Enforcement Trends: Labs Get Cameo, Rather than Starring Role in OIG’s New Enforcement Report

The Office of Inspector General just published its Semiannual Report to Congress (covering Oct. 1, 2016 through March 31, 2017). It's mostly more of the same other than the fact that, for once, laboratories were not the focal point of the enforcement sections. Here's a quick overview of the key compliance takeaways.

1. Improper Payments
Improper payments continued their steady creep up totaling $96+ billion in FY 2016, which included a reported:

• $284.1 million and $10.6 million in Express Lane payments to potentially ineligible Medicaid and Children's Health Insurance Program beneficiaries, respectively; and

• Over $26 million in payments to dead Medicare and Medicaid beneficiaries.

Improper payments for services that shouldn't have been billed:

• $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.