Tuesday, December 22, 2020

Blog #1 of 5: OIG Releases Annual Report on Lab Spending: CY2019

Triggered by the December 22 release of the OIG report on lab spending for CY2019, I've written a set of 5 blogs.

  • #1 - OIG report; Focus on 81408 as biggest genomic code
  • #2 - Review of all Tier 2 payments (81400-81408)
  • #3 - Review of MolDx Tier 2 payments
  • #4 - Review of NGS MAC Tier 2 payments
  • #5 - 81407 as the weirdest Tier 2 code

click to enlarge

Blog #1 here, Blog #2 here, Blog #3 here, Blog #4 here, Blog #5 here.


On December 22, 2019 OIG has released its annual Congressionally required support on lab spending - for CY2019.   It may seem quite recent that we had an OIG annual ;ab report, but that's because the CY2018 report was delayed to August 2020.   

For 2019, lab spending is up a little, from $7.6B to $7.7B.   

But the real boom is in genetic spending - rising from $475M in 2017 to $970M in 2018 to $1.36B in 2019.

  • Find the report  >> HERE.

Some of the rise from $475M to $1.4B in two years could be related to headlines of hundreds of millions of dollars of inappropriate charges:


Overall, total CLFS lab spending has gradually shifted from $7.0B in 2014 to $7.7B in 2020:

Limited Overall Budget Growth, 2014-2019

Genetic spending has risen much more sharply.

The top 15 tests, across all types, are as follows. Note that most dropped slightly from 2018 to 2019. Nerd fact: CPT code 81479, unlisted molecular test, should be in mid-chart at $202M, but isn't shown. Probably because "unlisted codes" aren't part of PAMA and the OIG report is on PAMA.

Note that the top genetic test is 81408, Tier 2, Level 9, which pays $2000 and has more than doubled from 2018 to 2019.   This led me to do some research on 81408 (which I've published in previous blogs the past couple months).


The 81408 story is so strange, it's hard to tell compactly, so I've assembled multiple data types onto one slide, at bottom.  

I have to mention, I'm transferring now to Part B data, which I have in detail. OIG data adds up both Part B and Hospital Outpatient data, but (you can show) for 81408 it makes no difference.  

81408 is the highest payment level in the Tier 2 genes, 81400-81408.  Each tier 2 gene code represents a procedure on any of one of  a list of gene names inside it.  81408 represents full sequencing of any one of about a dozen (rare) genes - you don't know which one was looked at.

First, we know that 81408 is the biggest genetic code in 2019.  What's it's utilization history?  

In a nutshell:  81408 exploded in scale 2016 to 2017 to 2018 to 2019.  81408 billing grew 580X from 2016 to 2019, and 270X from 2017 to 2019.  (See chart further below, "Muliples by Year.")

OK, that's odd.  Our next natural question is...

Who's billing for 81408?  

It turns out, it's never Labcorp, Quest, GeneDx, Myriad, Ambry, Invitae...

In fact, in CY2018, only about 10 labs got paid for 81408 (in more than 10 units).  (See 2018 lab-level data here).   Of the ten labs billing for 81408 in CY2017, by my count, 6 or 7 were implicated in the allegations of "Operation Double Helix" (DOJ here), 1 of them was bankrupt, and the 2 remaining had no public adverse notices that I could find.   I have no opinion on any of this; I'll let you decide if there seems anything unusual about this.  

In 2016 and 2017, the only labs paid (>10 claims) for 81408 were in TN and GA.  In 2018, of the top 13 labs billing 81408, and which accounted for 85% of far larger 81408 payments, 10 of the 13 were associated via Google with Operation Double Helix (allegations only).   

Typically, the 10 labs that billed 81408, billed it in pairs or in 2 units (2 x $2000). I learned that this is the allowable limit under national Medically Unlikely Edits (here).    

Labs billing for 81408 most typically billed many of the Tier 2 codes (81400-81408) but since 81408 and 81407 pay $2000 and $1000 respectively, most of the financial weight falls in the topmost Tier 2 codes, especially when billing 2x81408=$4000.   Another tidbit: If labs billed 81408 at all, in CY2018, it was usually 50-70-90% of their total Medicare payments.  But let's stop there; that's a topic I'll handle in my next blog, Blog #2, about Tier 2 billing as a whole.

LCD edits are regional so next, Where did labs bill?  

Only in a couple MAC systems.  Billing occurred mostly in the Novitas MAC (which stretches from New Jersey to Oklahoma) and in the former Cahaba MAC.   (See MAC MAP for 81408 below).  The Cahaba MAC was absorbed into Palmetto MAC in 2018 and MolDx edits were applied in 2H2018 to labs in GA and TN billing 81408.  

As far as I can tell, MolDx states never pay for 81408 and neither do the northern NGS MAC states.  (See blogs #3 and #4 on MolDx and NGS MAC handling of Tier 2 codes.)   Some commercial payers do not pay for 81408 (see here).  

So if you're keeping tally:  The LARGEST genetic code in Medicare in 2019, 81408, was not paid in most states, almost entirely paid in the Novitas MAC - whose LCD even today says "we have no edits on 81408" - and is not paid at all in some major private insurers either.  Plus, if you google-search the 10 labs paid for 81408 in 2018, you hit case after case related to DOJ.  (Note:  We don't know if any DOJ allegations will hold up in court or not.)   

Weirdest thing I've seen in almost 20 years around Medicare. 

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When Palmetto Took Over Cahaba MAC

The data shows: Palmetto crushed 81408 spending when they took over Tennessee and Georgia from Cahaba in 2H 2018 and put in MolDx rules.  81408 in Georgia in 2018 was $16M, in 2019, that plummets to $74,000.   81408 in Tennessee in 2018 was $7.7M, in 2019, that plummets to $4000.   (So MolDx stopped 81408 spending cold.  In fairness, for this issue, NGS MAC also stopped 81408 spending, with 99% less infrastructure than MolDx).    See blog #3 for a broader view of how MolDx handles all Tier 2 codes, not just 81408.
81408 exploded 2018/2019 (top of article), but plummeted in Palmetto MolDx states


Extra Facts

Bonus question.  Why the boom between 2017 and 2018?  Tier 2 codes date back to 2012 or so.   Answer?  maybe because the code was unpriced and manually processed with medical records before 2018.  On 1/1/2018, the code got a fixed fee schedule price of $2000, and an MUE of 2, and in some states, no edits.  Welcome to 2018.   

Definition of 81408.  List of 81408 gene names here.  They're generally very rare disorders.  The public DEX database from Palmetto shows that generally 81408 genes are not covered by MolDx - database here, example here.

Other explanations for 2019 genetic growth. Besides 81408, other codes rose substantially 2018-2019, such as 0037U, Foundation Medicine, rising well more than double, from 9900 to 22900 uses.   That added about +$45M from 2018 to 2019; whereas 81408 added nearly +$200M.  

OIG reports A+B; I have data for B.  OIG reports Part B lab + Part A hospital outpatient labs, getting about 150,000 tests or $290.4M.  If you look at CMS Part B lab data alone, it's $290M, suggesting +$400,000 in hospital 81408 cases or 200 cases of 81408 billing (about 0.14%). 

MUE could have saved $150M with a single digit.  Spending on 81408 in 2019 was about $290M; if the medically unlikely edit had been N=1 instead of N=2, about $150M would have been saved by that single digit on a CMS spreadsheet. 

No rocket science.  Nothing here is rocket science - it's all public data from the CMS website and basic Excel skills.  No machine learning needed.


Data for "> 10 cases billed" versus "All Data."   I said that 10 providers billed 81408 in CY2018.  In fact, that's providers named in the database with granular 81408 data (like charges and cases).  Cutting the data another way, CMS tells us that 74 total providers billed Medicare for 81408, but 64 of them must be for less than 10 cases.  Let's assume those 64 billed 5 each, or 320 cases; that's 320 cases of 81408 out of 62,479 cases, or 0.5%.  Outside the ten main labs billing 81408, then, 0.5% was also billed by labs with few cases, and 0.14% was billed by hospital-reference labs.  Ten labs accounted for >99% of 81408 billing, but not 100.0%.

The Novitas LCD L35396, states there are no edits on any Tier 2 codes:

Multiples by Year.

81408 billing grew 580X from 2016 to 2019, and 270X from 2017 to 2019.

Pled Guilty

Managers for two labs pled guilty in June 2020; the labs accounting for 8% of CY2018 81408 payments (here).  DOJ writes, "Once the amount of the bribe was calculated, Ark and Tamulski drafted and submitted sham invoices to the laboratories that backed into the agreed upon bribe amount and attempted to conceal the scheme through describing various services provided at hourly rates."  DOJ adds, and I emphasize, "The charge and allegations against the remaining defendants are merely accusations, and they are presumed innocent unless and until proven guilty."
Top Code 81408 - Dollars by State
(Here in table form, the data supporting the pie chart in the figure earlier in blog.)

In the bar chart below, 2018 payments in $$M; purple bars Novitas except for Florida; blue bars Cahaba (defunct MAC). No meaningful payments for 81408 in NGS MAC nor MolDx group of four MACs.