations. 
   
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................6 

Findings......................................................................................................12 

Medicare inappropriately paid nearly $17 million for 

polysomnography claims that did not meet certain Medicare 

requirements ...................................................................................12 
 
One hundred and eighty providers exhibited patterns of 

questionable billing for polysomnography services ......................14 

Conclusion and Recommendations ............................................................17 

            Agency Comments and Office of Inspector General Response .....19 

Appendix A:  Agency Comments ..............................................................20 

Acknowledgments......................................................................................23 

 
   
   
OBJECTIVES 
1. 	  To identify inappropriate payments for polysomnography claims that 
did not meet certain Medicare requirements. 
2. 	  To identify providers with patterns of questionable billing for 
polysomnography services. 
BACKGROUND 
Polysomnography Services 
In 2011, Medicare paid over 1 million claims for polysomnography 
services, totaling almost $565 million.1 Medicare spending on 
polysomnography increased from $407 million to $565 million 
(39 percent) from 2005 to 2011. 
Additionally, fraud investigators and sleep medicine professionals have 
identified specific vulnerabilities regarding inappropriate and fraudulent 
billing for polysomnography services.  Most recently, in January 2013, a 
provider agreed to pay $15.3 million to settle allegations of false 
polysomnography claims billed to Medicare and other Federal payers.2  
Polysomnography is a type of sleep study conducted to diagnose medical 
conditions that affect sleep (e.g., sleep apnea) and to evaluate the 
effectiveness of positive airway pressure (PAP) devices (a type of  
treatment device for sleep apnea).  During a polysomnography service, a 
beneficiary sleeps overnight while connected to sensors that measure and 
record parameters of sleep, such as brain wave activity, eye movement, 
and airflow.3  If polysomnography shows that a beneficiary has sleep 
apnea, a provider may prescribe a PAP  device for treatment.  Providers fit 
and titrate PAP devices (i.e., set them to the appropriate pressure for a 
beneficiarys condition), after which beneficiaries may get a PAP device 
for home use.4  Providers also may prescribe a different type of treatment 
device, called an oral appliance, instead of a PAP device. 
 
1  Office of Inspector General (OIG) analysis  of polysomnography claims from National  
Claims History data.  Throughout this report, references  to Medicare payment represent 
the total amount allowed by  Medicare, which consists of  payments  made by Medicare 
plus beneficiary cost-sharing  payments. 
2 U.S. Department of Justice, Florida-Based American Sleep Medicine to Pay 
$15.3  Million for Improperly Billing Medicare and Other Federal Healthcare Programs  
(press release).  Accessed at www.justice.gov on March 29, 2013. 

3 The Centers for Medicare & Medicaid Services (CMS) considers the overnight stay to 
 
be an integral part of this service.  CMS, Medicare Benefit Policy Manual, 

Pub.  No. 100-02, ch. 15,  70(B). 

4 Medicare covers prescriptions for PAP devices when an appropriate diagnosis results 

from a polysomnography service.  
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  1 
   
   
Providers can perform diagnostic and titration services in two visits or 
together in a single visit, known as a split-night service.  Providers can 
perform a split-night service when a diagnosis of sleep apnea can be made 
within the first few hours of the polysomnography service and the 
provider is able to fit and titrate the PAP device in the same night.  If the 
provider cannot make a diagnosis early in the polysomnography service, 
the beneficiary may need to return at a later date for an additional 
polysomnography service to fit and titrate the PAP device.5  
Polysomnography services are performed in hospital outpatient 
departments and nonhospital locations, such as independent diagnostic 
testing facilities and provider-owned sleep laboratories.  (In this report, we  
refer to these nonhospital facilities as nonhospital providers.) 
Medicare Requirements for Polysomnography Services 
Medicare pays for polysomnography services under different payment 
systems, depending on where the services are performed.  For 
polysomnography services performed in most hospital outpatient 
departments, Medicare pays under the Outpatient Prospective Payment 
System.6  For polysomnography services performed by nonhospital 
providers, Medicare pays under the Physician Fee Schedule.  In 2011, the 
Medicare payment rate for a polysomnography service was $780.77 for 
hospital outpatient departments and $618.03 for nonhospital providers.7, 8  
CMS contracts with Medicare Administrative Contractors (MAC) to 
process claims.  Fifteen MACs with a total of 128 distinct contracts 
processed polysomnography claims in 2011.9  Each MAC may have 
multiple contracts to process claims. 
Medicare Coverage Requirements.  The Social Security Act governs 
Medicare payments for all services, including polysomnography.  
 
5 OIG analysis  of local coverage determinations (LCD) for polysomnography services 
from 2011. 
 
6 Some hospitals are exempt from the Outpatient Prospective Payment System, and 

instead receive  cost-based reimbursement.
  
7 American Medical Association, Current Procedural Terminology  reference for code 

95811. Accessed at hsrl.mediregs.com on April 9, 2013.  Reimbursement amounts 
 
reflect unadjusted 2011 Outpatient Prospective Payment System and Physician Fee 

Schedule base  payment rates for the technical component  of the service. 
 
8  The five character codes and descriptions included in this document are obtained 
from Current Procedural Terminology (CPT, copyright [2011] by the American 
Medical Association (AMA).  CPT is developed by the AMA as a listing  of  
descriptive terms and five character identifying codes and modifiers for reporting 
medical services and procedures.  Any use of CPT outside of this document should 
refer to the most current version of the Current Procedural Terminology available 
from  AMA.  Applicable FARS/DFARS apply.  
9 OIG analysis  of polysomnography claims from National Claims History  data and MAC  
contract information from  the Services Tracking, Analysis, and Reporting System. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  2 
   
   
Medicare covers services that it considers reasonable and necessary, 
including services used to diagnose or treat a disorder.10 Also, Medicare 
does not pay duplicate claims (i.e., multiple claims submitted for a single 
service performed).11  
For all diagnostic tests, including polysomnography, CMS requires an 
order from the provider who evaluates or treats the beneficiary.12, 13   
Polysomnography providers must enter the name and National Provider 
Identifier (NPI) of this ordering provider on the polysomnography claim.14   
Statutory prohibitions on self-referral specify that beneficiaries receiving  
polysomnography services at hospital outpatient departments must be 
ordered by a provider who does not have a financial relationship with the 
hospital.15  
MACs may specify additional coverage requirements through LCDs.16   
LCDs include information such as utilization guidelines, permissible CPT  
codes, and diagnosis codes that support medical necessity.17  For example, 
all LCDs for polysomnography services list sleep apnea diagnosis codes as 
supporting the medical necessity of diagnostic polysomnography.18  
Nine of the fifteen MACs had LCDs that applied to some or all of the 
polysomnography claims processed in 2011.19 Of these nine MACs, eight 
had both LCDs that applied to hospital outpatient departments and LCDs 
that applied to nonhospital providers, whereas one had only LCDs that 
applied to nonhospital providers. The remaining six MACs had no LCDs 
for polysomnography in 2011.20  
Several LCDs for polysomnography specify that one service is usually 
sufficient for diagnosis and titration.  These LCDs note that there are some 
instances in which beneficiaries may need to return for repeat 
polysomnography services (e.g., in the case of equipment failure, 
inconclusive results, or titration adjustments).  However, the LCDs specify 
 
10 Social Security Act  1862(a)(1)(A); 42 U.S.C.   1395y(a)(1)(A). 
11 CMS, Reminder to Stop Duplicate Billings, Medicare Learning Network Matters 

No. SE0415.  Accessed  at www.cms.gov on  March 26, 2013. 

12 42 CFR   410.32(a). 

13 CMS, Medicare Benefit Policy Manual,  Pub. No. 100-02, ch. 15,  70(A).
  
14 CMS, Claims Processing  Manual, Pub.  No. 100-04, ch. 26,  10.4. 

15 Social Security Act  1877.  Polysomnography services performed by  nonhospital 

providers are not subject to the self-referral prohibition. 

16 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch.  13,    13.1.3. 

17 42 CFR   400.202.  

18 OIG analysis  of LCDs for polysomnography services from 2011. 
 
19 Because LCDs are established at the contract level, a MAC with multiple contracts 

may process some claims under contracts with applicable LCDs and other  claims under 

contracts without applicable LCDs. 

20 OIG analysis  of LCDs for polysomnography services from 2011. 
 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  3 
   
   
that routinely performing repeat services is not medically necessary, and 
that providers must have persuasive documentation to justify the necessity 
of repeat tests.21  
Medicare Billing Requirements.  Providers bill for polysomnography 
services using three CPT codes.  Providers bill for diagnostic services 
using either CPT code 95808 or 95810, depending on how many 
parameters of sleep are measured.  Providers bill for both full-night 
titration services and split-night services using CPT code 95811.  See 
Table 1 for a description of each type of polysomnography service and 
associated CPT codes. 
Table 1: Types of Polysomnography  Services 
Type of 
Polysomnography   CPT Code   Description  
Service  
Polysomnography; sleep staging with 1-3 additional parameters of 
95808  
sleep, attended by a technologist.  
Diagnostic 
Polysomnography; sleep staging with 4 or more additional 
95810  
parameters of sleep, attended by a technologist. 
Polysomnography; initiation of continuous positive airway  pressure 
Titration  95811  
therapy or bilevel ventilation, attended by  a technologist. 
Initial diagnostic polysomnogram  confirming the diagnosis of 
Split-night  95811   obstructive sleep apnea followed by titration during  
polysomnography on the same night. 
Sources:  AMA, CPT reference  for codes 95808, 95810, and 95811; 2011 LCDs for polysomnography services. 
All polysomnography services consist of two components:  the 
administration of the test (the technical component) and the providers 
interpretation of the test (the professional component).  Providers 
generally bill separately for the technical and professional components 
when each is performed by a different provider; some providers may  
perform only one component of the service.22 If a provider bills for the 
two components together, it is referred to as a global service.  There is 
no financial advantage to billing separately for each component as 
opposed to billing for a global servicefor a given provider, the sum of 
the Medicare payments for the technical and professional components is 
equal to the payment for the global service.23  
 
21 OIG analysis  of LCDs for polysomnography services from 2011.  
22 Most  hospital  outpatient  departments can receive payment only for the technical  
component.  
23 AMA, CPT reference for codes 95808, 95810, and  95811.  Accessed at 
hsrl.mediregs.com  on August 15, 2012.  
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  4 
   
   
CMS requires providers to obtain an NPI and to use it when submitting 
Medicare claims, including claims for polysomnography services.24, 25   
NPIs should be deactivated if they are no longer in use (i.e., if the provider 
organization dissolves or the provider dies).26  
CMS also requires an appropriate diagnosis code for payment for 
polysomnography services.27  CMS instructs providers to list the condition 
that justifies the service as the primary diagnosis code.28, 29   The primary 
diagnosis should be the one most relevant to the service. 
Medicare Safeguards for Polysomnography Services 
Medicare uses claims processing edits to prevent inappropriate payments.  
These electronic edits automatically pay all or part of a claim, deny all or 
part of a claim, or suspend all or part of the claim for manual review. 
CMS has edits for certain services, including polysomnography, that deny 
payment when the unit of service billed is not likely for normal medical 
practice.30   These edits, referred to as Medically Unlikely Edits, apply to 
all claims submitted nationally.  Medically Unlikely Edits for 
polysomnography services are intended to deny payment for claims with a 
unit of service greater than one.31  
MACs may choose to implement local edits to enforce their LCDs and 
reduce payment error.32  For example, MACs could implement an edit to 
deny payment for claims without a diagnosis code supporting the medical 
necessity of a service. These are considered local edits because they apply  
only to geographic areas covered by the MAC.  MACs have the discretion 
to implement local edits denying payment when overutilization is 
identified and an LCD serves as the basis for the denial.33  
CMS also conducts data mining to identify high-risk and potentially 
fraudulent providers. One way CMS does this is by running algorithms on 
claims data using its Fraud Prevention System.34   According to CMS staff, 
 
24 CMS, Transmittal No. 1349.  Accessed at www.cms.gov on March 26, 2013. 

25 45 CFR   162.410(a). 

26 45 CFR   162.408(c). 

27 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3,  3.4.1.3(A). 

28 CMS, Medicare Claims Processing Manual, Pub. No. 100-04, ch. 25,   75.5. 

29 Ibid., ch. 26,  10.4. 
 
30 CMS, Medically Unlikely Edits. Accessed at www.cms.gov  on March 26, 2013. 
 
31 Practitioner Services and  Outpatient Hospital Services Medically Unlikely Edit Tables.  

Accessed  at www.cms.gov on  March 26, 2013. 

32 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3,  3.4.1.5(A). 

33 Ibid., ch.3,  3.4.1.4(B). 
 
34 CMS, Center for Program Integrity: New  Strategic Direction and Key Antifraud 

Activities. Accessed at www.cms.gov  on  April 19, 2013. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  5 
   
   
the Fraud Prevention System includes algorithms to detect potentially 
fraudulent polysomnography providers. 
Related Office of Inspector General Work 
In addition to this evaluation, OIG is conducting audits of 
polysomnography claims for selected regions to determine whether the 
claims complied with Medicare requirements and were paid accurately.  
As part of these audits, OIG will review MAC safeguards for the selected 
regions. OIG is also evaluating MACs use and evaluation of local edits.  
METHODOLOGY 
Scope 
The findings in this report are based on analysis of Medicare claims data.  
We did not review medical documentation to determine the medical 
necessity of polysomnography services.  We also did not review MAC 
safeguards for polysomnography services.  Finally, because of data 
limitations, we did not analyze ownership information or other indications 
of self-referral, which may affect questionable billing for 
polysomnography services. 
Data Collection 
This study is based on our analysis of 100-percent Medicare claims data 
from CMSs National Claims History Standard Analytic File and other 
selected data sources. We collected Physician Fee Schedule and hospital 
outpatient claims from 2009 to 2011 and Durable Medical Equipment 
(DME) claims from 2009 to 2012.  We also collected current NPI 
information from CMSs National Plan and Provider Enumeration System 
(NPPES) and LCDs for polysomnography services from CMSs Medicare 
Coverage Database. 
To create our data set, we identified all paid claims for the technical 
component of polysomnography and global polysomnography services 
(CPT codes 95808, 95810, and 95811) from January 1, 2011, to 
November 30, 2011.35, 36   The data set contained 626,212 claims for a total 
of $470 million, representing 7,232 unique providers and 461,363 unique 
beneficiaries.37  
 
35 We  excluded zero-dollar claims.  
36  We excluded  claims from December 2011 because certain  associated claims were not 
available at the time of our analysis. 
37 For Physician Fee Schedule claims, we identified providers  by the performing NPI 
listed on the claim.  For hospital outpatient claims, we identified the provider by the 
organization NPI listed on the claim, but  we also obtained the NPI of the attending  
physician listed on the claim for certain analyses. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  6 
   
   
Identification of Claims That Did Not Meet Medicare 
Requirements 
We analyzed our data set to identify polysomnography claims that did not 
meet one or more of three Medicare requirements.  Specifically, we 
identified claims that 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 NPIs.  This analysis 
included all claims from  the 7,232 providers in our population. 
To identify polysomnography claims submitted with inappropriate 
diagnosis codes, we determined whether the primary diagnosis code on 
each claim was acceptable per the applicable LCD.  We did not perform 
this analysis for claims without applicable LCDs.  We classified an LCD 
as applicable if the contractor number listed on the LCD matched the 
contractor number listed on the claim and if the LCD was in effect on the 
service date for the claim. The 15 MACs that processed polysomnography 
claims in 2011 accounted for 128 distinct contracts, 79 of which had LCDs 
for polysomnography.  Of the 626,204 claims in our data set, 
456,096 (72.8 percent) had applicable LCDs. 
After identifying polysomnography claims submitted with inappropriate 
diagnosis codes, we determined what percentage of those claims came  
from hospital outpatient departments as opposed to nonhospital providers.  
For comparison, we also determined what percentage of all claims came  
from hospital outpatient departments as opposed to nonhospital providers. 
To identify polysomnography claims with the same service date as one or 
more other polysomnography claims for the same beneficiary, we grouped 
claims by beneficiary number and service date and identified groups with 
more than one claim.   We classified one claim from each of these groups 
as allowable but classified the remaining claims as inappropriate. 
To identify polysomnography claims that were submitted with invalid 
NPIs, we compared the provider NPI listed on each claim to NPI 
information from NPPES.  We classified an NPI as invalid if it did not 
exist in NPPES or if its NPPES status was inactive on the service date. 
Identification of Providers That Exhibited Patterns of 
Questionable Billing 
We identified providers that exhibited patterns of questionable billing in 
three steps. First, we developed 11 measures of questionable billing and 
determined providers percentages for each measure.  For this analysis, we 
excluded the 893 providers in our data set that had fewer than three 
claims, leaving a total of 6,339 providers.  Next, for each measure, we 
identified providers that had unusually high percentages of questionable 
billing relative to other providers. To establish an objective benchmark, 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  7 
   
   
we considered a providers percentage to be unusually high if it was 
greater than the 75th percentile plus 1.5 times the interquartile range for the 
measure.38  Finally, we identified providers that had unusually high 
percentages for three or more of the 11 measures.  We defined a pattern of 
questionable billing as having an unusually high percentage for three or 
more measures.  
The 11 measures of questionable billing are composed of 3 measures that 
identify claims that did not meet Medicare requirements (as discussed in 
the previous section), and 8 additional measures of questionable billing.  
All of these measures can represent services that were not medically 
necessary, not rendered, or otherwise inappropriate.  The three measures 
that identify claims that did not meet Medicare requirements are as 
follows: 
	   Inappropriate diagnosis code. This measure represents the 
percentage of a providers polysomnography claims that did not 
meet Medicare criteria because they had inappropriate diagnosis 
codes per the applicable LCD. Providers with unusually high 
percentages for this measure may be routinely performing and 
billing Medicare for polysomnography services that are not 
medically necessary.  
	   Same-day duplicate claims. This measure represents the 
percentage of a providers polysomnography claims that did not 
meet Medicare criteria because they were for the same service date 
as one or more other polysomnography claims for the same  
beneficiary.  Providers with unusually high percentages for this 
measure may be routinely submitting duplicate claims. 
 	  Invalid NPI. This measure represents the percentage of a 
providers polysomnography claims that did not meet Medicare 
criteria because they were submitted with invalid NPIs.39   
Providers with unusually high percentages for this measure may be 
billing Medicare inappropriately.  
The eight additional measures of questionable billing are based on 
Medicare coverage and billing requirements for polysomnography 
services, measures used in OIG questionable-billing studies for other 
 
38 This is a standard exploratory method for identifying members of a population  with  
unusually high values  on a given statistic compared to the rest of the population when  no  
established benchmarks exist.  See J.W. Tukey,  Exploratory Data  Analysis, 
Addison-Wesley, 1977. 
39 A portion  of a providers claims  may have  been submitted with an invalid NPI if the 
providers NPI changed  from active to inactive during  2011, the timeframe of our 
analysis. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  8 
   
   
Medicare services, and consultations with fraud investigators and sleep 
medicine professionals within and outside of OIG.  We consulted sleep 
medicine professionals to identify clinical standards and best practices for 
the provision of polysomnography services.  These professionals included 
MAC clinical medical directors; a practicing physician specialist and 
researcher; and representatives from a professional association, an 
accreditation organization, and an advocacy group.  We also consulted 
health care fraud investigators to identify data patterns that could indicate 
inappropriate or fraudulent billing.  These individuals included OIG 
auditors and agents, CMS policy and technical staff, and a private-sector  
fraud examiner knowledgeable about polysomnography compliance 
issues.  
The eight additional measures of questionable billing are as follows: 
 	  Shared beneficiaries. This measure represents the percentage of a 
providers beneficiaries who also had polysomnography claims  
submitted by one or more other providers.  Providers with 
unusually high percentages for this measure may be using 
compromised beneficiary numbers for fraudulent billing. 
 	  Unbundling a split-night service. This measure represents the 
percentage of a providers diagnostic claims for which the provider 
also submitted a titration claim for the same beneficiary the next 
day. CMS allows providers to perform diagnostic and titration 
services on separate nights, which should be billed on two separate 
claims.  Although there are some situations in which it may be 
necessary for a provider to perform these two services on 
consecutive nights, fraud investigators and sleep medicine 
professionals say it is unusual for a provider to do so routinely.   
Providers should not submit two separate claims if they perform a 
split-night service on a single night.40  Because a split-night service 
involves only one overnight stay, submitting two polysomnography 
claims for a split-night service constitutes inappropriate 
unbundling. Providers with unusually high percentages for this 
measure may be routinely performing split-night services but 
submitting separate diagnostic and titration claims to increase  
reimbursement. 
 	  Double-billing for the professional component. This measure 
represents the percentage of a providers claims for global services 
that had a corresponding claim for the professional component.  
Providers with unusually high percentages for this measure may be 
 
40 OIG analysis  of LCDs for polysomnography services from 2011.  
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  9 
   
   
routinely double-billing Medicare for the professional component 
of the polysomnography service.41  
 	  Repeated titrations. This measure represents the percentage of a 
providers beneficiaries who had three or more titration claims  
within a 90-day period.42   According to fraud investigators and 
sleep medicine professionals, it is rarely medically necessary for a 
beneficiary to undergo more than two titration services in such a 
short time.  Furthermore, most LCDs explicitly require that 
providers justify the medical necessity of polysomnography 
services beyond two nights of testing.  Given this, providers with 
unusually high percentages for this measure may be routinely 
performing and billing Medicare for titration services that are not 
medically necessary or not rendered. 
	   Missing professional component. This measure represents the 
percentage of a providers claims  for the technical component that 
had no corresponding claim for the professional component 
submitted by any provider.  Providers with unusually high 
percentages for this measure may be routinely billing for 
polysomnography services not rendered. 
 	  Titration with no corresponding treatment device.   This measure 
represents the percentage of a providers titration claims for which 
the beneficiary has no corresponding DME claims for PAP devices 
or oral appliances. According to fraud investigators and sleep 
medicine professionals, in almost all cases beneficiaries who 
require a titration service are prescribed a PAP device or oral 
appliance. Providers with unusually high percentages for this 
measure may be routinely billing for services that are not 
medically necessary or not rendered. 
	   Missing visit with ordering provider.   This measure represents the 
percentage of a providers polysomnography claims for which the 
beneficiary had no claims with the ordering provider in the 
preceding year.43  Providers with unusually high percentages for 
this measure may be routinely performing and billing Medicare for 
 
41 Double-billing is never permissible.  However, the polysomnography service and the 
interpretation of that service may take place on  different days.  Accordingly, we had to  
approximate corresponding claims.  Because of this approximation, our study 
characterizes instances of double-billing as only questionable rather than as definitively 
inappropriate. 
42  We excluded  from our analysis all claims for incomplete titration services. 
43 Because information on referring providers  was available only on Physician Fee 
Schedule claims, we did not perform this analysis for hospital outpatient claims. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  10 
   
   
polysomnography services for which they do not have valid orders, 
and therefore are not medically necessary.  
	   Repeated polysomnography services. This measure represents the 
percentage of a providers beneficiaries who had two or more 
polysomnography claims in each of 3 consecutive years.  Although 
it may be necessary in some cases for a beneficiary to undergo 
repeat tests, it is rarely medically necessary for beneficiaries to 
receive multiple polysomnography services in consecutive years, 
according to fraud investigators and sleep medicine professionals.  
As such, providers with unusually high percentages for this 
measure may be routinely performing and billing Medicare for 
polysomnography services that are not medically necessary or not 
rendered. 
Limitations 
The 11 measures of questionable billing used in this study do not provide 
conclusive evidence of fraudulent billing. Rather, the measures are 
intended to identify questionable scenarios on the basis of claims data.  In 
this study, we highlight providers that, relative to their peers, have 
unusually high percentages of questionable scenarios for several measures.  
Further investigation would be required to determine whether these 
providers have, in fact, submitted inappropriate or fraudulent Medicare 
claims for polysomnography services. 
Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  11 
   
   
FINDINGS 
Medicare inappropriately paid nearly $17 million for 
polysomnography claims that did not meet certain 
Medicare requirements  
Medicare inappropriately paid $16.8 million for polysomnography claims 
that did not meet one or more of three Medicare requirements.  These 
claims had inappropriate diagnosis codes, were same-day duplicate claims, 
or were submitted with an invalid NPI.  Of the providers with paid 
polysomnography claims in 2011, 35 percent (2,534 providers) submitted 
at least 1 claim that did not meet 1 or more of the 3 requirements.  Table 
2 shows the number, percentage, and amount of claims that did not meet 
one or more Medicare requirements. 
Table 2. Polysomnography Claims That Did Not Meet One or More 
Medicare Requirements  
Reason Claim Did Not Meet   Percentage of  
Number of Claims   Amount 
Medicare Requirements   All Claims  
Inappropriate diagnosis code  20,110   3.21%   $16,050,155 
Same-day duplicate claim  1,178   0.19%   $669,540 
Invalid NPI  109  0.02%   $86,594 
(Overlap)  (49)   (0.01%)   ($28,846) 
   Total   21,348   3.41%   $16,777,443  
Source:  OIG analysis of National Claims History data, 2013. 
 
A majority of the claims did not meet Medicare requirements because they 
had inappropriate diagnosis codes. Medicare should not pay claims with 
diagnosis codes that are not allowed by LCDs.44, 45 Medicare may have 
paid claims with inappropriate diagnosis codes because claims processing 
edits to prevent inappropriate payments did not exist or were ineffective.  
Past OIG work has found that MACs do not always use edits to enforce 
LCD requirements, including those related to diagnosis codes.46, 47  
Same-day duplicate claims were less common but also contributed to 
inappropriate payments.  Fifteen percent of these claims resulted from  
providers having indicated that multiple polysomnography services were 
performed, for the same beneficiary and same date of service, on a single 
claim submission.  These types of same-day duplicate claims could be 
 
44 SSA  1833(e) and 1862(a)(1)(A); 42 CFR   400.202. 

45 CMS, Medicare Program Integrity Manual, Pub. No. 100-08, ch. 3, 3.4.1.3(A). 

46 OIG,  Inappropriate Medicare Payments for Transforaminal Epidural  Injection 

Services, OEI-05-09-00030, April 2010. 

47 OIG,  Medicare Payments for Facet Joint Injection  Services, OEI-05-07-00200, 

September 2008. 

Questionable Billing for Polysomnography Services (OEI-05-12-00340)  12 
   
   
prevented by effective claims processing edits, such as CMSs Medically  
Unlikely Edits; however, a recent Government Accountability Office 
report found deficiencies in CMSs Medically Unlikely Edits.48 The 
remaining 85 percent of same-day duplicate claims resulted from separate 
claims submissions, either by the same provider or different providers.  
Preventing payment for such claims through automatic, real-time edits 
may not be feasible, as it would require comparisons across multiple claim 
submissions on different dates. 
A small proportion of claims paid inappropriately were submitted with an 
invalid NPI. Payments to invalid NPIs may occur if CMS does not 
validate NPIs. A previous OIG study found that Medicare paid 
$91 million for DME claims from providers with invalid or inactive 
provider numbers because Medicare claims processing systems verified 
only that the provider numbers listed on a claim met certain format 
requirements.49  
Of claims that did not have an appropriate diagnosis code,    
85 percent were from hospital outpatient departments 
These claims accounted for $14 million of the $16 million paid for claims  
with inappropriate diagnosis codes.  This is a disproportionately high 
share; only 53 percent of all polysomnography claims in 2011 came from 
hospital outpatient departments. 
Each of the eight MACs with LCDs that applied to hospital outpatient 
departments processed a portion of these inappropriate claims.50 Despite 
having written policies outlining appropriate diagnosis codes, these MACs  
were unable to prevent inappropriate payments.  This may be the result of  
ineffective claims processing edits or not having any edits to verify that 
the diagnosis codes submitted were appropriate.  
Only 15 percent of the claims paid with an inappropriate diagnosis code 
were from nonhospital providers.  This is a disproportionately low share; 
47 percent of all polysomnography claims in 2011 came from nonhospital 
providers. 
MACs that processed polysomnography claims from nonhospital 
providers may have approved fewer inappropriate claims because they had 
 
48 Government Accountability Office, Medicare Program Integrity:  Greater Prepayment 
Control Efforts Could  Increase Savings and Better Ensure Proper Payment, 
GAO-13-102, November 2012.  
49 OIG,  Medical Equipment and Supply Claims with Invalid  or Inactive Physician  
Numbers, OEI-03-01-00110, November 2001. 

50 The remaining seven MACs that processed polysomnography claims from hospital
  
outpatient departments in  2011 did not  have applicable  polysomnography LCDs, and are 

therefore excluded from this analysis. 

Questionable Billing for Polysomnography Services (OEI-05-12-00340)  13 
   
   
effective claims processing edits.  Alternatively, these providers may have 
submitted fewer inappropriate claims. 
One hundred and eighty providers exhibited patterns 
of questionable billing for polysomnography services 
Of the 6,339 providers of polysomnography services in our population, 
180 exhibited patterns of questionable billing for such services for 2011.  
These providers account for 3.7 percent of the $470 million paid for 
polysomnography services in 2011. 
These 180 providers may be submitting inappropriate Medicare claims for  
polysomnography services, and therefore warrant greater scrutiny.   We  
identified these providers because they had unusually high percentages, 
relative to other providers, on three or more of our measures of 
questionable billing. Providers that frequently submit claims that do not 
meet Medicare requirements (such as the claims discussed in the previous 
finding) or are associated with other measures of questionable billing may 
be more broadly engaged in inappropriate billing. 
Table 3 summarizes the measures of questionable billing associated with 
the 180 providers with patterns of questionable billing. 
Table 3. Summary of 180 Providers with Patterns of Questionable Billing for 
Polysomnography Services, by Measure of Questionable Billing 
Number of Providers 
Measure of Questionable Billing  With an Unusually  
High Percentage * 
Measures That Identify Claims That Did Not Meet Medicare Requirements  
Same-day duplicate claims  105 
Inappropriate diagnosis code  50 
Invalid NPI  4 
Additional Measures of Questionable Billing  
Shared beneficiaries  81 
Unbundling a split-night service  79 
Double-billing for the professional component   64 
Repeated titrations  52 
Missing professional component   51 
Titration with no corresponding treatment device  44 
Missing visit with ordering provider   31 
Repeated polysomnography services  10 
Source:  OIG analysis of National Claims History data, 2013. 
* Numbers do not sum to 180 because each provider is counted in 3, 4, or 5 rows. 
 
Same-day duplicate claims. Most providers with patterns of questionable 
billing had an unusually high percentage of same-day duplicate claims.  
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  14 
   
   
Because an overnight stay is required for a polysomnography service, 
beneficiaries can undergo only one such service in a day.   Therefore, 
same-day duplicate claims may represent claims for services not rendered.  
Frequent billing of same-day duplicate claims by a provider raises 
questions about the legitimacy of a providers services. 
Shared beneficiaries. Nearly half of providers with patterns of 
questionable billing had an unusually high percentage of beneficiaries who 
had polysomnography claims from one or more other providers in 2011.  
These providers may be using the same compromised beneficiary numbers 
as other providers to fraudulently bill for services not rendered.  Past OIG 
investigations have uncovered schemes in which individuals have used 
stolen beneficiary numbers to submit false claims to Medicare.51 More 
recently, an individual pled guilty to illicitly obtaining and selling 
Medicare beneficiary information for fraudulent billing.52  
Unbundling a split-night service. Many providers with patterns of 
questionable billing had an unusually high percentage of diagnostic 
polysomnography claims with a titration claim for the same beneficiary on 
the following day.   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).  Such unbundling inappropriately 
increases reimbursement by generating payment for two separate services 
instead of a single service. For nonhospital providers, unbundling could 
result in their receiving $1,186.79 instead of $618.03.53  
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. Instead, the 
provider might submit two separate claims:  one for a full-night diagnostic 
service on the date the split-night service began, and one for a full-night 
titration service on the date the split-night service ended. 
Frequently performing separate diagnostic and titration services on 
consecutive nights is unusual, although there are situations in which it may 
 
51 Testimony of  Gerald T. Roy, OIG Deputy  Inspector General for Investigations, before 
the U.S. House of Representatives, Committee on Energy & Commerce, Subcommittee 
on Oversight  & Investigations, March 2, 2011.  
52 U.S. Department of Justice, Illegal Marketer of Medicare Information Admits Role in  
Detroit-area  Home Health Care Fraud Scheme (press release).  Accessed at 
www.justice.gov on  February 22, 2013. 
53 AMA, CPT reference for codes 95810 and  95811.  Accessed at hsrl.mediregs.com on  
April  9, 2013.  Reimbursement  amounts  reflect  unadjusted 2011 Physician Fee Schedule  
payment rates for the technical component  of the service, which may differ from  
nonhospital providers actual reimbursement amounts.  
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  15 
   
   
be necessary.  According to fraud investigators and sleep medicine 
professionals, scheduling a titration service on the night immediately 
following a diagnostic service is logistically difficult for providers and 
beneficiaries. After performing a diagnostic service, a provider may have 
difficulty fitting a patient into the sleep lab schedule for a titration service  
the next night. However, for beneficiaries travelling long distances, 
providers may opt to pre-schedule two consecutive nights of testing, and 
cancel the second night if it turns out to be unnecessary.  Further, although 
beneficiaries may not want to sleep in a lab two nights in a row, a provider 
may deem it medically necessary to perform a titration service as soon as 
possible if the beneficiary is diagnosed with sleep apnea but a split-night 
service cannot be performed. 
Missing visit with ordering provider. Some providers with patterns of 
questionable billing had an unusually high percentage of claims for 
beneficiaries with no evidence of a visit with the ordering provider in the 
preceding year.  An in-person evaluation is required to determine whether 
polysomnography services are warranted; according to sleep medicine 
professionals, polysomnography should be performed within a year after 
the in-person evaluation.  Given this, these providers may be performing 
polysomnography services for which they do not have valid orders, and 
that therefore are not medically necessary.  
Previous OIG studies have raised the same concern for other types of 
claims.  A 2011 OIG study on questionable Medicare billing by suppliers 
of lower-limb prostheses found that Medicare inappropriately paid 
$61 million for beneficiaries with no claims from their referring 
physicians.54   Additionally, a 2009 OIG study on ultrasound services found 
that Medicare paid $49 million in questionable claims for beneficiaries 
with no prior service claims  from the ordering physician.55  
   
 
54 OIG,  Questionable Billing by Suppliers of Lower Limb  Prostheses, OEI-02-10-00170, 

August 2011. 

55 OIG,  Medicare Part B Billing for Ultrasound, OEI-01-08-00100, July 2009. 

Questionable Billing for Polysomnography Services (OEI-05-12-00340)  16 
   
   
CONCLUSION AND RECOMMENDATIONS 
We found that in 2011, Medicare paid nearly $17 million for 
polysomnography services that did not meet requirements.  Although this 
represents a relatively small percentage of payments for polysomnography 
services, CMS and MACs could likely have prevented nearly all of these 
inappropriate payments through more effective claims processing edits, 
particularly prepayment edits to deny claims with inappropriate diagnosis 
codes. By implementing such edits, CMS and MACs could reduce future 
inappropriate payments for polysomnography services. 
We also found that 180 providers exhibited patterns of questionable billing 
for polysomnography services. Although our study did not look for or 
find conclusive evidence of fraud, these providers warrant further scrutiny, 
as they may be likely to submit inappropriate or fraudulent claims for such  
services. Further investigation of these specific providers may also help 
CMS prevent future inappropriate payments. 
We recommend that CMS: 
Implement Claims Processing Edits or Improve Existing Edits 
To Prevent Inappropriate Payments 
CMS should implement claims processing edits or improve existing edits 
for polysomnography services. 
To prevent payments for claims with inappropriate diagnosis codes, CMS 
could encourage MACs to implement claims processing edits or improve 
existing edits to check claims for appropriate diagnosis codes.  CMS could 
prioritize working with MACs that process claims from  hospital outpatient 
departments, as payments for claims with inappropriate diagnosis codes 
were concentrated among these providers.  
To prevent paying for same-day duplicate services, CMS could investigate 
why its existing Medically Unlikely Edits for polysomnography did not 
stop claims identified in this study.  CMS could then correct any identified  
problems. 
To prevent paying for claims with invalid NPIs, CMS could also ensure 
that claims processing edits validate NPIs. 
Recover Payments for Claims That Did Not Meet Medicare 
Requirements 
CMS should investigate, and recover, if appropriate, the payments 
identified in this study for claims that did not meet Medicare requirements.  
In a separate memorandum, we will refer to CMS for appropriate action 
the claims that did not meet Medicare requirements. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  17 
   
   
 
Consider Using Measures of Questionable Billing From This 
Study To Identify Providers for Further Investigation 
CMS should consider using one or more of the measures of questionable 
billing in this study to improve safeguards for polysomnography services. 
CMS could augment algorithms in its Fraud Prevention System to identify 
polysomnography providers that, on the basis of one or more of the 
measures of questionable billing used in this study, have 
questionable-billing patterns. These measures could be used as screening 
tools to help CMS select targets for audit or investigation.  
Take Appropriate Action Regarding Providers That Exhibited 
Patterns of Questionable Billing  
CMS should refer providers with patterns of questionable billing to 
contractors for further investigation to determine whether the billing 
patterns represent inappropriate or fraudulent billing.  In a separate 
memorandum, we will refer to CMS for appropriate action the providers 
we identified as having patterns of questionable billing. 
   
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  18 
   
   
AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL  
RESPONSE 
CMS concurred with all four of our recommendations.  To address our 
recommendations about inappropriate payments, CMS plans to re-review 
the Medically Unlikely Edits for polysomnography services and 
investigate their accuracy and effectiveness.  In addition, CMS plans to 
investigate, and recover, if appropriate, the payments that did not meet 
Medicare requirements.  To address our recommendations about providers 
with patterns of questionable billing, CMS plans to use the measures OIG 
identified in this report to develop algorithms to detect and analyze 
aberrant billing of polysomnography.  CMS also plans to instruct 
contractors to review providers with inappropriate billing and take 
appropriate action. For the full text of CMSs comments, see Appendix A.   
   
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  19 
  APPENDIX A 
Agency Comments 
/,P.VICtf'
( -i_ 
DEPARTMENT OF HEALTH & HUMAN SERVICES 
C..nters for Medicare & Medlcaid Services 
~~:::-:~ 
Administrator 
Washington, DC 20201 
AUG 15  2013
DATE: 
TO: 	 Daniel R. Levinson 

Inspector General 

FROM: 	 Mantyn Tavenner 

Administrator 

SUBJECT: 	 Office oflnspector General (OIG) Draft Report-"Questionable Billing for 
Polysomnography Services" (OEI-05-12-00340) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the above-referenced OIG draft report. The purpose ofthis report is to analyze the 
increased Medicare spending on polysomnography services based on the growing concerns about 
fraud and abuse regarding these services. 
The CMS is committed to preventing improper and fraudulent billing for polysomnography 
services, particularly given the rise in Medicare spending for such services. CMS pays for 
polysomnography services under different payment systems, relying on Medicare Administrative 
Contractors (MACs) to process claims. CMS is committed to working with its MACs to develop 
and implement claims processing edits and improve existing edits in an effort to prevent such 
improper payments. 
We appreciate OIG' s efforts in working with CMS to ensure that appropriate action is taken 
regarding improper payments as well as providers that exhibit patterns ofquestionable billing for 
polysomnography services. Our response to each ofthe OIG recommendations follows. 
OIG Recommendation 
The OIG recommends that CMS implement claims processing edits or improve existing edits to 
prevent inappropriate payments . 
CMS Response 
The CMS concurs with this recommendation. CMS has developed and implemented medically 
unnecessary edits (MUEs) for the Current Procedural Terminology codes (95808, 95810, and 
95811) for polysomnography services, effective April I, 2007. CMS also has MUEs for the new 
2013 polysomnography codes 95782 and 95783, effective January I, 2013. 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  20   
   
 
 
 
 
 
 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  21 
   
   
 
 
 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  22 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Ann Maxwell, Regional 
Inspector General for Evaluation and Inspections in the Chicago regional 
office; Thomas F. Komaniecki, Deputy Regional Inspector General; and 
Laura Kordish, Deputy Regional Inspector General.  
Kelly Waldhoff served as team leader for this study, and Adam Freeman 
served as lead analyst.  Other Office of Evaluation and Inspections staff 
from the Chicago regional office who conducted the study include Hilary 
Slover.  Central office staff who provided support include Clarence 
Arnold, Meghan Kearns, Sandy Khoury, Starr Kidda, and 
Christine Moritz.  
 
Questionable Billing for Polysomnography Services (OEI-05-12-00340)  23 
   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components: 
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
audits  with its own audit resources or by  overseeing  audit work done by others.  Audits  
examine the performance of HHS programs and/or its grantees and contractors in carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections 
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General 
The Office of Counsel to the  Inspector  General (OCIG) provides general legal services to 
OIG, rendering  advice and opinions on HHS programs  and operations and providing all 
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and abuse cases involving HHS programs,  including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.