OIG Semiannual Report: Opioid Crackdown Is Making Labs a Prime Enforcement Target Once Again

Once the favorite whipping boy of federal enforcers, labs have been demanding less and less of the OIG’s attention in recent years. But the newly published OIG Semiannual Report to Congress (covering Oct. 1, 2017 through March 31, 2018) suggests that this trend may be arresting if not reversing as a result of the opioid crackdown. Here are the key things labs and lab managers need to know about the new Report.

Improper Payments to Labs
Labs featured prominently in improper Medicare and Medicaid payments during the period, specifically specimen validity tests billed in combination with urine drug tests which accounted for $66.3 million in improper payments to physician offices. The OIG cites CMS officials as stating that medically necessary tests for certain conditions billed on the same day as a urine drug test for a single beneficiary should be rare since the former usually can be used for the latter. Yet, such payments were frequently made due to:

• Providers’ failure to follow existing Medicare guidance; and
• Flaws in CMS system edits designed to screen out such improper claims.

Even after CMS implemented improved edits, $1.8 million in improper payments still got through over a seven-month rate. On a projected basis, that would amount to $12.1 million over a five-year period. OIG’s recommendations with which CMS has concurred:

• Order Medicare contractors to recover those $66.3 million in improper payments from physicians that billed them; and
• Further strengthen CMS’s system edits.

Other Problem Areas
Other problem areas resulting in improper payments that the OIG cites include:

• Outpatient physical therapy services—of the 300 claims that OIG randomly reviewed, 61% did not meet Medicare medical necessity, coding or documentation requirements;
• Hospital reporting of cardiac medical device credits associated with recalled devices—none of the 296 hospital payments reviewed complied with Medicare rules for reporting manufacturing credits;
• Payments for Part B drugs—Failure to exclude noncovered versions in average sales prices of two Part B drugs resulted in $366 million in improper payments over a two-year period; and
• Capitation payments for dead patients—while CMS policies and procedures did a good job of preventing them, the agency was less effective in recovering improper payments that had already been made, with $2.4 million for 1,817 capitation payments for 978 beneficiaries still unrecovered;

Enforcement Activities
Year over year, enforcement activities were sharply down in all metrics except for program exclusions. Most startling was the over 25% decline in year to date recoveries compared to FY 2017:

Enforcement against Labs
The OIG typically includes at least two or three cases involving labs among its highlighted cases. But the 2018 Semiannual Report calls out just one such case, a settlement of allegations that a services agreement between Primex Clinical Laboratories, LLC and the CEO and owner of lab service firm DNA Stat, LLC (DNA Stat) constituted an illegal kickbacks arrangement. Among other things, Primex and DNA Stat allegedly provided physicians with in-office medical technicians to do work related to a Primex-sponsored study to induce them to order pharmacogenetic tests from Primex. Price tag:

• Primex agreed to pay $3.5 million and enter a five-year corporate integrity agreement; and
• The CEO agreed to pay $270,000 and a five-year exclusion.

The 5 Takeaways
OIG Semiannual Reports tend to be pretty formulaic and relatively unchanged from year to year. But there are always subtle “tells” to be found, especially when you read them against previous versions. For lab managers, the key points in this year’s Report:

1. Overall federal enforcement activity is down compared to the same period last year;
2. Pharmaceuticals, medical devices and opioid drugs are commanding the lion’s share of the OIG’s attention;
3. But while labs are no longer the focal point they used to be, they remain on the OIG enforcement radar;
4. In fact, attention is shifting back to labs particularly to the extent they play a role in monitoring of patients prescribe legal opioids;
5. The inclusion of an item calling out urine drug testing is both an indication and a harbinger of increased enforcement activity targeting labs that perform opioid related tests.