Clinical Laboratories Continue to Figure Less Prominently in New OIG Enforcement Report

The Office of Inspector General just published its most recent Semiannual Report to Congress. To the untrained eye, the newest OIG Report, which covers Oct. 1, 2016 through March 31, 2017, is not substantially different from what we have come to expect. But there are some subtle differences, particularly with regard to labs.

Labs in Cameo, Not Leading Role
Laboratory and pathology testing remains on the OIG’s radar, of course. Accordingly, the new OIG Report includes the customary section about the labs that got busted. The differences have more to do with volume than substance. There are only two items directly involving labs in the OIG Report, roughly 50 percent below previous norms for these reports. Conspicuous by their absence are mentions of problem areas involving or enforcement initiatives specifically targeting labs. This little subtlety represents a continuation of recent patterns, as illustrated by the chart below.

Lab-Specific Items in OIG Reports Since 2010

Here is a quick overview of the key compliance takeaways in the new OIG Report.

1. Improper Payments
Improper payments continue their steady climb, totaling $96+ billion in FY 2016, including a reported:

• $284.1 million in Express Lane payments to potentially ineligible Medicaid beneficiaries who may not have been eligible;

• $10.6 million more in Express Lane payments to potentially ineligible Children’s Health Insurance Program beneficiaries; and

• Over $26 million in payments to Medicare and Medicaid beneficiaries who were dead at the time they supposedly received the billed services.

Improper payments for services that shouldn’t have been billed in the first place:

• $358.8 million of the total $438.1 million paid by Medicare for chiropractic (82 percent) were for unallowable services;

• At least $176 million in Medicaid payments to State Agencies for room and board costs under the HCBS Waiver Program; and

• $2.7 million for hearing aid devices replaced without cost to the hospital or beneficiary.

2. Problem Areas
The Report cites a pair of vulnerabilities and misaligned incentives that the OIG focused on during the period:

• The 2-midnight policy for determining inpatient/outpatient status for Medicare hospital billing; and

• The tripling of Part D catastrophic coverage spending, much of which attributable to new high-price drugs.

3. Enforcement Activities
Key enforcement numbers for the first half of FY 2017:

• $2.04 billion in total recoveries;

• 468 criminal actions;

• 461 civil actions; and

• 1,422 exclusions.

Key areas of enforcement cited in the Report included prescription drugs, care in non-institutional settings and grant fraud. Laboratories did not make the list.

4. Enforcement Against Labs
Medical device and pharmaceutical companies are getting a lot of the attention that the OIG used to concentrate on labs. Even so, labs continue to figure prominently in OIG enforcement activities. Several of the biggest cases cited in the Report involve labs, including:

• The $6.1 million paid by Pharmasan Labs, NeuroScience and founder Gottfried Kellermann to settle claims of falsely billing Medicare for urinary transmitter testing, including via the use of “shift factor” measurement methods not properly validated under CLIA rules; and

• The $1.3 million settlement by New Jersey-based MedNet for allegedly using “fee-for-service” and “direct-bill” agreements to pay hospitals and physicians for Medicare referrals.

Takeaway: For labs, the most important thing about the new OIG Semiannual Report is the relative lack of attention paid, at least compared to previous years. Although labs remain fixed on the OIG radar, the agency seems to be focusing more than ever on drugs, devices and state agencies.