COVID-19: A Roadmap to Fraud Investigations: Office of Inspector General Targets Labs for Billing COVID-19 Add-On Tests

Introduction

On 6 December 2022, the Department of Health and Human Services Office of Inspector General (HHS-OIG) issued a report (Report) that summarized findings of HHS-OIG’s review of laboratories with questionably high billing for additional tests alongside COVID-19 tests.¹ This examination of laboratory billing practices by HHS-OIG and subsequent review by the Centers for Medicare and Medicaid Services (CMS) marks the start of another significant wave of COVID-19 and Public Health Emergency (PHE) related government audits.²

This article will provide an overview of the Report and set forth general best practices for laboratories, including tips for conducting self-auditing.

HHS-OIG’s December 2022 Report

To conduct its review of potential fraud, waste, or abuse associated with laboratory billing practices during the PHE, HHS-OIG analyzed data from Medicare Part B claims for COVID-19 tests billed alongside add-on tests from February through December 2020.³ Specifically, HHS-OIG narrowed its focus to “outlier” labs—laboratories that exceed the thresholds for one or both of the following measures:

1. Laboratories where a high proportion of the total number of tests were add-on tests; or 
2. Laboratories where a high proportion of the total payment resulted from add-on tests.⁴

The Report defined “add-on tests” as one of the following diagnostic tests that were billed simultaneously with COVID-19 tests:

• Individual Respiratory Tests (IRTs);
• Respiratory Pathogen Panels (RPPs);
• Genetic Tests; or 
• Allergy Tests.⁵

Of the 19,577 laboratories that received Medicare Part B payments for COVID-19 tests during the review period, 56% did not bill for any add-on tests on claims for COVID-19 tests.⁶ The remaining 44% of laboratories billed for at least one of the aforementioned add-on tests on the same claim as a COVID-19 test.⁷ While HHS-OIG acknowledges in its Report that patient-specific, add-on tests are sometimes legitimate, it also provides that “the unnecessary or excessive billing of add-on tests could indicate waste or potential fraud.”⁸ 

Notably, HHS-OIG identified 378 so-called outlier laboratories that HHS-OIG claims billed Medicare Part B for questionably high levels of add-on tests that purportedly pose a risk of waste or potential fraud.⁹ These laboratories were paid more than US$67 million for add-on tests during the review period in 2020.¹⁰ 

The Report also highlights what HHS-OIG perceives to be a potentially concerning billing pattern, where eight of the 378 alleged outlier labs billed Medicare Part B for the same tests for the same enrollee, as another lab on the same day.¹¹ As a result of the findings from the Report, HHS-OIG has referred all 378 so-called outlier laboratories to CMS for further review.¹² CMS contracts with Unified Program Integrity Contractors (UPICs) assigned to one of five geographic locations, to fulfill program integrity functions of the Medicare Program and investigate potential fraud, waste, and abuse.¹³ Laboratories whose claims data fit the criteria of the 378 purported outliers identified by HHS-OIG should expect CMS to refer them to the UPICs for investigation in the near future.

Laboratory Self-Auditing Recommendations

Laboratories or other entities providing testing services should perform self-audits, or internal audits, to ensure compliance with Medicare’s billing guidance. When performing a self-audit, there are a number of steps to keep in mind.

The first step for a laboratory is to select an appropriate timeframe that will be reviewed during the audit. The timeframe for review should encompass claims from several months prior to and after the time period in question. For example, in the Report, HHS-OIG’s scope of review was from February 2020 through December 2020, which means a self-auditing period should capture claims from late 2019 through early 2021 to provide comparison data. The following are some key dates and regulations to consider when selecting the timeframe for review:

• 31 January 2020: HHS announced the COVID-19 PHE, which was determined to have existed since 27 January 2020;¹⁴
• 27 March 2020: The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law;¹⁵ and
• 31 March 2020: CMS’ “Policy and Regulatory Revisions in Response to the COVID 19 Public Health Emergency” became effective.¹⁶

Next, the laboratory should select a specific category of testing to review. Generally, the laboratory should secure copies of the 1500 or UB04 claim form submitted to Medicare for each claim identified during the review period. It may be helpful to create a comprehensive list of services rendered during the review period, or create a list of payable Current Procedural Terminology (CPT®)/ Healthcare Common Procedure Coding System (HCPCS) codes if the services were paid on an “à la carte” basis. The laboratory should also identify whether any of the services have specific Medicare coverage policies (including local coverage determinations (LCDs) and national coverage determinations (NCDs)), and review the relevant chapter(s)/section(s) for both the Medicare Benefit Policy Manual (Pub 100-2) and the Medicare Claims Processing Manual (Pub 100-4).¹⁷

Further, the laboratory should create a comprehensive list of documents that: supports the service was provided based on the official American Medical Association (AMA)/HCPCS definition of the code reported; demonstrates the service met the Medicare contractor’s definition of a medically necessary service; and demonstrates any additional coverage requirements outlined in the policies and/or manuals have been met.¹⁸ The laboratory should also ensure that all documents that are required to be signed by the treating/ordering provider are signed with the legible identifier of the signatory.¹⁹

When performing the documentation review itself, the laboratory should be cognizant that guidelines and regulations changed rapidly during the first year of the PHE. The laboratory should be sure to apply guidelines applicable to the specific dates of service being reviewed rather than applying a blanket guideline across the entire universe of claims.

Lastly, it is important to bear in mind that failing to report and return a known overpayment within 60 days of discovery is a violation of the False Claims Act.²⁰ The reporting period begins when either: the reasonable diligence is completed; or on the day of quantification, when the person received credible information of a potential overpayment if the person failed to conduct reasonable diligence and the person in fact received an overpayment.²¹ Laboratories, accordingly, have up to eight months for repayment (six months to investigate and quantify, plus 60 days to report and return the overpayment), regardless of whether the potential overpayment was discovered due to an external review or an internal self-audit.²² It is important to note that the 60-day period to make the refund begins at the time the overpayment is quantified, regardless of whether the 180-day due diligence period has expired.²³

Conclusion

This Report marks another significant step by HHS-OIG in its initiative to provide oversight of the COVID-19 preparedness response and seek recovery of allegedly misspent funds. Recommendations made by HHS-OIG to CMS will be implemented through the Center for Program Integrity (CPI) assigning audits to UPICs or other appropriate enforcement agencies.²⁴ As the government continues to scrutinize COVID-19 and PHE-related payments made by CMS, we can expect to see many more audits in this arena. Providers should work proactively to implement compliance programs and conduct self-auditing to ensure compliance with all applicable Medicare guidance.