Alleged Violation of Medicare’s 14-Day Rule Costs Company $2.8 Million

Caris Life Sciences has agreed to shell out $2,886,675 to settle claims that it deliberately delayed submitting claims for genetic cancer screening tests in an attempt to get around the so-called Medicare “14-day rule” banning billing of lab tests within 14 days after a patient’s stay in a hospital. This is one of the biggest settlements by a lab for an alleged 14-day rule violation.

The Medicare 14-Day Rule

The Centers for Medicare and Medicaid Services (CMS) generally bundles payment for a lab test with the payment for a hospital service. So, you can’t separately bill for tests performed on specimens if a physician ordered the test within 14 days of the patient’s discharge from a hospital stay, whether in an inpatient or outpatient setting. However, the Medicare date of service (DOS) policy, commonly referred to as the 14-day rule, allows labs to directly bill for tests performed more than 14 days after discharge. The default date of service for a lab test is the date the specimen was collected.

The Caris Life Sciences Case

Announced on June 1, the Caris settlement resolves claims that the Texas-based molecular testing firm carried out a “nationwide scheme” to delay testing of cancer patients so it could improperly bill Medicare for a pair of screening tests for detecting genes within breast cancer tumors to predict the risk of cancer recurrence. Oncologists and other physicians use the Caris Molecular Intelligence and the ADAPT Biotargeting System tests to help determine appropriate treatment options for cancer patients. The government accused Caris of violating the 14-day rule in three different ways:

• Seeking direct reimbursement for tests provided to hospital inpatients within 14 days after a discharge, even though those tests were covered in the lump-sum Diagnosis-Related Group (DRG) payment for the inpatient stay;
• Directly billing CMS for tests ordered within 14 days after an inpatient or outpatient discharge and not discouraging providers who ordered the tests to place a new order after the 14-day period elapsed; and
• Seeking direct reimbursement for tests ordered within 14 days of a Medicare beneficiary’s outpatient procedure.    

“Caris conducts ongoing employee compliance training and takes disciplinary action against employees failing to follow its policies,” according to a company statement. While not admitting any wrongdoing or liability, Caris determined that discretion was the better part of valor and settled the claims, which began as a qui tam whistleblower lawsuit. The settlement only partially resolves the qui tam suit, which remains under seal [United States ex rel. Doe v. (UNDER SEAL) and United States ex rel. Caughron v. CDx Holdings, Inc. f/k/a Caris Life Science, Civil Action No. 18-CV-0352 (E.D.N.Y)].

Avoiding Liability for Violating the 14-Day Rule

Although the 14-day rule has been around a long time, it remains confusing, particularly for independent labs in the outpatient setting. According to CMS’ most recent guidance on the subject from January 1, 2018, an independent lab or lab performing Advanced Diagnostic Laboratory Tests (ADLTs) or molecular pathology testing on a hospital outpatient must bill the testing rather than bill back the hospital when:

• The physician orders the test following the date of a hospital outpatient’s discharge from the hospital’s outpatient department;
• The specimen was collected from a hospital outpatient during an encounter;
• It was medically appropriate to collect the sample from the hospital outpatient during the hospital outpatient encounter;
• The test results didn’t guide treatment provided during the hospital outpatient encounter; and
• The test was reasonable and medically necessary for the treatment of an illness.