Medical Billing

How to Avoid Pass-Through Billing Traps: A 2022 Useful Guide!


Pass through billing occurs between a reference laboratory and a physician practice that enables the physician practice to send specimens to the reference laboratory for testing, pay directly to the reference laboratory, and then bill the patient or the insurance company for the medical test typically at a higher fee. The billing provider increases its profit by charging for a service that it did not perform. This is illegal and may hurt the credibility of the practice. However, to avoid such situations, healthcare organizations now rely on experienced companies for providing medical billing services and medical coding services.

According to a study published by the JAMA Network, around $58.5 to $83.9 billion go to waste due to medical fraud or abuse, which increases the total cost of healthcare.

Pass through billing can have serious repercussions and that is why it is important to take precautionary measures so that you do not get caught into this trap.

It is important to differentiate between what is pass through billing and what is not. Healthcare professionals who charge for ancillary services just to increase their markup cost are committing a crime according to the American Medical Association. Apart from this practice being unethical, it puts an additional burden on the healthcare system and conflicts with the rules and regulations of insurance.

A medical clinic charging for certain services that were provided by an independent medical contractor is basically engaging in this illegal act. Now that we have aptly described pass-through billing and how it can affect billing business, it is time to learn about certain steps to avoid the trap of pass through billing.

billing traps


How To Avoid the Trap?

Pass through billing practice is observed mostly in rural healthcare facilities, as they don’t generate much revenue. They participate in fraudulent billing schemes to increase their revenue by claiming reimbursements for the services they did not provide.

This is a growing problem in the U.S but you can easily avoid pass-through billing traps by developing a compliance program. Although it is not necessary for you to follow the Compliance Program that is recommended by the Centers for Medicare and Medicaid Services (CMS) however, implementing it does reduce the threats of unlawful billing conduct.

Implementing a compliance program: An effective compliance program can help deduct any error in medical coding or billing and decrease the risk of penalties on your medical billing practices. It also increases the credibility of your work.

Medical billing infrastructure: Having an effective medical billing infrastructure that complies with the APC and supports your in-house billing can increase the reliability and accuracy of your billing. Therefore, it is highly recommended for medical providers to invest in training their staff and resources to provide high-level maintenance.

Get familiar with rules and regulations: Another way to void a pass through billing trap is to get familiar with the rules and regulations defined by the Office of Inspector General (OIG). The OIG caters to illegal billing issues and frauds in Medicare, Medicaid, and other federal healthcare programs. By being aware of the OIGs rules you can avoid getting engaged in any illegal billing practices completely. By focusing on proper medical coding, documentation, and other medical rules you can ensure that you are working under the OIGs defined rules and regulations.

Documentation: It is extremely essential that you properly document an unlisted cost and use a single code for injections for a single session rather than coding it multiple times.

Mix-ups in medical coding can also lead to your practice being labeled as a fraud. Therefore, it is important to take steps to accurately bill your medical services. Keep accurate and timely documentation of codes, so that you can bill properly for the services you provide without mixing it up.

Upcoding as unethical practice

Upcoding is another unethical practice in medical coding. Upcoding means you are billing a patient for a few minutes to meet up under a whole session. There are times when upcoding can easily be neglected by the concerned authorities, however, when caught you can face serious consequences.


Another thing to keep in mind to avoid coding mix-ups that can lead to medical billing abuse is following the National Correct Coding Initiative (NCCI) rules while reporting medical coding. This helps you properly report medical payments by using relevant and reliable coding methods.

Remember pass through billing or medicare pass through billing is illegal and unethical. You can easily get caught and face serious charges. It is sometimes difficult to differentiate between pass-through medical billing practice and other in-house billing and ancillary services, which may appear similar and unethical to you.

It is always a better option to consult a medical attorney if you have any doubts. Also, if you want to avoid pass-through traps you should consider training your staff and making them familiar with medical rules and regulations.

Pass through Billing Relevant Laws

The pass through billing is governed by three relevant laws;

False Claims Act – This law is intended to prohibit the government from selling poor and below-the-par quality goods and services.

Anti-Kickback Statute – This is the criminal law that mainly prohibits the remuneration for obtaining and providing compensation for patient referrals along with the generation of business which is paid by the federal health care.

Physician Self-Referral Law – This law is commonly regarded as the Stark Law which prohibits physicians from referring patients for receiving health care services from entities with the physician.


A Pass through billing is a nefarious practice that should be avoided at all costs. Legal action against such tactics may be taken by federal interrogation authorities.

In some cases, it is quite difficult to distinguish between a practice known as pass through billing and genuine medical claims. As a precaution, you should visit a medical lawyer if you have any doubt and you can get a thorough understanding on what is pass through billing. Furthermore, you should check compliance with government programs to avoid a pass through billing for labs.

Additionally, educate your team on the latest medical billing regulations and procedures.