Federal authorities, including the U.S. Department of Health and Human Services Office of Inspector General (OIG), the U.S. Department of Justice (DOJ), and the Centers for Medicare/Medicaid Services (CMS), have been ramping up investigations, audits, and payment suspensions targeting laboratories involved in COVID-19 testing. These actions are primarily driven by concerns over the medical necessity of tests, proper billing practices, and compliance with federal regulations, including Medicare and other federally funded programs.
Labs are often cited for recurring issues related to the following:
- Doctors’ Orders: Ensuring that tests are ordered in accordance with medical necessity.
- Patient Complaints: Allegations from patients about not receiving tests or services.
- Testing Procedures: Ensuring that the laboratory processes tests according to required protocols.
- Medical Necessity: A key area under scrutiny, where tests may be deemed medically unnecessary.
- Billing Practices: Investigations into potential improper billing for unnecessary or unapproved tests.
One of the biggest challenges laboratories face is the argument that the COVID-19 tests they performed were not medically reasonable or necessary, often based on the high frequency of testing for certain beneficiaries. However, case law has established that laboratories are not required to independently determine the medical necessity of the tests they process. In United States v. Boston Heart Diagnostics Corp., 296 F. Supp. 3d 155, 159-60 (D.D.C. 2017), the court held that laboratories are entitled to rely on the ordering physician’s judgment regarding medical necessity. The ruling also made clear that laboratories neither have the ability nor the obligation to make these determinations themselves.
In fact, the court referenced OIG Guidance clarifying that laboratories are not required to independently assess the medical necessity of tests, as doing so would be inconsistent with the OIG’s policies. That said, laboratories must be able to provide sufficient documentation from the treating or ordering physician that supports the medical necessity of the tests performed. This may include requisition forms, test orders, and diagnosis codes that meet the criteria set forth by CMS.
To ensure compliance with federal guidelines and avoid costly audits, investigations, or payment suspensions, laboratories must adhere to the following best practices outlined in OIG guidance:
- Requisition Design:
Laboratories should utilize uniform requisition forms that require physicians to clearly identify the tests being ordered and the medical necessity for each. These forms should allow for the inclusion of diagnosis codes that support the need for the test.
- Notice to Physicians:
Labs are encouraged to inform physicians about the OIG’s stance on the importance of ordering only medically necessary tests. Physicians should also be made aware that ordering unnecessary tests may result in civil penalties. Labs are encouraged to notify physicians annually regarding this requirement.
- Physician Acknowledgments:
When physicians use customized test profiles, laboratories must ensure that physicians acknowledge that they will only order tests that are medically necessary. This acknowledgment should be formalized in writing and should confirm that tests will only be ordered based on the specific needs of the patient.
- Monitoring Test Utilization:
Laboratories must proactively monitor test utilization patterns to identify any signs of overutilization or unnecessary test ordering. If any such patterns emerge, labs are responsible for investigating and addressing the issue, ensuring that physicians are only ordering tests that meet the criteria for medical necessity.
Addressing Patient Complaints and Misunderstandings
In addition to allegations regarding medical necessity, federal investigations often rely on patient complaints or interviews to support claims of improper testing or billing practices. A common issue arises when patients assert that they did not receive a test, or that they did not request a test. However, many of these patients may not have direct contact with the laboratory or may be unaware that their provider sent their sample to a laboratory they are unfamiliar with. This often occurs because laboratories primarily handle sample processing and provide results without direct interaction with the patients themselves.
As a result, patients may be unaware that the laboratory was involved in their testing process, leading to misunderstandings where they believe they were not tested by the laboratory in question, even though the lab did indeed provide the service.
What to Do if Your Laboratory Faces an Audit, Investigation, or Payment Suspension
If your laboratory is contacted by federal authorities for an audit, investigation, or faces potential payment suspension, you must act fast. It is crucial to act promptly and engage specialized healthcare attorneys who can guide you through the process and ensure compliance with all federal requirements. Frier Levitt understands the challenges that come with these investigations, and we are here to provide the strategic support needed to resolve any compliance issues. We are committed to helping you navigate the process smoothly, ensuring your laboratory remains in full compliance and minimizing the risk of penalties. Contact us for assistance.
