OIG Work Plan Targets Medicare Part B Billing & Payment of Lab Tests

During the Public Health Emergency (PHE), the Department of Health and Human Services (HHS) has cut labs extraordinary slack in the form of waivers that temporarily loosen Medicare test coverage rules as well as kickback restrictions for arrangements promoting COVID-19 diagnosis and treatment. But the détente appears to be coming to an end. In recent weeks, the OIG has quietly signalled that its historical suspicions over lab billing and payment abuses remain very much intact and that it intends to take new enforcement actions against labs that have taken advantage of the situation.

The OIG Work Plan

The items the OIG lists in its work plan are a helpful indicator of where its enforcement focus lies at any particular time, particularly since the agency began publishing monthly updates several years ago. During the pandemic, the OIG has added three new items focusing on a specific aspect of Medicare Part B billing and payment of lab tests, including two this month.

1. Billing of COVID-19 Add-On Tests

The objective of COVID-19 testing is to determine whether an individual has the virus. However, labs can also perform add-on tests, e.g., to confirm or rule a diagnosis other than COVID-19. In its June 2020 work plan, the OIG added a new item targeting potential add-on test abuses. In the item, the agency expressed its “program integrity concerns” related to add-on tests in conjunction with COVID-19, particularly the potential of fraudulent billing for associated respiratory pathogen panel (RPP) tests, allergy tests or genetic tests.

Adding to the concern is that during the PHE, CMS has relaxed the rules requiring an order from the treating physician or nonphysician practitioner (NPP) for COVID-19 tests. According to the OIG, relaxation of physician ordering/NPP rules gives “unscrupulous actors more leeway for fraudulent billing of unnecessary add-on testing.” To address these concerns, the OIG said it would perform a study analyzing Medicare claims data for lab testing to identify trends in the use of RPP, allergy and genetic testing and identify billing patterns indicating that labs may be committing fraud and abuse.

2. Medicare Payments for Clinical Diagnostic Lab Tests in 2020

The June 2021 OIG work plan includes a new item providing for annual PAMA review of Part B payments for clinical lab tests in the previous fiscal year. “Medicare is the largest payer of clinical laboratory services in the nation,” the OIG notes. The agency will analyze and issue a report on the top 25 lab tests by expenditures. While this is an exercise the agency is required to perform each year under PAMA, the top 25 also represent a kind of road map the OIG relies on to prioritize its review and enforcement resources and/or confirm previous suspicions of irregularities.

3. Audit of CMS CLFS Rate Setting Process for PHEs

The other new item in the June 2021 work plan deals with how CMS sets the Clinical Laboratory Fee Schedule for lab tests under Part B. As required by PAMA, reimbursement rates are based on the weighted median of private payer rates as reported to CMS by “applicable laboratories.” CMS sets a rate for each test’s HCPCS code. The data are reported every three years—although the pandemic forced the delay of Jan. 1, 2020 reporting to Jan. 1, 2022. CMS or Medicare administrative contractors use “cross-walking” or “gap-filling” methods to set rates for new tests after considering the public comments.

Is the CLFS methodology well suited for PHEs? If not, how can it be improved? The OIG intends to carry out an audit to address these questions. While the inquiry is narrow in scope, putting PAMA rate setting methodology under a microscope is almost always a positive development.