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Analysis of CMS Data Raises Alarm on Potential Genetic Testing Fraud

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NEW YORK – Despite federal efforts to rein in diagnostic testing fraud, new data from the US Centers for Medicare and Medicaid Services suggest that genetic testing fraud may be rampant, particularly in two areas overseen by two Medicare Administrative Contractors, Novitas and First Coast Service Options (FCSO).

The two MACs, which cover Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, Texas, Florida, Puerto Rico, and the US Virgin Islands, have seen particularly high rates of billing for tier two molecular pathology procedure codes, which are defined by Novitas as codes that cover rare disease and low volume molecular pathology services.

According to reimbursement expert Bruce Quinn, tier two codes are also ones that are often abused by fraudulent genetic testing operations. Many of these codes were assigned prices in 2018, making them payable by Medicare for the first time, Quinn said in an interview. 

Quinn, who analyzed the 2021 billing data released in October by CMS on his blog, said that many of the highest-billed codes were ones that "should never be billed in Medicare patients … other than in vanishingly rare amounts." One such code, 81442, covers genetic testing for Noonan syndrome, a genetic disorder that is often tested for in children and thus "has no place at all in the Medicare population," Quinn said. In 2019, Medicare payments for the code were $0, while in 2021 they totaled $35 million, with many of the payments made in states covered by Novitas and FCSO. 

Spending on tier two codes rose from $358 million in 2020 to $595 million in 2021, according to Quinn's analysis.

His analysis of the data uses a "more global approach" than how CMS reviews the data, he said. CMS will occasionally perform "laser-focused audits," but doesn't normally review the data at the level of claims processing patterns like Quinn does. According to a CMS spokesperson, MACs review many pieces of information, including claims data, to develop a yearly improper payment reduction strategy, and CMS provides guidance to the contractors on an as-needed basis.

A possible reason for high billing rates in certain states, Quinn posits, is that Novitas and FCSO previously allowed claims with those codes to be paid without edits, meaning there was no review of the claims before payment was granted. Other MACs, such as those under the MolDX program led by Palmetto GBA, don't reimburse for those codes, leaving Novitas and FCSO as the areas with the highest concentration of payments for those "highly unlikely" codes.

That's not to say the labs billing these codes don't do legitimate testing — many of the laboratories do, but that testing "may not be very high quality," Quinn said. Performing that testing could also be a tactical move, he said: If the labs weren't doing the testing, the proprietors could risk jail time or stronger punishment. If they perform actual testing alongside their fraudulent schemes, the punishment may be lighter, depending on what their lawyers argue — more to the tune of a $2 million fine or a "relatively light sentence relative to the rewards." 

Quinn noted that Novitas and FCSO have recently changed their policies for these codes. In 2021, the MACs released billing and coding articles saying that tier two codes "should rarely, if ever, be used unless instructed by other coding and billing articles." Certain tier two codes, when billed, will require additional information "to identify the specific analyte/gene(s) tested in the narrative of the claim or the claim will be rejected," Novitas added.

Novitas and FCSO directed all questions to CMS. 

Quinn's analysis comes as the US Department of Health and Human Services — in collaboration with other government agencies, such as the Federal Bureau of Investigation and the US Department of Justice — has recently worked to crack down on fraudulent Medicare claims, with an emphasis on genetic testing payments.

In 2019, the HHS' Office of the Inspector General worked with the DOJ and FBI on a joint operation that resulted in 35 people charged with billing $2.1 billion in unnecessary cancer genetic tests. And earlier this year, the DOJ charged 36 people for collecting more than $1.2 billion in fraudulent payments for telemedicine, cardiovascular and cancer genetic testing, and durable medical equipment. 

In just the past year, multiple laboratory owners and diagnostics companies have been charged with fraud or settled allegations of inappropriate billing, including Caris Life Science, which paid $2.9 million to settle allegations of improper billing for cancer testing. The University of California, San Diego Health System also resolved false billing allegations for medically unnecessary genetic testing by paying nearly $3.0 million, while Metric Lab Services and Spectrum Diagnostic Labs and two of their owners agreed to pay $5.7 million to settle accusations of running a fraudulent genetic testing scam. 

Meanwhile, a man from Florida pled guilty to three separate fraud schemes and agreed to pay $97.4 million in restitution, and in August, eight people were indicted for allegedly operating a genetic testing fraud scheme that improperly billed Medicare for more than $150 million. 

Isaac Bledsoe, a special agent with the HHS OIG, affirmed Quinn's opinion that MAC regions may play a role in genetics testing fraud. Typically, he said, MACs in the MolDX program won't adjudicate a claim for molecular tests unless "a number of rigorous registrations and checks are done" — checks that until recently, Novitas and FCSO did not have. As a result, fraudulent actors move their laboratories to states not covered under MolDX because it's "a little bit easier to get those claims through," he said. In the 2019 fraud-busting collaboration, dubbed Operation Double Helix, all of the labs indicted were located outside MolDX jurisdictions, he added. 

Since testing fraud became a priority for the OIG in 2018, Bledsoe said there's been a shift in the type of fraud occurring. In the early years, pharmacogenetic and cancer genetic testing were the big businesses for fraudsters, but as crackdowns on those types of tests increased, the new pot of gold became dementia and Alzheimer's testing, as well as diabetes testing. During the COVID-19 pandemic and the accompanying shift to telemedicine, respiratory pathogen panel testing fraud went up, as did testing for Noonan syndrome, Bledsoe said, adding more recently, there has been a rise in fraudulent cardiovascular genetic testing. 

Quinn noted in his data analysis that there was particularly high billing of code 81411, a code covering an aortic dysfunction/dilation test. Spending on that code went from $0 in 2019 to $48 million in 2021 and was found largely in little-known labs in Novitas and FCSO regions. Last year, both Novitas and FCSO released billing and coding articles saying that 81411, along with other codes for cardiovascular genetic testing, are not covered. 

In Bledsoe's view, these shifts have occurred because as enforcement agencies have focused on certain testing areas and set their investigation priorities, the ability to catch fraud earlier has improved — particularly with the use of more advanced data analytics. Ultimately, the OIG is the agency setting those priorities, although it does work collaboratively with CMS, the FBI, the DOJ, and a number of other stakeholders to determine what those priorities should be, Bledsoe said. One key priority for 2023 is a focus on fraud within Medicare Advantage plans, which are harder to conduct data analysis for because of differences in claims processing systems compared to fee-for-service plans, he said. 

In a report last year, the HHS OIG found that spending on genetic testing had increased significantly and indicated that there were concerns about possible fraud. The report — which analyzed data from 2016 to 2019 from the Medicare Part B program that covers medical services including outpatient care and doctors' services — found upticks in payments made for genetic tests, the number of genetic tests performed, the number of ordering providers for those tests, and the number of laboratories that received more than $1 million per year in payments for genetic testing. 

Payments during the four years that were analyzed for genetic tests quadrupled to $1.41 billion from $351 million, and the number of tests conducted rose to 2.1 million from 627,000, the HHS OIG report found. Meantime, the number of labs that received more than $1 million per year from Medicare payments for genetic tests rose from 26 to 72. According to the report, fraud in genetic testing is "prevalent" and was exacerbated by the COVID-19 pandemic due to labs adding genetic tests onto claims for COVID-19 testing in an attempt to obtain additional reimbursement. 

A report released this week from HHS OIG further analyzed the effect of the pandemic on genetic testing increases, finding that 378 laboratories billed Medicare Part B for add-on tests at "questionably high levels" in volume, payment amount, or both. Those add-on tests, which included some genetic tests, "significantly increased the per-claim amounts that Medicare Part B paid to these labs," the report said. "These patterns of questionably high billing raise concerns that some tests may have been wasteful or potentially fraudulent," it said. The OIG has referred the labs to CMS for further review, it noted.

Outliers aren't outlaws

Not everyone is convinced about the state of Medicare genetic testing fraud today, however. While Jason Mehta, a partner at law firm Foley & Lardner who works with clients that have been accused of fraud, said that genetic testing scams are the "fraud schemes du jour" right now, "simply being an outlier doesn't make you an outlaw." High rates of billing "can't be the sole determinant" for an investigation, he said, and there are a variety of other fraud schemes that are "equally worthy of government attention." In his view, the government is "heavily scrutinizing genetic testing" and assuming many labs are missing the "good faith desire" to provide testing to Medicare beneficiaries who need it.

Although most criminal prosecutions have been "low-hanging fruit" cases that are egregious, and the government is "right to focus on these," Mehta said those situations are "not reflective of the industry" overall. The emphasis on genetic testing fraud can have a "chilling effect on others in the industry," he noted.

Natalie Adams, a fellow partner at Foley & Lardner, said that the speed with which genetic testing has evolved has caused confusion for many laboratories she works with. It's "not always clear what the rules are in emerging fields," she said, and "later, when the government tries to enforce these rules, it can be frustrating." 

As for the regional differences in claims utilization, Mehta said that it "makes sense" for labs to seek out where the highest profit is, so he's not surprised more labs are shipping tests to Novitas and FCSO regions. He said he's also not surprised the government may view that as suspect, but he said he's "not 1,000 percent sure that's correct." 

"I think the fact that certain tests stand out as high reimbursement tests would certainly elicit the attention of the government, and I certainly can appreciate why the government would focus on regions of the country and MACs where higher payments were being disbursed," he said. But "simply receiving reimbursement is not illegal." 

Adams agreed, adding that while it makes sense for the government to start its fraud investigations by looking at locations where there is the most spending, it "can't conflate profit with fraud" and shouldn't outlaw profitability. 

Government investigations can have a negative impact on labs, regardless of whether they're convicted of a crime, she added. "Payment suspension can result in bankruptcy," Adams said, and investigations are "disruptive" to a lab's business. 

Mehta, who formerly worked as a prosecutor with the DOJ, noted that since this wave of enforcement for healthcare fraud began around 2019, the level of sophistication has increased — early indictments were "more blunt, and black and white," but now the government is not focused solely on numbers and, instead, looks at different testing arrangements, screening utility, and the efficacy of a test. As the government has prioritized healthcare fraud enforcement, more clients have reached out to Mehta and his colleagues for guidance on the front end before being tapped for an investigation or audit, he said. However, the "vast majority" of the time, people specifically seek them out if there's already a problem, Mehta added.

His and Adams' hope is that the government "finds ways to help labs on the front end" and inform people of the rules before there's an issue, Adams said. "It'd be a shame if we focused on back-end enforcement to the detriment of innovation." 

Elizabeth Sullivan, a lawyer at McDonald Hopkins and chair of the firm's healthcare practice group, echoed many of Mehta's and Adams' sentiments, saying that the government is "wary of fraud everywhere in genetic testing." 

Her colleague Richard Blake, also a lawyer at the firm who chairs its government compliance, investigations, and white collar defense practice group, said that the government is "making an assumption that there is a massive amount of fraud" occurring, but that he questions that view. "There are no doubt instances of fraud, but it's nowhere near what the government is making it out to be." The emphasis the government has placed on genetic testing fraud is not cutting down on fraud but is instead "keeping labs from doing what is right," he said. Those labs are "afraid some bureaucrat will come in" and stop them from performing certain tests or take them to court. In addition, fighting fraud allegations is expensive, which is why there are so many settlements in these cases, Blake said. 

Sullivan and Blake both said that they don't see a strong connection between fraud cases the government chooses to go after and certain MACs, noting that it appears to be dependent on the US attorney's offices and the relationships they have with the enforcement task force. Blake said that he's "not sure it's just the MAC, but also local HHS and FBI offices" who determine which cases get pursued. 

MACs are allowed by Congress — via a section in the Social Security Act — to make local coverage determinations, and according to a spokesperson for CMS, MACs' distinct authorities under the statute may lead to some degree of variability in coverage decisions. That variability can be due to many different reasons, including incomplete scientific evidence, variable local market penetration of different technologies, or variations in the local prevalence of a disease, the spokesperson said. 

MAC policies are developed with open forums, comment periods, and other mechanisms to get input from stakeholders, and MACs are expected to be responsive to public comment and their advisory committees, the spokesperson noted. 

MAC contracts are also re-competed about every seven years, and the spokesperson said that CMS has re-competed MAC contracts before the term is up due to poor performance. 

In Mehta's view, the variations in coverage decisions across different MACs are a good thing, since local coverage determinations handed down by the MACs "reflect the unique characteristics" of the populations in those states. But as telehealth continues to grow and geography doesn't dictate where a service is rendered, that is "where the MACs break down a little bit," he said. 

On the MACs end, the changes enacted by Novitas and FCSO regarding tier two and cardiovascular genetic testing codes could have a significant impact on genetic testing spending and fraud, reimbursement expert Quinn said. He believes that the recent policies could cut down on "a huge amount" of fraudulent spending, but the changes are coming late in the game. 

"2022 may finally look better, but these are things that could have been done in 15 days in the summer of 2019," he said.

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