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Clinical Laboratory Owner Receives 15-Year Federal Prison Sentence, Hefty Fine as DOJ Hits Hard on Healthcare Fraud Cases

US Department of Justice sends a strong message that it will continue to root out fraud involving clinical laboratory owners and operators

Arkansas clinical laboratory owner/operator Billy Joe Taylor has been sentenced to 15 years in federal prison and ordered to pay nearly $30 million in restitution, according to a June 8 press release from the US Attorney’s Office for the Western District of Arkansas.

Taylor pleaded guilty in October of 2022 to conspiracy to commit fraud and money laundering. He and his accomplices submitted $134 million in false or fraudulent claims to Medicare before and during the COVID-19 pandemic.

The claims came from five laboratory companies owned and operated by Taylor and his co-conspirators. All claims centered around respiratory illness tests or urine drug tests that were either not medically necessary or not ordered by medical providers, the DOJ’s press release states.

Taylor’s 15-year sentence in federal prison and huge restitution reinforces the fact that the federal Department of Justice (DOJ) will indict—and convict—owners and managers of clinical laboratory companies accused of healthcare fraud.

Billy Joe Taylor, owner/operator of five clinical laboratories in four states, was sentenced in June to 15 years in prison and ordered to repay nearly $30 million in fraudulent test claims made to Medicare prior to and during the COVID-19 pandemic. This conviction is part of an ongoing campaign against healthcare fraud being conducted by the US Department of Justice. (Photo copyright: Arkansas Democrat-Gazette.)

Details of Taylor Fraud Case

Taylor allegedly obtained private personal and medical data from Medicare beneficiaries and then used that information to submit and resubmit claims to Medicare for diagnostic tests. More than $38 million was received from Medicare on those fraudulent claims, the DOJ noted.

According to an October 2022 DOJ press release, the labs involved in the case included:

In 2021, Taylor claimed innocence and told Arkansas Business that the accusations were “sensationalism-type claims from the government that were completely erroneous and false.”

As a young man, Taylor planned to go into the clinical laboratory field when he was still in high school. He got started by volunteering at his hometown hospital in Stigler, Oklahoma, the Free Library reported. Eventually hired by the hospital to draw blood, run tests, and keep quality control and inspection data, Taylor later moved to other hospitals before partnering in 2009 to start Advanced Laboratory Services (ALS) of Oklahoma City, Oklahoma.

A pulmonary embolism and stroke forced Taylor to sell his share in ALS, and not long after returning as a consultant, his business partner sold the lab company. Taylor joined two people from a Tulsa laboratory to start a new company, acquiring Medtest Laboratories LLC of Hurricane, West Virginia, and Vitas laboratory LLC in 2017. He hoped to compete with national laboratories, earning up to $2 million per month, the Free Library reported.  

Other Clinical Laboratory Testing Fraud Schemes

The DOJ’s aggressive efforts to crack down on healthcare fraud over the past years have produced multiple court cases against clinical laboratory owners, managers, and the doctors who conspire with them. Dark Daily has covered such fraud cases in numerous ebriefings over the years.

In “Southern California Physician and Clinical Laboratory Owners Charged in Federal Crackdown on Pandemic-Related Billing Fraud,” we reported on federal charges that had been brought against a number of physicians and clinical laboratory owners in what the DOJ described as the “largest ever” coordinated nationwide law enforcement effort against COVID-19 pandemic-related healthcare fraud.

Also, in “California Clinical Laboratory Owners among 21 Defendants Indicted or Criminally Charged for COVID-19 Test Fraud and Other Schemes Totaling $214 Million,” we covered how the DOJ had charged the owners of a California clinical laboratory—as well as 19 other defendants—for their roles in fraudulent billing, kickbacks, and money laundering schemes to defraud Medicare of more than $214 million.

And in “Department of Justice Recovers $1.8B from Medical Laboratory Owners and Others Accused of Alleged Healthcare Fraud During COVID-19 Pandemic,” we reported that DOJ had recovered billions of dollars as a result of federal investigations into alleged healthcare fraud by clinical laboratories and other organizations during fiscal year 2020.

DOJ’s Healthcare Fraud Unit

In 2021, the DOJ’s Healthcare Fraud Unit brought “criminal charges against 14 defendants, including 11 newly-charged defendants and three who were charged in superseding indictments, in seven federal districts across the United States for their alleged participation in various healthcare fraud schemes that exploited the COVID-19 pandemic and resulted in over $143 million in false billings,” a DOJ press release announced.

In a statement to the press, Deputy Attorney General Lisa O. Monaco said, “The multiple healthcare fraud schemes charged today describe theft from American taxpayers through the exploitation of the national emergency … These medical professionals, corporate executives, and others allegedly took advantage of the COVID-19 pandemic to line their own pockets instead of providing needed healthcare services during this unprecedented time in our country.

“We are committed to protecting the American people and the critical healthcare benefits programs created to assist them during this national emergency, and we are determined to hold those who exploit such programs accountable to the fullest extent of the law,” she added.

Monaco’s statement emphasizes the DOJ’s expanding focus on healthcare fraud. The DOJ formed the Health Care Fraud Strike Force in 2007 to handle cases like Taylor’s. The program is composed of 15 teams operating out of 25 federal districts. During the 15 plus years the Strike Force has been active, the DOJ has charged more than 5,000 defendants who collectively billed over $24 billion to both private insurers and federal healthcare programs.

Therefore, it behooves clinical laboratory managers to ensure all lab operations are well-within the bounds of legality. The DOJ is taking its hunt for healthcare fraudsters quite seriously.

—Kristin Althea O’Connor

Related Information:

Lavaca Man Sentenced in $134 Million COVID-19 Health Care Fraud and Money Laundering Scheme

Lavaca Man Sentenced to 15 Years in Prison, Ordered to Pay More than $29.8 Million in Medicare Fraud Case

Lavaca Man Gets July 19 Sentencing Date in Federal Healthcare Fraud, Money Laundering Case

Lab Owner Fights His Insurer, and Now a Federal Fraud Case: Lavaca Man Denies Fraud in Health System, Accusing US of ‘Sensationalism’

Lavaca Man Pleads Guilty of Conspiracy to Commit Healthcare Fraud and Money Laundering

Lavaca Man Pleads Guilty to Stealing Millions in Medicare Fraud

DOJ Announces Coordinated Law Enforcement Action to Combat Healthcare Fraud Related to COVID-19

Federal Trial for Lavaca Man Facing Healthcare Fraud Charges Moved to Next Year

Southern California Physician and Clinical Laboratory Owners Charged in Federal Crackdown on Pandemic-Related Billing Fraud

California Clinical Laboratory Owners among 21 Defendants Indicted or Criminally Charged for COVID-19 Test Fraud and Other Schemes Totaling $214 Million

Department of Justice Recovers $1.8B from Medical Laboratory Owners and Others Accused of Alleged Healthcare Fraud During COVID-19 Pandemic

Continued Cyberattacks on Hospitals, Clinical Laboratories, and Other Providers Cause Closures as Hackers Grow in Sophistication

Cybersecurity experts recommend clinical laboratories have in place a plan for performing tests and distributing results prior to a cyberattack

Hospitals of all sizes continue to be prime targets for sophisticated cyberattacks, where hackers remotely disable a healthcare network’s computer systems—including its laboratory information system—and extort ransomware payments. Similar attacks are happening to clinical laboratories and other providers, although not with the same frequency.

Recently, hospitals in Illinois, Idaho, Vermont, Indiana, and other states had their ability to treat patients severely reduced and, in some cases, completely shut down by cybercriminals, endangering lives and costing millions of dollars in damages.

Today’s hospitals rely on information technology (IT) for patient care workflow, internal/external communication, billing, and medical laboratory testing. It’s this reliance on computer/internet technology combined with the vast quantities of protected health information (PHI), that makes hospitals such ripe targets for attack.  

In June, a US cancer center had to take its digital services offline which “significantly reduced patient treatment capability” following a ransomware attack by a group of hackers known as the TimisoaraHackerTeam (THT), MedCity News reported.

“Patients don’t stop getting sick just because a hospital is hit by a ransomware attack,” Christian Dameff, MD, emergency physician at UC San Diego Health and lead author of a study that looked into how cyberattacks affect other hospitals in the area, told ABC News. “They have to go somewhere. So, what this research shows is that those patients go to neighboring hospitals that can be overwhelmed.” Clinical laboratories can also become overwhelmed with test orders when nearby hospitals lose their ability to distribute the results of critical lab tests. (Photo copyright: UC San Diego Health.)

In its “Healthcare and Public Health Sector Cybersecurity Notification” on the event, the federal Division of Critical Infrastructure Protection (CIP) wrote, “Little is known about the obscure group of hackers, but when its ransomware is deployed, their rarely used and very effective technique of encrypting data in a target environment has paralyzed the health and public health (HPH) sector.”

The CIP operates within the US Department of Health and Human Services’ (HHS) Office of the Administration for Strategic Preparedness and Response (ASPR) and Health Sector Cybersecurity Coordination Center (HC3).

Here is a list of other cyberattacks on healthcare providers and the consequences of these crimes.

Recent Cyberattacks Close Hospitals, Disrupt Clinical Laboratory Testing

The 44-bed St. Margaret’s Hospital in Spring Valley, Illinois, was forced to close its doors in June due in part to a 2021 ransomware attack, NBC News reported. 

“The attack halted the hospital’s ability to submit claims to insurers, Medicare or Medicaid for months, sending it into a financial spiral,” Linda Burt, RN, Vice President of Quality and Community Services at St. Margaret’s, told NBC News. “We were down a minimum of 14 weeks. And then you’re trying to recover. Nothing went out. No claims. Nothing got entered. So, it took months and months and months.”

Meabwhile, 88-bed Idaho Falls Community Hospital experienced a cyberattack in May that required it to divert ambulances to other hospitals for 24 hours, CNN reported. The provider’s sister healthcare facility, MountainView Hospital in Las Vegas, which shares the same computer system, was also affected.

The Idaho Falls attack “forced nurses and doctors … to use pen and paper rather than computers for patient charts,” a hospital spokesperson told CNN.

At the University of Vermont Medical Center (UVM), Burlington, Vermont, a ransomware attack affected healthcare services for 28 days, costing the provider $50 million to recover, and preventing healthcare workers from accessing critical treatment plans for cancer patients, ABC News reported.

UVM’s President and Chief Operating Officer, Stephen Leffler, MD, an emergency medicine physician, told ABC News that the 2020 cyberattack significantly disrupted clinical laboratory operations at UVM.

“When the laboratory had a critical lab result on someone, they couldn’t put it in the electronic medical record,” he explained. “They couldn’t call the floor. And so, we literally had our administrators start going in the lab, standing there and running a paper result to the floors.

“Everything that we do and rely on was down,” he added. “We actually sent some staff to Best Buy to buy Walkie Talkies!

“It can happen to you—even when you think it’s impossible,” Leffler warned.

And at Johnson Memorial Health, Franklin, Indiana, clinical laboratory tests took two hours to perform instead of 30 minutes, NPR said in its report on cyberattacks affecting Indiana providers. The lab had to use “runners” to share handwritten test results with caregivers and patients, NPR explained. 

“You ask many CEOs across the country, ‘What keeps you up at night?’ Of course, they talk about workforce, financial pressures, and they say, ‘the possibility of a cyberattack,” John Riggi, National Advisor for Cybersecurity and Risk at the American Hospital Association (AHA), told NPR.

Cyberattacks Affect Surrounding Hospitals

To make matters worse, cyberattacks have a “blast radius” that impacts the healthcare community around an attacked provider, Christian Dameff, MD, Assistant Professor, Emergency Medical Services, University of California, San Diego, told ABC News. Dameff was lead author in a study that looked at how healthcare providers nearby to an attacked provider are affected.

“Hospitals adjacent to healthcare delivery organizations affected by ransomware attacks may see increases in patient census and may experience resource constraints affecting time-sensitive care for conditions such as acute stroke,” Dameff and co-authors wrote in a JAMA Open Network article titled, “Ransomware Attack Associated with Disruptions at Adjacent Emergency Departments in the US.”

“Healthcare cyberattacks such as ransomware are associated with greater disruptions to regional hospitals and should be treated as disasters,” they wrote.

Vigilance Is Required as Cyberattacks Increase

Ransomware attacks on hospitals climbed from 43 to 91 annually during the years 2016 to 2021, a separate study in JAMA Health Forum reported, adding that large organizations with multiple facilities were increasingly targeted.

The US experienced a 57% increase in cyberattacks in 2022 compared to 2021, according to a Check Point Research (CPR) report. Healthcare ranked second on the list of attacked industries due, according to Check Point, to the quantity and availability of personal and sensitive information, such as social security numbers and medical data.

“We expect the increase in cyber activity to only increase. With AI [artificial intelligence] technologies such as ChatGPT readily available, it is possible for hackers to generate malicious code and emails at a faster, more automated pace,” the CPR report noted.

For its part, the AHA said in a statement it plans to:

  • Make available cybersecurity services to members.
  • Work with federal agencies to mitigate cyber threats.
  • Advocate for increased government cybersecurity assistance.

Hospital clinical laboratory leaders need to be vigilant and work with colleagues to prevent cyberattacks. Check Point’s report advises, for example, avoiding malicious links and unexpected electronic attachments as well as verifying software is legitimate before downloading it. These are standard warnings, but they only work if staff members actually heed these actions.

Also important for diagnostics professionals is having a plan for performing clinical laboratory and anatomic pathology tests and distributing the results in the event of an attack.    

—Donna Marie Pocius

Related Information:

An Illinois Hospital Is the First Health Care Facility to Link Its Closing to a Ransomware Attack

Feds Warn Healthcare Providers about “Obscure” Ransomware Gang

Healthcare and Public Health Sector Cybersecurity Notification

TimisoaraHackerTeam Ransomware Attacks US Cancer Center

St. Margaret’s Health—Spring Valley Breached by Cyber Security Attack

Cyberattack Forces Idaho Hospital to Send Ambulances Elsewhere

Cyberattacks Are Growing Threats to Patient Safety, Experts Say

Cyberattacks on Healthcare Are Increasing: Inside One Hospital’s Fight to Recover

Ransomware Attack Associated with Disruptions at Adjacent Emergency Departments in the US

Trends in Ransomware Attacks on US Hospitals, Clinics, and Other Healthcare Delivery Organizations, 2016-2021

Check Point Research Reports a 38% Increase in 2022 Global Cyberattacks

Keeping Hospitals and Patients Safe against Cyberattacks

Health Care Cost Institute: Employers in Seven States Pay Up to 6X More for Hospital Lab Tests as Compared to Same Tests in Doctor Offices and Independent Labs

New report notes that variations in price for common clinical laboratory tests should not exist ‘regardless of clinical setting’ and yet they do

Hospital laboratory leaders may soon observe employers—especially those in seven particular states—shopping around a bit more when it comes to insurance coverage of clinical laboratory tests for their employees. That’s because a recent study by the Health Care Cost Institute (HCCI ) found that employer-sponsored insurance pays three to six times more for lab tests performed by hospital outpatient labs compared to lab tests done by physician offices and independent clinical laboratories.

In an issue brief it developed in conjunction with West Health, the HCCI revealed that standard clinical laboratory tests cost as much as six times more when performed through hospital outpatient lab outreach programs rather than physician offices in Colorado, Indiana, Nevada, New Mexico, North Carolina, Texas, and West Virginia.

“Among individuals with employer-sponsored insurance, we observe substantially higher prices paid for common lab tests when these tests were billed by hospital outpatient departments (including on- and off-campus locations) compared to when they were performed in physician offices and independent labs,” the report authors wrote.

HCCI is a Washington, DC-based non-profit research institute focused on issues impacting the US healthcare system. West Health, in Washington, DC, and San Diego, is a nonprofit group that works to lower healthcare costs for seniors.

“By their very nature, [clinical laboratory] tests are standardized to be the same regardless of clinical settings, yet our research finds that hospital outpatient departments are typically billing private insurance three times more for the same lab test compared to physician offices and independent laboratories,” wrote Cristina Boccuti, MA, MPP, Director of Health Policy at Health West in the HCCI report. (Photo copyright: West Health.)

Price Markups Vary by Clinical Laboratory Test Type

In their HCCI issue brief, Cristina Boccuti, MA, MPP, Director of Health Policy at Health West; Senior Researcher and doctoral candidate Jessica Chang; and Aditi P. Sen, PhD, Director of Research and Policy at Health Care Cost Institute, wrote, “In this brief, we compare prices (as determined by total payments on claims) for clinical lab tests between hospital outpatient departments (25% of tests in our study) and physician offices and independent labs (75% of tests in our study) among individuals with employer-based health insurance.

“This analysis,” they added, “uses HCCI’s unique commercial claims dataset, which contains claims for 55 million Americans annually. In addition to analysis of individual clinical lab tests, we also examined variation across five broader categories following previously established methods relying on [Current] Procedural Terminology (CPT) codes.”

Those five test categories and percentage of samples studied included:

  • Clinical Chemistry (54%)
  • Microbiology (24%)
  • Complete blood count (10%)
  • Urine (9%)
  • Toxicology (4%)

Price markups (a calculated ratio based on each setting’s median price) varied by type of medical laboratory test and were usually three to five times higher in a hospital outpatient setting as compared to the physician office or independent clinical lab site. Some urine tests were more than seven times higher.

“Variation should not exist among clinical lab tests,” the HCCI authors wrote. “Analysis of most non-emergent clinical lab tests on a specimen, such as a blood test or urine sample, is identical regardless of factors such as where the test is performed or patient risk.”

The most frequently ordered lab tests with the highest markup included:

  • Urinalysis (automated with microscopy): $2.72 office/independent lab; $21.39 hospital outpatient (more than seven times price markup).
  • Comprehensive metabolic panel: $8.85 office/independent lab; $47.13 hospital outpatient (more than five times markup).
  • General health panel: $22.97 office/independent lab; $127.97 hospital outpatient (more than five times markup).
  • Basic metabolic panel: $7.75 office/independent lab; $38.44 hospital outpatient, (five times markup).

“Under commercial insurance, some hospital outpatient departments are being paid over $200 for a metabolic panel, which has a medical office-based price of (about) $9,” the HCCI report noted.

Medical Laboratory Test Prices All Over the Map

When HCCI explored clinical laboratory test pricing throughout the US, the researchers found price markups in hospital outpatient settings ranging two to six times higher than the same lab tests performed in offices and independent labs. States with low markups were North Dakota, Arkansas, and Minnesota.

Markups varied within states as well. The HCCI analysts shared an example of lipid profile testing in Pennsylvania, where the average price difference between hospital outpatient and physician offices ranged from $34 in Philadelphia to just $17 in Pittsburgh.

Big Differences in Microbiology, Toxicology Lab Test Prices

As to clinical laboratory testing categories, the report found the greatest price markups were in blood count and urine testing. The biggest median price differences—more than $30 per test—was observed in microbiology and toxicology:

  • Blood count: $6.34 in office/independent lab versus $29.61 in hospital outpatient setting.
  • Urine: $4.33 office/independent lab versus $24.39 hospital outpatient.
  • Microbiology: $16.50 office/independent lab versus $47.80 hospital outpatient.
  • Toxicology: $12.15 office/independent lab versus $43.65 hospital outpatient.

While individual lab test prices may seem low, the overall investment is huge in the context of 232 million lab tests, and spending is increasing. Nearly $7 billion was spent on medical laboratory tests in 2019, as compared to $5.8 billion on 155 billion tests in 2012, HCCI data shows.  

Calls for Price Transparency, Payment Integrity

Meanwhile, an analysis of paid claims by Avalon Healthcare Solutions in Tampa, Florida, explained that hospital outpatient labs are paid on average 300% to 400% of Medicare’s Clinical Laboratory Fee Schedule (CLFS).

Bill Kerr, MD, co-founder and CEO at Avalon, noted in an article he penned for MedCity News that a hospital outpatient laboratory may receive $100 for a routine test, while a non-hospital lab will get on average $20 for the same test on the same instrument.

“Hospitals frequently argue that they need to charge more to support their specialty test innovation and development. That doesn’t hold true for routine testing though,” he wrote.

Kerr pointed out that physicians could order tests as part of incentives to use hospital-affiliated labs. “Plus,” he wrote, “payers are often hesitant to educate their members about lower-cost lab testing options because of various provisions in their contracts with hospitals.”

What could help, he added, are lab testing price transparency and “payment integrity programs,” that have science “at the core” and aim to flag unneeded and as well as needed tests, especially in oncology. 

HCCI Advises Site Neutral Payment, Negotiation

HCCI also made recommendations in its report. They include:

  • Policymakers for states with the high hospital outpatient setting markups “should use site-neutral payment policies for insurance plans regulated at the state level.”
  • In negotiations, health insurers and self-insured employers can aim to limit site-based payment differentials for their enrollees and employees.

For hospital clinical laboratory leaders, the HCCI is calling attention to an issue that may eventually restrict the ability of hospitals to bill outpatient lab tests using inpatient pricing. 

—Donna Marie Pocius

Related Information:

Price Markups for Clinical Labs: Employer-based Insurance Pays Hospital Outpatient Departments 3X More Physician Offices and Independent Labs for Identical Tests

Power Your Analytics with HCCI’s Leading Medical and Pharmacy Claims Dataset

Lab Testing Transparency Will Improve Patient Care and Lower Costs

Providers and Legislators Seek Changes in Rules Implementing No Surprises Act and How Physicians, Labs, and Other Providers Can Bill Patients

Provider groups and members of Congress say the rules favor payers, federal judge agrees, but path forward in how providers bill patients remains unclear

Groups representing healthcare providers—including pathologists—are challenging the Biden administration’s implementation of the No Surprises Act, a bill passed in 2020 that aims to protect patients from surprise medical bills.

This will be of particular interest to pathologists who—as a study from the Health Care Cost Institute (HCCI) found—were second only to emergency room physicians among providers with the highest percentage of out-of-network billing.

Dark Daily’s sister publication The Dark Report covered the HCCI study and its findings in “Federal Rule to Revise Out-Of-Network Billing.”

The College of American Pathologists (CAP) and American Society for Clinical Pathology (ASCP), both of which supported the No Surprises Act, are now among numerous provider groups claiming that the bill’s rules for resolving payment disputes unfairly favor payers.

These groups have bipartisan support in Congress, Bloomberg Law reported, noting that some legislators are urging Health and Human Services (HHS) Secretary Xavier Becerra to change the rules. The lawmakers may seek to amend the law or turn to the courts if Becerra does not follow through on their requests.

“Either we legislate, we go to court, whatever it takes,” Rep. Brad Wenstrup (R-Ohio) told Bloomberg. Meanwhile, a federal district court judge has sided with the Texas Medical Association (TMA) in two lawsuits over the rules, Healthcare Dive reported.

“We need to make sure that the administration is implementing what we passed consistent with the legislative intent,” Sen. Michael Bennet (D-Colorado) told Bloomberg Law regarding the No Surprises Act. “We had a very complicated coalition of people to come together to support this legislation.” (Photo copyright: Senate.gov.)

Details of No Surprises Act

The No Surprises Act aims to protect patients from “balance billing,” in which they receive surprise bills for out-of-network medical services even when they use in-network providers. The bill was signed into law in December 2020, with most provisions taking effect on Jan. 1, 2022.

As Dark Daily reported in “ASCP and CAP Support New Legislation That Bars Surprise Medical Billing,” following passage of the bill, patients who unknowingly receive services from out-of-network providers are liable only for costs they would have incurred for in-network care. Providers and payers then have 30 days to negotiate a payment. If they can’t agree, an arbiter determines the payment as part of a federal independent dispute resolution (IDR) process.

Passage of the bill required the federal Department of Health and Human Services (HHS), Department of Treasury, and Department of Labor to craft regulations and guidance to implement the law—including the IDR process—according to the American Hospital Association (AHA).

Legal Pushback to Arbitration Rule

One contention was an interim rule that instructed arbiters to use the “qualifying payment amount” (QPA) as the primary basis for ruling in favor of either insurers or providers in payment disputes.

Writing in MedPage Today, pediatric radiologist Richard Heller, MD, National Subspecialty Lead for Pediatric Radiology at Radiology Partners in Chicago, and Radiological Society of North America (RSNA) Board Liaison for Public Information and Corporate Relations, described the QPA as “the insurer’s median in-network rate.”

Heller wrote that “the calculation methodology does not result in real world, market-based rates. Further, insurers calculate their own QPA, and may do so in a non-transparent fashion, raising questions about QPA integrity.”

He added, “The departments have repeatedly tried to establish the QPA as the primary factor arbiters should use in their decision making. These attempts have twice been rejected by a federal court. Recent guidance issued by the administration as a result of the second Texas Medical Association lawsuit more closely reflects the balance that Congress intended.”

In its first lawsuit, the TMA characterized the QPA as “an opaque and flawed insurer-calculated amount” that would result in reduced payments to providers. The lawsuit claimed that Congress, instead, intended for the dispute resolution process to look at “a range of factors.”

Federal Judge Jeremy Kernodle ruled in the TMA’s favor and ordered HHS to change the rule. He also sided with the TMA in another lawsuit, which alleged that a final rule issued in August 2022, while “formally abandoning the QPA rebuttable presumption,” unduly restricted use of non-QPA factors, according to a litigation update for certified IDR entities from Sidley Austin LLP.

The final rule “nevertheless continues to place a thumb on the scale for the QPA by requiring arbitrators to begin with the QPA and then imposing restrictions on the non-QPA factors that appear nowhere in the statute,” the judge stated in his ruling, the American Medical Association (AMA) reported.

In its latest lawsuit, the TMA is challenging a big hike in administrative fees for dispute resolution, which went from $50 initially to $350 beginning last January.

Another issue with the law has been the sheer volume of arbitration cases. The administration originally estimated that payers and providers would submit about 17,000 claims per year, but between April 15 and Sept. 30, 2022, about 90,000 disputes were initiated, according to a government report cited by RevCycleIntelligence.

The No Surprises Act reflected lawmaker compromises about arbitration, Sen. Michael Bennet (D-Colorado) told Bloomberg Law. Bennet indicated to the news outlet that he is not happy with the current arbitration process.

Pathology Groups Weigh In

The CAP and ASCP joined other physician organizations in raising early objections to the Biden Administration’s plans to implement the independent dispute process.

“The skewed IDR process outlined within the IFC [Interim Final Rule with Comment Period] will remove a critical incentive for insurers to negotiate reasonable contracts with physicians by establishing the QPA as a reasonable out-of-network payment,” the ASCP stated in a Dec. 6, 2021, letter to administration officials.

On Dec. 23, 2021, the CAP filed an amicus brief in a lawsuit brought by the AMA and AHA challenging an interim rule issued that September. The regulations “must support an equitable and balanced system for resolving out-of-network payment disputes,” said CAP President Emily Volk, MD, FCAP in a statement accompanying the filing. “As of today, the rules heavily favor the insurers when their power is already too great.”

The AMA and AHA later withdrew the lawsuit after the Biden administration revised the rule, Healthcare Finance News reported. However, the groups still contend that the rule favors payers.

High Stakes for Pathologists

When the law passed Congress, it appeared likely it would have a disproportionate impact on medical laboratories and pathology groups. The HCCI report ranked pathology number two among six specialties responsible for the highest percentage of out-of-network bills. And when the interim final rule was published in the Federal Register, the HCCI data was cited in an accompanying commentary.

However, the CAP told The Dark Report that the statistics about pathologists, though accurate, were “presented in a somewhat misleading manner.”

The No Surprises Act does permit balance billing when patients have given prior consent, but pathologists were among a group of specialties barred entirely from the practice, Dark Daily previously reported.

—Stephen Beale

Related Information:

Surprise Medical Bill Disputes Spur Lawmakers to Seek Changes

The Six Provider Lawsuits Over the No Surprises Act: Latest Developments

HCCI: How Often Do Providers Bill Out of Network?

HHS and Federal Departments Issue Final Rules to Clarify No Surprises Act Dispute Resolution

Biden Administration Should Revise No Surprises Act Rules, Says ASCP

Judge Removes Disputed Element of No Surprises Act

Executive War College Headliners Connect Genetic Testing, Wearable Technology, Precision Medicine, and Struggle Over Claim Reimbursement between Clinical Labs and Payers

Keynote speakers advise clinical laboratory leaders to leverage diagnostic data that feeds precision therapies

At this week’s Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management in New Orleans, keynote presenters dissected ways that clinical laboratory leaders and anatomic pathologists can contribute to innovative treatment approaches, including wearable technology and precision medicine.

The speakers also noted that labs must learn to work collaboratively with payers—perhaps through health information technology (HIT)—to establish best practices that improve reimbursements on claims for novel genetic tests.

Harnessing the ever-increasing volume of diagnostic data that genetic testing produces should be a high priority for labs, said William Morice II, MD, PhD, CEO and President of Mayo Clinic Laboratories.

“There will be an increased focus on getting information within the laboratory … for areas such as genomics and proteomics,” Morice told the keynote audience at the Executive War College on Wednesday.

William Morice II, MD, PhD

“Wearable technology data is analyzed using machine learning. Clinical laboratories must participate in analyzing that spectrum of diagnostics,” said William Morice II, MD, PhD (above), CEO and President of Mayo Clinic Laboratories. Morice spoke during this week’s Executive War College.

Precision Medicine Efforts Include Genetic Testing and Wearable Devices

For laboratories new to genetic testing that want to move it in-house, Morice outlined effective first steps to take, including the following:

  • Determine and then analyze the volume of genetic testing that a lab is sending out.
  • Research and evaluate genetic sequencing platforms that are on the market, with an eye towards affordable cloud-based options.
  • Build a business case to conduct genetic tests in-house that focuses on the long-term value to patients and how that could also improve revenue.

Morice suggested that neuroimmunology is a reasonable place to start with genetic testing. Mayo Clinic Laboratories found early success with tests in this area because autoimmune disorders are rising among patients.

A related area for clinical laboratories and pathology practices to explore is their role in how clinicians treat patients using wearable technology.

For example, according to Morice, Mayo Clinic has monitored 20,000 cardiac patients with wearable devices. The data from the wearable devices—which includes diagnostic information—is analyzed using machine learning, a subset of artificial intelligence.

In one study published in Scientific Reports, scientists from Mayo’s Departments of Neurology and Biomedical Engineering found “clear evidence that direct seizure forecasts are possible using wearable devices in the ambulatory setting for many patients with epilepsy.”

Clinical laboratories fit into this picture, Morice explained. For example, depending on what data it provides, a wearable device on a patient with worsening neurological symptoms could trigger a lab test for Alzheimer’s disease or other neurological disorders.

“This will change how labs think about access to care,” he noted.

For Payers, Navigating Genetic Testing Claims is Difficult

While there is promise in genetic testing and precision medicine, from an administrative viewpoint, these activities can be challenging for payers when it comes to verifying reimbursement claims.

“One of the biggest challenges we face is determining what test is being ordered. From the perspective of the reimbursement process, it’s not always clear,” said Cristi Radford, MS, CGC, Product Director at healthcare services provider Optum, a subsidiary of UnitedHealth Group, located in Eden Prairie, Minnesota. Radford also presented a keynote at this year’s Executive War College.

Approximately 400 Current Procedural Terminology (CPT) codes are in place to represent the estimated 175,000 genetic tests on the market, Radford noted. That creates a dilemma for labs and payers in assigning codes to novel genetic tests.

During her keynote address, Radford showed the audience of laboratory executives a slide that charted how four labs submitted claims for the same high-risk breast cancer panel. CPT code choices varied greatly.

“Does the payer have any idea which test was ordered? No,” she said. “It was a genetic panel, but the information doesn’t give us the specificity payers need.”

In such situations, payers resort to prior authorization to halt these types of claims on the front end so that more diagnostic information can be provided.

“Plans don’t like prior authorization, but it’s a necessary evil,” said Jason Bush, PhD, Executive Vice President of Product at Avalon Healthcare Solutions in Tampa, Florida. Bush co-presented with Radford.

[Editor’s note: Dark Daily offers a free webinar, “Learning from Payer Behavior to Increase Appeal Success,” that teaches labs how to better understand payer behavior. The webinar features recent trends in denials and appeals by payers that will help diagnostic organizations maximize their appeal success. Click here to stream this important webinar.]

Payers Struggle with ‘Explosion’ of Genetic Tests

In “UnitedHealth’s Optum to Offer Lab Test Management,” Dark Daily’s sister publication The Dark Report, covered Optum’s announcement that it had launched “a comprehensive laboratory benefit management solution designed to help health plans reduce unnecessary lab testing and ensure their members receive appropriate, high-quality tests.”

Optum sells this laboratory benefit management program to other health plans and self-insured employers. Genetic test management capabilities are part of that offering.

As part of its lab management benefit program, Optum is collaborating with Avalon on a new platform for genetic testing that will launch soon and focus on identifying test quality, streamlining prior authorization, and providing test payment accuracy in advance.

“Payers are struggling with the explosion in genetic testing,” Bush told Executive War College attendees. “They are truly not trying to hinder innovation.”

For clinical laboratory leaders reading this ebriefing, the takeaway is twofold: Genetic testing and resulting precision medicine efforts provide hope in more effectively treating patients. At the same time, the genetic test juggernaut has grown so large so quickly payers are finding it difficult to manage. Thus, it has become a source of continuous challenge for labs seeking reimbursements.

Heath information technology may help ease the situation. But, ultimately, stronger communication between labs and payers—including acknowledgement of what each side needs from a business perspective—is paramount. 

Scott Wallask

Related Information:

Executive War College Keynote Speakers Highlight How Clinical Laboratories Can Capitalize on Multiple Growth Opportunities

What Key Laboratory Leaders Will Learn at This Week’s 2023 Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management

Ambulatory Seizure Forecasting with a Wrist-Worn Device Using Long-Short Term Memory Deep Learning

UnitedHealth’s Optum to Offer Lab Test Management

Learning from Payer Behavior to Increase Appeal Success

Federal EKRA Law Continues to Cause Uncertainty in Clinical Laboratory Sales Compliance

Healthcare attorneys advise medical laboratory leaders to ensure staff understand difference between EKRA and other federal fraud laws, such as the Anti-kickback Statute

More than four years have passed since Congress passed the law and yet the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) continues to cause anxiety and confusion. In particular are the differences in the safe harbors between the federal Anti-Kickback Statute (AKS) and Stark Law versus EKRA. This creates uncertainty among clinical laboratory leaders as they try to understand how these disparate federal laws affect business referrals for medical testing.

According to a news alert from Tampa Bay, Florida-based law firm, Holland and Knight, “EKRA was enacted as part of comprehensive legislation designed to address the opioid crisis and fraudulent practices occurring in the sober home industry.” However, “In the four years since EKRA’s enactment, US Department of Justice (DOJ) enforcement actions have broadened EKRA’s scope beyond reducing fraud in the addiction treatment industry to include all clinical laboratory activities, including COVID-19 testing.”

It is important that medical laboratory leaders understand this law. New cases are showing up and it would be wise for clinical laboratory managers to review their EKRA/AKS/Stark Law compliance with their legal counsels.

David Gee

“Keeping in mind that [EKRA is] a criminal statute, clinical laboratories need to take steps to demonstrate that they’re not intending to break the law,” said attorney David Gee, a partner at Davis Wright Tremaine, in an exclusive interview with The Dark Report. “[Lab leaders should] think about what they can do to make their sales compensation program avoid the things the government has had such a problem with, even if they’re not sure exactly how to compensate under the language of EKRA or how they’re supposed to develop a useful incentive compensation plan when they can’t pay commissions.” David Gee will be speaking about laboratory regulations and compliance at the upcoming Executive War College in New Orleans on April 25-26, 2023. (Photo copyright: Davis Wright Tremaine.)

How Does EKRA Affect Clinical Laboratories?

The federal EKRA statute—originally enacted to address healthcare fraud in addiction treatment facilities—was “expansively drafted to also apply to clinical laboratories,” according to New York-based law firm, Epstein Becker and Green. As such, EKRA “applies to improper referrals for any ‘service,’ regardless of the payor. … public as well as private insurance plans, and even self-pay patients, fall within the reach of the statute.”

In “Revised Stark Law, Anti-Kickback Statute Rules Are Good News for Labs,” Dark Daily’s sister publication The Dark Report noted that EKRA creates criminal penalties for any individual who solicits or receives any remuneration for referring a patient to a recovery home, clinical treatment facility, or clinical laboratory, or who pays or offers any remuneration to induce a referral.

According to Epstein Becker and Green, EKRA:

  • Applies to clinical laboratories, not just toxicology labs.
  • Has relevance to all payers: Medicare, Medicaid, private insurance plans, and self-pay.
  • Is a criminal statute with “extreme penalties” such as 10 years in prison and $200,000 fine per occurrence.
  • Exceptions are not concurrent with AKS.
  • Areas being scrutinized include COVID-19 testing, toxicology, allergy, cardiac, and genetic tests.

“For many clinical laboratories, a single enforcement action could have a disastrous effect on their business. And unlike other healthcare fraud and abuse statutes, such as the AKA, exceptions are very limited,” Epstein Becker and Green legal experts noted.

“Therefore, a lab could potentially find itself protected under an AKS safe harbor and still potentially be in violation of EKRA,” they continued. “The US Department of Health and Human Services (HHS) and the DOJ have not provided any clarity regarding this statute (EKRA). Without this much needed guidance clinical laboratories have been left wondering what they need to do to avoid liability.”

EKRA versus AKS and Stark Law

HHS compared AKS and the Stark Law (but not EKRA) by noting on its website prohibition, penalties, exceptions, and applicable federal healthcare programs for each federal law: 

  • AKS has criminal fines of up to $25,000 per violation and up to a five-year prison term, as well as civil penalties.
  • The Stark Law has civil penalties only.
  • AKS prohibits anyone from “offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal healthcare program business.”
  • The Stark Law addresses referrals from physicians and prohibits the doctors “from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.”

EKRA is more restrictive than AKS, as it prohibits some compensation that AKS allows, healthcare attorney Emily Johnson of McDonald Hopkins in Chicago told The Dark Report.

“Specifically, AKS includes a safe harbor for bona fide employees that gives an employer wide discretion in how employees are paid, including permitting percentage-based compensation,” Johnson wrote in a Dark Daily Coding, Billing, and Collections Special Report, titled, “Getting Paid for COVID-19 Test Claims: What Every Clinical Lab Needs to Know to Maximize Collected Dollars.”  

EKRA Cases May Inform Clinical Laboratory Leaders

Recent enforcement actions may help lab leaders better understand EKRA’s reach. According to Holland and Knight:

  • Malena Lepetich of Belle Isle, Louisiana, owner and CEO of MedLogic LLC in Baton Rouge, was indicted in a $15 million healthcare fraud scheme for “allegedly offering to pay kickbacks for COVID-19 specimens and respiratory pathogen testing.”
  • In S-G Labs Hawaii, LLC v. Graves, a federal court concluded the laboratory recruiter’s contract “did not violate EKRA because the recruiter was not referring individual patients but rather marketing to doctors. According to the court, EKRA only prohibits percentage-based compensation to marketers based on direct patient referrals.”
  • In another federal case, United States v. Mark Schena, the court’s rule on prohibition of direct and indirect referrals of patients to clinical labs sent a strong signal “that EKRA most likely prohibits clinical laboratories from paying their marketers percentage-based compensation, regardless of whether the marketer targets doctors or prospective patients.”

What can medical laboratory leaders do to ensure compliance with the EKRA law?

In EKRA Compliance, Law and Regulations for 2023, Dallas law firm Oberheiden P.C., advised clinical laboratories (as well as recovery homes and clinical treatment facilities) to have EKRA policies and procedure in place, and to reach out to staff (employed and contracted) to build awareness of statute prohibitions and risks of non-compliance.

One other useful resource for clinical laboratory executives and pathologists with management oversight of their labs’ marketing and sales programs is the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management. The conference takes place on April 25-26, 2023, at the Hyatt Regency in New Orleans. A panel of attorneys with deep experience in lab law and compliance will discuss issues associated with EKRA, the Anti-Kickback Statutes, and the Stark self-referral law. 

Donna Marie Pocius

Related Information:

The State of EKRA

Four Years After EKRA: Reminders for Clinical Laboratories

Revised Stark Law and AKS Rules Are Good News for Labs

Comparison of the Anti-Kickback Statute and Stark Law

Getting Paid for COVID-19 Test Claims: What Every Clinical Lab Needs to Know to Maximize Collected Dollars

EKRA Compliance, Law and Regulations for 2023

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