Expected Audit Targets for 2024 and How Laboratories Can Ensure Compliance

It is not a matter of if but when healthcare entities will be audited. There are different types of audits that address various administrative operations such as billing, reimbursement, Health Insurance Portability and Accountability Act of 1996 (HIPAA), accounts receivable, chart reviews, and compliance. There are also different auditing entities such as Medicare, Medicaid, government payers, and commercial insurers. With the end of the COVID-19 pandemic declared last spring, there will likely be an increase of all types of audits by various payers continuing into next year. Based on an examination of U.S. Department of Health and Human Services Office of Inspector General (OIG) Advisory Opinions, Work Plan items, and corporate integrity agreements (CIAs), here are what will likely be key audit targets for 2024, to help lab leaders ensure their compliance programs address these areas.

Referring professional components to another lab

Clinical laboratories should be wary of how they bill for the professional components (PC) and technical components (TC) of a service, especially if one laboratory refers the TC to another lab.

Background: A recent Advisory Opinion (AO 23-06) regards a proposal to purchase the technical component of anatomic pathology services from certain laboratories. An anatomic pathology laboratory would enter written agreements with other laboratories to provide the PC of a nongovernment insured service while the referring laboratory would provide the TC. Both components would be billed by the anatomic laboratory and that laboratory would forward a fair payment to the laboratory performing the TC. The arrangement addresses the fact that though the referring laboratories have the capacity to perform both components, they aren’t able to bill certain commercial payers or are out of network. This arrangement would provide some reimbursement to both the anatomic and referring laboratories. The anatomic facility was concerned that if they didn’t follow through with the arrangement, which would likely increase referrals, their volume of current referrals would decrease.¹

However, the OIG rejected the arrangement, due to the following key reasons:¹

• • The agency was concerned that it typically costs more to refer one of the components and less to perform both components. Referrals may involve a higher payment—a plus for the referring laboratories.

• The OIG concludes “that the [p]roposed [a]rrangement, if undertaken, would generate prohibited remuneration under the [f]ederal anti-kickback statute, if the requisite intent were present, which would constitute grounds for the imposition of sanctions” under the Social Security Act

The OIG website (www.oig.hhs.gov) is a good resource for lab leaders as it includes all advisory opinions, many of which are applicable to laboratories.

How to Avoid These Risks: It was appropriate that the anatomic laboratory requested an advisory opinion. If the opinion is adopted, the arrangement would be void and compliance retained.

Improper billing or payment of COVID-19 and other test types    

OIG Work Plan issues are another important resource to inform labs of likely audit targets and help them update their compliance plans accordingly. Here are three Work Plan issues that should help labs focus their plans for 2024:

1. 2022 Medicare payments for CDLTs

Background: The OIG Office of Evaluation and Inspections plans to audit 2022 Medicare payments for clinical diagnostic laboratory tests (CDLTs). Under PAMA (Protecting Access to Medicare Act of 2014), the Centers for Medicare & Medicaid Services (CMS) began paying for lab tests under calculated payment rates using private payer data on January 1, 2018. The OIG will analyze and report on the top 25 laboratory tests by expenditure for 2022.²

2. Clinical laboratories’ emergency preparedness during the COVID-19 PHE

Background: The OIG Office of Audit Services plans to evaluate CMS’s emergency preparedness related to clinical laboratories during the COVID-19 Public Health Emergency (PHE).³ During such events, CMS has the authority to implement regulatory flexibilities and waivers to allow Medicare beneficiaries to have access to needed health care. The Emergency Preparedness Act does not include clinical laboratories and so there was no mandate for laboratories to meet various requirements to plan for disasters, coordinate with other agencies, and meet needs of patients. However, the audit will look at CMS’s emergency preparedness to ensure that:³

(1) beneficiaries maintain access to all types of laboratory tests, including laboratory tests for novel infectious diseases during a public health emergency, and

(2) laboratories have the ability to develop and deliver timely and accurate testing for novel infectious diseases during a public health emergency.

3. Medicare Part B add-on payments for COVID-19 tests

Background: The Office of Audit Services will also examine Medicare Part B add-on payments for COVID-19 tests. In October 2020, CMS announced it planned to encourage fast COVID-19 test turnaround times by offering higher reimbursements “for expedited results.”⁴ During the pandemic, CMS doubled COVID-19 high-throughput testing reimbursement from $50 to $100. Starting in 2021, an amended Administrative Ruling (CMS 2020-1-R2) lowered the base payment amount for COVID-19 tests that use high-throughput technology to $75. This move was in response to an evaluation of resources needed for COVID-19 testing. However, that change also established an additional $25 add-on payment for a COVID-19 test that uses high-throughput technology if the laboratory:⁴

• • completed the test in no more than two calendar days,

• •  completed most of the CDLTs that use high-throughput technology in no more than two calendar days for all patients (not just Medicare beneficiaries) in the previous month, and

• reported add-on Healthcare Common Procedure Coding System (HCPCS) code U0005.

For this audit, the OIG will review providers’ supporting documentation for the COVID-19 add-on payments to determine whether the documentation complied with Medicare requirements.

How to Avoid These Risks: Compare the PAMA response to your internal data as a check on charges. Discuss how prepared laboratories were during the pandemic, identify deficiencies, and plan for potential future events. Plan an approach to supply documentation for add-on COVID-19 services.

Artificially delaying testing of specimens

Providing prompt lab testing is important not only for patient care, but to help labs avoid compliance issues, as cases published by the OIG illustrate. The OIG website lists all currently sanctioned providers and copies of their corporate integrity agreements (CIAs), offering another helpful resource for labs in developing and updating their compliance plans. Here’s one recent example of how delaying testing proved costly for one lab:

Background: A hospital whistleblower complaint regarding a molecular diagnostic laboratory in California resulted in an $8.25 million settlement and a five-year CIA.⁵ According to a press release about the settlement, the US alleged that the laboratory conspired with hospitals nationwide to artificially delay ordering their laboratory genetic assay in order to circumvent Medicare’s 14-Day Rule. Under this rule, laboratories cannot separately bill Medicare for tests performed on patient samples if a doctor ordered the test within 14 days of the patient’s discharge from hospital. However, the 14-Day Rule allows laboratories to bill Medicare directly for the testing if the test was performed 14 days after the patient’s discharge. The US alleged that the lab aimed to get around the 14-Day Rule in two ways:⁵

1. 1. Refusing to perform tests if a Medicare patient had been discharged less than 14 days earlier, canceling the order, and then requesting a physician to resubmit the order after the 14-day period had passed.

1. Using a “Medicare hold” system in which lab employees automatically held test orders for Medicare patients when those orders were received, and refused to test the samples until 14 days after the patient’s discharge. Using calendar reminders to notify them of the fourteenth day after discharge, employees contacted the ordering physician to ‘“confirm” the order.’ Employees then reported that “confirmed” date for billing purposes, rather than the actual, earlier date of the order.

The relator and the government also contended that the hospital “worked in concert” with the laboratory to bypass the 14-Day Rule. The hospital allegedly held tissue specimens for at least 14 days after patients were discharged before sending them to the lab for testing. Despite knowing samples should be sent for testing right away, the hospital held the test orders to allow the laboratory to bill Medicare separately for tests and avoid having to pay the lab for tests. Under a separate agreement, the hospital settled these false claims allegations for $211,039.28.

How to Avoid These Risks: Create a policy (or policies) that follows the 14-Day Rule and provides timely testing. Contractually work with hospital clients and define a fee to charge as appropriate.

Another useful example that is also the first criminal COVID-19 healthcare fraud case brought to trial involves a medical laboratory in Silicon Valley, California. The case resulted in the president of the laboratory being sentenced to eight years in prison and ordered to pay $24 million in restitution for scheming to:⁶

• • defraud investors,

• • commit healthcare fraud, and

• pay illegal kickbacks related to the submission of more than $77 million in claims for COVID-19 and allergy testing.

According to a press release, the laboratory company’s president claimed that he invented a technology that could test for any disease “using a single drop of blood from a finger stick sample.”⁶ He and a publicist claimed that he was the “father of microarray technology” and shortlisted for the Nobel Prize.⁶ The company’s president also valued his company at $4.5 billion when it was actually on the verge of bankruptcy. Also, after the company failed to develop a COVID-19 antibody test early in the pandemic, he claimed “to have multimillion-dollar contracts and other business developments that all proved to be bogus,” said an investigator in the press release.⁶

In addition, the lab company president led a scheme in which fraudulent claims were submitted to Medicare and private insurance for unnecessary allergy testing. The lab performed allergy screening tests for 120 different allergens on all of its patients, without considering medical necessity. The lab’s president also paid kickbacks to marketers to obtain patient specimens, thus violating the Eliminating Kickbacks in Recovery Act. Evidence at trial showed that his company “billed more per patient to Medicare for blood-based allergy testing than any other laboratory in the United States.”⁶

Takeaways

The above sample audit targets aim to bring attention to current fraud and abuse activities and what labs should be wary of in their own practices. These examples represent coding, billing, and reimbursement issues as well as compliance program issues. To be proactive and help avoid such compliance issues, the OIG website is a key resource for labs. In addition, lab leaders should ensure they attain and maintain documentation of the services they provide.

References:

1. 1. U.S. Department of Health and Human Services Office of Inspector General, Advisory Opinion No. 23-06. https://oig.hhs.gov/documents/advisory-opinions/1131/AO-23-06.pdf

1. 1. U.S. Department of Health and Human Services Office of Inspector General website, “Medicare Payments for Clinical Diagnostic Laboratory Tests in 2022.” https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000778.asp

1. 1. U.S. Department of Health and Human Services Office of Inspector General website, “CMS’s Emergency Preparedness Related to Clinical Laboratories During the COVID-19 Public Health Emergency.” https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000723.asp

1. 1. U.S. Department of Health and Human Services Office of Inspector General website, “Medicare Part B Add-On Payments for COVID-19 Tests.” https://oig.hhs.gov/reports-and-publications/workplan/summary/wp-summary-0000706.asp

1. 1. United States Attorney’s Office Western District of Kentucky press release, “California Genetic Testing Company Agrees To Pay $8.25 Million To Resolve False Claims Allegations; Paducah, Ky, Area Hospital Also Settles.”

1. 1. United States Attorney’s Office Northern District of California press release, “Silicon Valley Executive Sentenced For Defrauding Investors And Participating In Covid-19 And Allergy Testing Scheme.”

1. 1. Voorhees, Diana. G2 Intelligence September 2023 Lab Compliance Advisor, “How to Ensure Proper Documentation for Billing Laboratory Services. https://www.g2intelligence.com/how-to-ensure-proper-documentation-for-billing-laboratory-services/