A related issue is the growing use of contract sales representatives to sell clinical laboratory and pathology testing services and whether such arrangements violate federal compliance requirements

More and tougher payer audits are hitting an expanding number of clinical laboratories and anatomic pathology groups in recent months. Across the nation, experts in medical laboratory billing and collections are reporting that health insurers are auditing for a host of issues, several of them unexpected and without precedent.

Three types of clinical lab companies seem to be the highest-profile targets for these intense payer audits. Reports identify lab companies offering toxicology and pain management testing as undergoing rigorous audits. Medical lab companies with proprietary molecular diagnostic assays and genetic tests are known to have been audited in this manner. Some anatomic pathology groups are believed to have also experienced such audits.

More Stringent Medicare Audits of Medical Labs and Pathology Groups

Similarly, there are reports that Medicare audits, ranging from RAC audits to CERT Audits have become more stringent. CERT audits happen when the Medicare program detects a billing pattern from providers that deliver high cost items or services, as well as providers—including medical lab companies—submitting claims at either a high volume or in a manner deemed to possibly be from atypical billing and coding practices. This puts some lab companies with expensive proprietary molecular or genetic tests at a higher risk of audit by the Medicare program.

What makes this a high-stakes issue for all lab executives and pathologists is that even compliant labs are at risk of undergoing one of these comprehensive payer audits, then ending up with a demand for a sizeable recoupment. This is particularly true if they fail to provide certain documentation requested by the payer’s auditors in a timely fashion.

Labs Should Take Steps to Avoid Unwarranted Payer Demands for Recoupment

To avoid unwarranted demands for recoupment, clinical laboratories must be prepared for the new targets of these payer audits. For example, one issue getting tougher scrutiny during private payer audits is how out-of-network labs collect the money owed by patients for co-pays, deductibles, and co-insurance.

Another example of a new and tough target for payer audits involves medical necessity. Lab managers responsible for billing and collection say that these audits often scrutinize the use of panels for molecular and genetic testing, as well as toxicology tests. For anatomic pathology groups, auditors want to look at documentation for special stains, whether tests are unnecessary, and whether lab test requisition forms could be “steering” physicians to order more tests.

Dark Report First to Report on Tougher Audits by Private Health Insurers

On the subject of labs being audited for how they collect patient co-pays, clients of Dark Daily’s sister publication, The Dark Report (TDR) were first to learn about this trend of payer audits for patient deductibles from an intelligence briefing published in August. (See TDR, “Cigna Audits Toxicology Laboratory Companies for Proof that Patients Paid,” August 24, 2015.)

To this point, The Dark Report wrote “In a potentially ominous development for the lab industry, Cigna has begun to ask toxicology labs to submit proof of patient payment before it will reimburse those claims. Cigna has also filed a lawsuit against several toxicology lab companies alleging they submitted fraudulent and inflated claims.”

During Audit, National Insurer Asks for Proof That Patient Paid the Medical Lab

Labs undergoing these types of audits may have a strong response. In its intelligence briefing, The Dark Report interviewed attorney Richard S. Cooper of McDonald Hopkins, based in Cleveland. Cooper points out that “Cigna’s effort to require documentation of patients’ payments [before it pays the lab’s claims] may be counter to prompt-payment laws. There is also a question as to whether Cigna’s member contracts support such a procedure. If they do not, this could serve as the basis for an ERISA-based claim by a qualifying laboratory. Our firm is working with several toxicology laboratory companies that have received audit notices from Cigna since the beginning of the year.”

If tougher payer audits were not enough, the past 18 months have seen a surprising increase in the number of labs being sued by health insurers because of allegations that these labs submitted false or fraudulent claims. One example involves Health Diagnostic Laboratory of Richmond, Virginia. In October 2014, the cardiology testing lab company was sued for $84 million by Cigna. Then, following HDL’s settlement with the federal government this April, it was sued by Aetna, Inc. for “tens of millions of dollars.”

And that was not all. News accounts say that Cigna, Aetna, and UnitedHealthcare ceased paying the lab test claims of HDL. This was one reason HDL filed for Chapter 11 Bankruptcy in July.

More Payers Filing Lawsuit against Lab Companies Doing Toxicology Testing

Similarly, some lab companies offering toxicology and pain management testing have been sued by payers over claims of fraudulent billing. One of the first high-profile lawsuits was in New Jersey. In August 2013, Horizon Blue Cross Blue Shield of New Jersey filed suit against Avee Laboratories. It seeks $36 million as repayment from what it alleges are false and fraudulent claims submitted by Avee.

In August, Cigna filed a lawsuit in Florida against Sky Toxicology, Ltd.; Sky Toxicology Lab Management, LLC; Frontier Toxicology, Ltd.; and Hill Country Toxicology, Ltd. The lawsuit claims that the defendant lab companies collected more than $20 million in fraudulent drug tests from Cigna members. Notably, given how Cigna has been auditing some clinical lab companies, in its lawsuit, Cigna claims the defendant lab companies submitted fraudulent bills because the labs waived the patients’ cost sharing (co-pays and deductibles), as well as patient-brokering and kickback schemes.

Jane Pine Wood (left) is a member of McDonald Hopkins, LLC, and serves on the firm’s Board of Directors. Ms. Wood’s legal practice focuses upon health law, including regulatory, compliance, and contractual matters, as well as Medicaid and Medicare reimbursement issues. Richard S. Cooper (right) is the Manager of McDonald Hopkins’ National Healthcare Practice Group and is co-chair of its Healthcare Restructuring Practice Group. He focuses his national practice in healthcare law, representing clients in transactional, restructuring, corporate, compliance, regulatory, licensure, reimbursement, contractual, strategic planning, and venture matters.

Jane Pine Wood (left) is a member of McDonald Hopkins, LLC, and serves on the firm’s Board of Directors. Ms. Wood’s legal practice focuses upon health law, including regulatory, compliance, and contractual matters, as well as Medicaid and Medicare reimbursement issues. Richard S. Cooper (right) is the Manager of McDonald Hopkins’ National Healthcare Practice Group and is co-chair of its Healthcare Restructuring Practice Group. He focuses his national practice in healthcare law, representing clients in transactional, restructuring, corporate, compliance, regulatory, licensure, reimbursement, contractual, strategic planning, and venture matters.

Helping Lab Managers Understand Best Responses to More Rigorous Payer Audits

To help all laboratories understand these important developments with payer audits, Dark Daily has arranged a special webinar, titled “Update on Government and Private Payer Audits: Prepare your Lab with the Newest Audit Tactics, as Payers Tighten the Audit Noose on Larger Numbers of Labs.” It will take place on Wednesday, October 21, 2015 at 1:00 PM EDT.

The webinar will be conducted by attorneys Richard S. Cooper and Jane Pine Wood, both with the law firm of McDonald Hopkins. This webinar has several goals:

• First, it will alert all clinical labs and pathology groups to the nature of these audits;

• Second it will provide recommendations on how to prepare in advance for such audits; and,

• Third, it will identify the most effective actions labs can take to respond to payer demands for recoupment.

There is another important compliance issue that is related to tougher audit practices by private payers. How labs use contract sales representatives to market their lab testing services is getting more scrutiny by federal healthcare regulators and private health insurers. This topic will be discussed during the October 21 webinar.

Use this link to register today (or copy and paste this URL into your browser: http://darkdaily.com/audio-conferences/update-on-government-and-private-payer-audits-prepare-your-lab-with-the-newest-audit-tactics-as-payers-tighten-the-audit-noose-on-larger-numbers-of-labs-1021

It is important for lab owners, pathologists and managers to recognize an unwelcome reality as a consequence of these developments. Simply put, even clinical labs with a reputation for fair play and consistent compliance are undergoing these audits—and often finding that the health insurer concludes the audit with a demand for substantial recoupment. This is the reason why all labs should anticipate such audits and take the necessary steps to be prepared with the necessary documentation and timely answers to the requests made by auditors from the Medicare program and from private health insurers.

 

Related Information:

Update on Government and Private Payer Audits: Prepare your Lab with the Newest Audit Tactics

Cigna Audits Toxicology Laboratory Companies for Proof that Patients Paid 

Cigna Sues HDL, Alleges Unlawful Fee Scheme: Lawsuit Accuses Health Diagnostic Laboratory of defrauding Cigna of as much as $84 Million

Addiction treatment bonanza: How urine tests rake in millions

Blue Cross Accuses Drug Test Co. Of $36M Fraud Scheme

Cigna Sues Sky Labs for Fraud in Florida Drug Testing Schemes