FY 2022 OIG Enforcement Rebounds—but Recovery Dollars Don’t Show It

After two years of steady decline, U.S. Department of Health and Human Services Office of Inspector General (OIG) enforcement activity has started recovering to nearly pre-pandemic levels, although those numbers aren’t yet reflected in the total recovery numbers. That’s the takeaway of the new Fall 2022 Semiannual Report to Congress (SAR) summarizing the agency’s health fraud and program integrity efforts during the second half of fiscal year (FY) 2022 covering the period from April 1, 2022, through September 30, 2022. Here’s a high-level briefing of the SAR and what it tells us about long-term enforcement trends, including those affecting clinical labs.¹

How the SAR Can Help Lab Compliance

The OIG has traditionally served as the spearhead of federal enforcement activity targeting labs, particularly in the realm of Medicare and Medicaid fraud. The bad news about the OIG is its decades-long suspicion and mistrust of labs. The good news is that the agency has also been a leading source of compliance guidance. In March 1997, the OIG published a Model Compliance Plan for labs.² It has also issued a steady stream of Special Fraud Alerts, Bulletins, and other compliance guidance for labs and other providers.

Over the years, the OIG has also been very transparent about its activities. In addition to publishing an updated Work Plan setting out its most recent agenda and projects each month, the agency submits detailed SARs of its activities to Congress twice a year.³ “This report describes pragmatic and meaningful progress…during the reporting period,” notes OIG’s Inspector General Christi A. Grimm in a press release on the SAR.⁴

The statistics listed in the SAR are a sort of heartbeat of enforcement activity, both current and over the long term. The narrative analysis enables us to trace how and where the OIG is directing its enforcement and program activities energies.

FY 2022 OIG Fraud Enforcement by the Numbers

After last year’s decline from $3.14 billion to $3.00 billion in FY 2021, total OIG expected healthcare fraud investigative recoveries for the entire year slipped back to $2.73 billion in FY 2022. While that number represents a five-year low, it belies signs of a recovery in enforcement activity. The agency also expects to recover another $1.199 billion from audits.

More significantly, the level of significant enforcement actions is up across the board. After decreasing for three years in a row, total criminal actions in the second half of FY 2022 rebounded from 532 to 710, the highest since 2019 before the pandemic began.

After declining from 791 to 689 last year, civil actions in the second half of FY 2022 bounced back to 736. Eventually, this increase in civil actions, which include false claims and unjust-enrichment lawsuits filed in federal district court, civil monetary penalty (CMP) settlements, and administrative recoveries from provider self-disclosure matters, will result in higher recovery amounts.

Meanwhile, total exclusions reversed last year’s significant declines, with an increase from 1,689 to 2,332, just 308 behind the pre-pandemic year of 2019. The rebound in exclusions isn’t all that surprising given that the new draconian CMS affiliations exclusions rule is now in full force and effect. (For more on the rule, see Laboratory Compliance Advisor, October 28, 2019.⁵)

OIG Enforcement Year-Over-Year Enforcement Action (April – September, FY 2018-2022)

Labs Remain a Central Target for OIG Enforcement

As in most years, labs figured prominently in the narrative sections of the SAR describing the OIG’s enforcement achievements for FY 2022. According to the SAR, identifying and rooting out fraud, waste, and abuse in federal healthcare programs constitutes the agency’s “largest body of work.” Many of the issues that draw the OIG’s investigative and enforcement attention involve reimbursement of lab services, including billing for services not rendered, medically unnecessary services and upcoding, as well solicitation and receipt of kickbacks and illegal referral arrangements.

Telehealth & Telemarketing: Approximately 742,000 providers billed for telehealth services during the first year of the COVID-19 pandemic. According to the OIG, 1,714 of these providers posed high risks of false billing to Medicare, based on at least one of seven measures the agency developed to serve as red flags of telehealth fraud, waste, or abuse. Labs were on the list of the OIG’s primary suspects. At one point during the year, the agency actually issued a Special Fraud Alert on billing of cancer genetic and cardiac tests provided via telehealth arrangements.⁶

In one example, on June 16, Marc Sporn, the owner and operator of several telehealth and telemarketing companies was sentenced to 14 years in prison for carrying out a widespread fraud scheme that cost Medicare over $20 million. Specifically, Sporn’s companies marketed medically unnecessary genetic tests to Medicare patients, and sold doctors’ orders for those tests in exchange for kickbacks, knowing that the labs would use these orders to bill Medicare for medically unnecessary services.⁷

Kickbacks: In describing its accomplishments in cracking down on illegal kickbacks, the OIG cites the 24-month sentence and $7.6 million restitution penalty against the CEO of Northwest Physicians Laboratory (NWPL) for obtaining over $3.7 million in kickback payments by steering urine drug test specimens to two labs for tests that were then billed to federal health programs, resulting in $6.5 million of false payments. The fees were listed as marketing services, but no marketing services were actually performed. NWPL, which has since dissolved, pleaded guilty in February 2021 and was sentenced to pay $8,114,417 in restitution.⁸

Value-Based Arrangements: Speaking of kickbacks, labs were among the providers excluded from the Anti-Kickback Statute (AKS) and Stark Law safe harbors for value-based arrangements that took effect in 2020. Extending the safe harbors to labs was among the recommendations the OIG received as part of its FY 2022 Annual Solicitation for proposals to modify the rules. However, the SAR notes that the agency rejected the proposal due to concerns that labs “could use the safe harbor to protect arrangements that are intended to market their products or inappropriately tether clinicians to the use of a particular product.”

Automated Chemistry Tests: Billing and payment of lab tests also came up in a separate report listing the OIG’s “top 25 unimplemented recommendations” issued by the agency in October 2021.⁹ That report echoes the previous recommendation that CMS seek legislative authority to control costs for automated chemistry tests. Protecting Access to Medicare Act of 2014 (PAMA) market-based price cuts haven’t gone far enough to curb Medicare spending on lab services, the OIG suggests.

NPI Information on Medicare Advantage Encounter Records: Number 11 on the OIG’s list of top unimplemented recommendations is that CMS require Medicare Advantage organizations to submit an ordering provider’s National Provider Identifier (NPI) number on encounter records for labs as well as durable medical equipment, prosthetics, orthotics, supplies, imaging, and home health services. NPIs are critical for identifying questionable billing patterns, pursuing fraud investigations for ordering and referring providers, and assessing whether ordering or referring providers have determined that services were appropriate for patients, the OIG notes.

The agency adds that NPI requirements should be backed by the development and implementation of “reject edits” that reject encounter records that don’t list the required ordering provider NPI or an NPI that’s not valid and active in the National Plan and Provider Enumeration System registry.

References:

1. 1. https://oig.hhs.gov/reports-and-publications/archives/semiannual/2022/fall-sar-2022.pdf

1. 1. https://oig.hhs.gov/documents/compliance-guidance/965/cpcl.html

1. 1. https://oig.hhs.gov/reports-and-publications/workplan/

1. 1. https://oig.hhs.gov/newsroom/news-releases-articles/2022-fall-sar/

1. 1. https://www.g2intelligence.com/the-new-cms-medicare-exclusion-rules-how-to-comply-with/

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

1. 1. https://www.justice.gov/opa/pr/owner-and-operator-telemedicine-and-telemarketing-companies-sentenced-14-years-20-million

1. 1. https://www.justice.gov/usao-wdwa/pr/former-ceo-defunct-medical-testing-laboratory-sentenced-prison-medical-kickback-scheme

1. 1. https://oig.hhs.gov/reports-and-publications/compendium/files/compendium2021.pdf

1. 1. https://oig.hhs.gov/reports-and-publications/top-challenges/2022/index.asp