High Billing by Labs Continues to Be Trigger for Audits

The end of 2022 signaled a continued focus by regulating agencies on the clinical laboratory industry. On December 6, 2022, the U.S. Department of Health and Human Services Office of the Inspector General (OIG) issued a report entitled, “Labs With Questionably High Billing for Additional Tests Alongside COVID-19 Tests Warrant Further Scrutiny.” The report discusses potential concerns related to billing of additional tests in conjunction with COVID-19 testing that was billed to and paid by Medicare Part B in 2020.¹ This was followed by OIG’s issuance in mid-December of a Data Brief reviewing Medicare Part B spending on laboratory tests in 2021, entitled “Medicare Part B Spending on Lab Tests Increased in 2021, Driven by Higher Volume of COVID-19 Tests, Genetic Tests, and Chemistry Tests.”²

The themes and takeaways of these reports are not necessarily new, as they continue the refrain from regulating agencies that laboratories need to be mindful of compliance when it comes to billing. A lack of medical necessity, upcoding, and not being careful about bundling tests are key concerns of regulators. Engaging in such conduct may signal that a laboratory is engaged in fraud, waste, and abuse. 

However, the report and Data Brief also highlighted that while overall spending on laboratory testing has increased, such payments have been concentrated on COVID-19 testing with add-on tests and genetic testing; routine chemistry testing and spending on those types of tests have decreased since 2017.

Such a significant increase in spending is notable and follows with the various data briefs and fraud alerts that have been published by the OIG and other agencies over the last two years and echo the concerns regarding possible fraud and abuse. 

The OIG Report

The report issued in December, which was performed due to steady Medicare Part B spending on COVID-19 laboratory tests, highlights some of those concerns regarding fraud, waste, and abuse. The report analyzed lab Medicare Part B billing from February to December 2020 for COVID-19 tests and additional diagnostic tests. While the analysis initially identified 19,577 laboratories that received COVID-19 payments from Medicare Part B, ultimately only 8,582 of those laboratories billed for additional tests. After excluding additional laboratories that received fewer than one hundred COVID-19 tests, the analysis focused on 5,588 laboratories that billed Medicare Part B for COVID-19 tests and other diagnostic tests. The OIG performed an outlier analysis on those limited laboratories and identified 378 laboratories, approximately 6.76 percent of the total outlier analysis, that warranted further scrutiny for their billing practices and potential concerns for fraud, waste, and abuse.

The analysis in the report focused on two categories: (1) laboratories where add-on tests constituted a high proportion of each laboratory’s total number of tests; and (2) laboratories for which add-on tests constituted a high proportion of each laboratory’s total payments for tests. In short, the OIG found that, for the 378 labs identified in the outlier analysis:

• • 276 labs billed for high volumes of add-on tests on claims for COVID-19 tests;

• • 263 labs billed for high payment amounts from add-on tests on claims for COVID-19 tests;

• • 161 labs billed for both high volumes of add-ons and high payment amounts from add-ons on claims for COVID-19 tests; and

• A small number of labs had at least 10 claims where two labs had billed for the same enrollee for the same tests on the same day.

For these 378 laboratories, the report highlighted specific concerns for the potential for fraud, waste, and abuse. One such concern was that the testing had little if any variation across patients, suggesting that the tests were not tailored to individual patients’ needs. Here, the OIG provided a specific example that one outlier laboratory regularly billed for a combination of five add-on respiratory tests on almost all its claims for COVID-19 tests, raising a question about the medical necessity of such testing. A second concern was that the add-on tests were performed to such an extent as to make up the majority of reimbursement, with the concern being whether there was upcoding or otherwise impermissible bundling. Finally, the OIG identified a concern that there was sharing of enrollee information due to billing for the same enrollee on the same day. Based on this outlier analysis, the OIG referred these labs to the Centers for Medicare & Medicaid Services for further review and potential audit.

The OIG Data Brief

Following on the heels of the report focused on payments in 2020, the OIG also issued a Data Brief detailing the Medicare Part B spending on laboratory tests since 2020. As part of this Data Brief, the OIG identified the top 25 tests based on Medicare spending pursuant to the mandate under the Protecting Access to Medicare Act of 2014 (PAMA). The Data Brief noted a “17 percent increase from 2020” for overall spending by Medicare Part B on laboratory tests. The OIG also found that “Medicare Part B spent $5.5 billion on the top 25 tests, which accounted for 59 percent of total spending in 2021.”

According to the OIG, factors contributing to the overall increase in spending include “increased spending on COVID-19 tests; continued growth of genetic tests; and increased volume for panel and chemistry tests.” The OIG further noted that, even though PAMA lowered the rates for many laboratory tests by Medicare, there was a significant increase in spending on laboratory tests in 2021. Some of this is unsurprising given that COVID-19 tests were not subject to PAMA cuts, however, Medicare did institute its own price cut for COVID-19 testing in 2021. 

Interestingly, the Data Brief noted that there was a 29 percent increase in spending on COVID-19 tests, with a 37 percent increase in the volume of tests performed in 2021. COVID-19 tests ranked numbers 1, 5, 10, 16, and 17 in the top 25 listed in this Data Brief.  However, the Data Brief highlighted that testing increased and decreased in waves that “coincided with two new variants: the Delta variant and the Omicron variant, respectively.” 

The Data Brief also focused on genetic testing. The OIG noted that “Medicare Part B spending on genetic tests increased by 56 percent in 2021, to $1.9 billion, continuing a long-term trend.”  As part of the top 25 tests identified by OIG in this Data Brief, which mirror many of the findings in the report, the OIG called out the increased spending on genetic tests, noting that there has been “an upward trend since OIG began monitoring spending on lab tests in 2014.”  The OIG further stated, “[t]he number of genetic test procedure codes on the CLFS continues to grow and total spending on genetic tests has more than tripled since OIG began monitoring payments in 2014.” The OIG noted in the Data Brief that “[c]ompared to volume from 2019, the volume of genetic tests increased 24 percent from 2.3 million.”  Regarding genetic tests, the OIG stated that “[a]lthough these tests represented a notable portion of spending for the top 25 tests, they accounted for the lowest volume” with Medicare Part B spending $803 million on genetic tests for essentially five procedure codes in the top 25 in 2021. Genetic tests came ranked at numbers 7, 9, 19, 20, and 24 for the top 25 tests. The increased payment for genetic testing was noted to be a factor in the increase of both the volume of testing as well as the number of procedure codes eligible for payment.

Focus on COVID-19, Add-On, and Genetic Tests Is Nothing New

OIG’s focus in the report and Data Brief on COVID-19, add-on, and genetic tests continues to identify the same concerns regulatory agencies seemingly have regarding the increase in new laboratories providing COVID-19 and genetic tests. A year prior, in December 2021, the OIG issued a Data Brief (A-09-20-03027) regarding trends in genetic tests, highlighting potential concerns regarding fraud, waste, and abuse.³ Focus on genetic testing was again flagged as a concern for potential fraud, waste, and abuse in the summer of 2022, including the issuance of a Special Fraud Alert, coupled with various announcements of criminal investigations.⁴ Now, there are specific data from Medicare Part B analyzed by the December 2022 report and Data Brief, demonstrating regulatory agencies’ continued focus on these issues.

Takeaways 

The recent Data Brief and report just focused on Medicare Part B testing. The analysis does not include COVID-19 tests billed to the Health Resources and Services Administration (HRSA), Medicaid, or commercial payors. However, the outlier analysis is a clear example of the data analytics deployed by payors to perform audits. The key takeaways and compliance issues are equally applicable to these payors. Overall, as continued analysis is performed by regulatory agencies, laboratories should expect a continued potential for audits particularly focused on COVID-19 and genetic testing. As there was a significant increase in spending by the government and presumably other payors, it is reasonable to expect a renewed focus on this increase. Laboratories should be diligent in reviewing their claims and analyzing medical necessity, upcoding, bundling, and overall billing compliance.

References:

1. 1. https://oig.hhs.gov/oei/reports/OEI-09-20-00510.pdf

1. 1. https://oig.hhs.gov/oei/reports/OEI-09-22-00400.pdf

1. 1. https://oig.hhs.gov/oas/reports/region9/92003027.pdf

1. 1. https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf

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Danielle H. Tangorre, partner at Robinson+Cole, represents and advises a broad range of healthcare providers, including clinical laboratories and hospitals, on operational and compliance issues, federal and state fraud and abuse laws, other regulatory matters, and business transactions. Danielle completed a Clinical Ethics Fellowship at the Alden March Bioethics Institute at Albany Medical Center after obtaining an MS in Bioethics at Albany Medical Center, while concurrently completing law school at Albany Law School of Union University.