Wednesday, November 30, 2022

Brief Blog: Dark Report Article on Lab Test Fraud

The November 21, 2022 issue of Dark Report has an article on genetic test fraud, focusing on a group of separately enrolled Medicare labs collectively known as "McNamara labs."  Per DOJ and Dark Report, $174M in false claims are alleged.   

I found a 30 page indictment PDF online here.   The report names 4 lab entities, some of which allegedly did not have the capability for genetic testing.   Such labs acquired samples, referred them elsewhere for lab processes, then billed Medicare for them.

Two rules are involved (aside from medical necessity concerns.)   First, lab tests billed by Lab A but referred out for lab work by Lab B, must be submitted to CMS by Lab A with a referral modifier on the claim line.  The DOJ document specifically alleges that claims lacked this referral modifier (PDF page 13).

Second, the tests referred out can only be billed to Medicare by Lab A under a strange rule called the 70/30 rule.  This is a law that a lab can only bill out in this way, if it meets a standard, that it actually does perform 70% of the tests that it bills.   Numerous online resources explain this (here, here, here).

As far as I understand, the statute is based on number of tests.  So a lab could accession and refer out 300 $1800 BRCA tests ($540,000), as long as it performed 701 $3 glucose or hematocrit tests ($2103).  (This is my impression; but I'm not an attorney).

Labs Can Be Looked Up

The CY2020 billing patterns of the labs cited in the 30-page indictment can be looked up at a CMS website of paid claims (paid to which docs and which labs); I'll leave this as an exercise to the reader.  When I spot checked, the labs named by DOJ were high billers of 81408 and other Tier 2 codes; one was on Canal Street by the French Quarter in New Orleans (NPI '00340.)  I had seen some of the lab names before simply by trawling the 2020 CMS records for high payments on gene test 81408.

Through 2021, the lack of Tier 2 genetic test code edits in some Southern states was scandalous (here).

70/30 Rule?

The Dark Report article notes that, possibly, the 70/30 rule was being violated (while adding: there is not enough evidence to say).  

I didn't see any reference to the 70/30 rule at all in the indictment, unless I missed something.  As noted, lack of "referral lab billing modifier" was alleged by DOJ.  The title of the Dark Report article is a little ambiguous; "Lab allegedly billed Medicare for tests it did not perform," here not meaning the tests were never run by anybody, but that they were not run by the lab that billed.

The article appears to ask rhetorically whether a performing lab B, under a situation where the acquisition lab A still is the billing lab, might have responsibilities to report something.  This isn't directly part of the 70/30 rule at 1833(h).   But in May 2020, Reuters reported that PerkinElmer's reference lab was being probed for its role as a performing laboratory for tests acquisitioned and billed elsewhere.  Here.  However, other sources quoted PerkinElmer that it was not a investigation target, here.