Medical laboratory leaders must take steps to protect their lab’s financial stability and know how to prepare and respond to investigations and regulatory threats

Clinical laboratories and anatomic pathology groups may soon face a new normal that includes more frequent and tougher audits by both private payers and the government, resulting in larger monetary demands. The financial strain medical laboratories will experience from more aggressive audits will be compounded by the roll out on January 1, 2018, of new Medicare Part B price cuts.

Attorney Richard S. Cooper, Co-chair, National Healthcare Practice Group, McDonald Hopkins, LLC, in Cleveland, says audit activity has been “ramping up” during the past 18 months, but has accelerated in recent months.

“We are seeing a dramatic increase in the number of audits and the dollar amount the payers are trying to recoup as a result of those audits,” Cooper said in an interview with Dark Daily, noting monetary demands can reach “seven to eight” figures.

“We’re seeing that with both government payers as well as commercial payers and we’re seeing much more aggressive audit tactics being utilized than we have in the past.”

Payers Put Clinical Laboratories Under Increased Scrutiny

While toxicology/pharmacogenomics and molecular/genetic testing laboratories frequently are the targets of the increased scrutiny, Cooper says no medical laboratory is immune from questioning. The “medical necessity” of providing and billing for diagnostic tests or services, and laboratory waivers of “patient responsibility” for copays and deductibles, are the two most common compliance issues being cited, states Cooper, who points to Cigna, UnitedHealthcare and Blue Cross Blue Shield as among the most active commercial payers his firm encounters.

“There are large dollars at stake and they are going after those dollars,” Cooper explains.

In this new environment, Cooper maintains medical directors and lab executives must:

  1. Protect the lab’s financial stability in 2018 by considering operational changes and taking other steps to prepare for revenue losses due to PAMA (Protecting Access to Medicare Act).
  2. Get educated about practices that can trigger audits by commercial payers, or state and federal regulators, and consider conducting self-audits using an independent third-party.
  3. Know how to respond if a lab is charged with proficiency test violations, which can result in significant penalties from Centers for Medicaid and Medicare Services (CMS), such as loss of a lab’s CLIA license and revocation of the medical director’s license to operate a medical laboratory for two years.
  4. Expect scrutiny of “piggyback” arrangements with toxicology labs that could raise compliance concerns and violate commercial payer contracts. A “piggyback” arrangement is where a lab bills under the payer contract of another provider because it is unable to contract with the payer directly. This often involves “piggybacking” on lab or hospital (usually Critical Access Hospital) contracts. In many cases, the billing entity does not perform the lab services for which they are billing. The services are instead performed by the non-participating lab, and the billing provider pays most of the collections back to the non-billing laboratory, retaining a fee for using the contracts. There may not be disclosure to the payers about which entity actually performed the test.

Navigating Tougher Clinical Laboratory Laws and Regulations

To help medical laboratory and pathology group leaders prepare for the perils they face, and take proactive steps to navigate the tough lab regulations and legal issues that lay ahead, click here to register for Dark Daily’s upcoming webinar “Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing  Violations, and More,” (or place this link into your browser:

Attorney Richard S. Cooper, Co-chair, National Healthcare Practice Group, McDonald Hopkins LLC, in Cleveland will be a featured speaker and moderator during a new Dark Daily webinar on the Medicare Part B price cuts, and the critical legal and compliance issues clinical laboratories and pathology groups face starting in 2018. (Photo copyright: McDonald Hopkins LLC.)

This crucial learning event takes place on Wednesday, November 8, 2017, at 1 p.m. EST.

Cooper, who will moderate the webinar, will be joined by David W. Gee, JD, a Partner at Davis Wright Tremaine LLP in Seattle, and Jeffrey J. Sherrin, JD, President and Partner, O’Connell and Aronowitz in Albany, New York.

These three attorneys are among the nation’s foremost experts in issues unique to clinical laboratories, pathology groups, hospital labs, toxicology/pharmacogenomics labs, and molecular/genetic testing labs. Following our speakers’ presentations, there will be a question and answer period, during which you can submit your own specific questions to our experts.

You can’t afford to miss this opportunity. Click here to get up to speed on the most serious regulatory, compliance, and managed care contracting issues confronting all labs today. This webinar will provide solutions to the perils facing labs now and in 2018 by helping you map a proactive and effective course of action for your clinical lab or pathology group.

—Andrea Downing Peck

Related Information:

Tougher Lab Regulations and New Legal Issues in 2018: More Frequent Payer Audits, Problems with Contract Sales Reps, Increased Liability for CLIA Lab Directors, Proficiency Testing Violations, and More

What Every Lab Needs to Know about the Medicare Part B Clinical Laboratory Price Cuts That Take Effect in Just 157 Days, on Jan. 1, 2018

Nation’s Most Vulnerable Clinical Laboratories Fear Financial Failure If Medicare Officials Cut Part B Lab Fees Using PAMA Market Price Data Final Rule