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Clinical Laboratories and Pathology Groups

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

It did not take long for fraudsters to pursue hundreds of billions of federal dollars designated to support SARS-CoV-2 testing and it is rare when federal prosecutors bring cases only a few months after illegal lab testing schemes are identified

As if the COVID-19 pandemic weren’t bad enough, unscrupulous clinical laboratory operators quickly sought to take advantage of the critical demand for SARS-CoV-2 testing and defraud the federal government.

Unfortunately for the many defendants in these cases, federal investigations into alleged cases of fraud were launched with noteworthy speed. As a result of these investigations into alleged healthcare fraud by clinical laboratories and other organizations during fiscal year (FY) 2020, the US Department of Justice (DOJ) announced the US government has recovered $1.8 billion.

The federal prosecutions involved dozens of medical laboratory owners and operators who paid back “hundreds of millions in alleged federal healthcare program losses,” Goodwin Life Sciences Perspectives explained.

The annual report of the Departments of Health and Human Services (HHS) and Justice Health Care Fraud and Abuse Control Program (HCFAC) reported that federal agencies found and prosecuted alleged healthcare fraud for unnecessary laboratory testing related to:

The HCFAC is a joint program of the HHS Office of Inspector General (OIG), Centers for Medicare and Medicaid Services (CMS), and DOJ, a CMS fact sheet explained.

Billions Recovered by HCFAC Program

When combined with similar efforts starting in prior years, the program has returned to the federal government and private individuals a total of $3.1 billion, the DOJ noted.

“In its 24th year of operation, the program’s continued success confirms the soundness of a collaborative approach to identify and prosecute the most egregious instances of healthcare fraud, to prevent future fraud and abuse, and to protect program beneficiaries,” the report states.

Graphic oh healthcare fraud

According to the graphic above, which is based on analysis by B2B research company MarketsandMarkets, “North America will dominate the healthcare fraud analytics market from 2020–2025.” As clinical laboratory testing represents a significant portion of the fraud, medical lab managers will want to remain vigilant. (Graphic copyright: MarketsandMarkets.)

COVID-19 Pandemic an Opportunity for Fraud

The HHS report notes that the COVID-19 pandemic required CMS to develop a “robust fraud risk assessment process” to identify clinical laboratory fraud schemes, such as offering COVID-19 tests in exchange for personal details and Medicare information.

“In one fraud scheme, some labs are targeting retirement communities claiming to offer COVID-19 tests but are drawing blood and billing federal healthcare programs for medically unnecessary services,” the HHS report notes.

Still other alleged schemes involved billing for expensive tests and services in addition to COVID-19 testing. “For example, providers are billing a COVID-19 test with other far more expensive tests such as the Respiratory Pathogen Panel (RPP) and antibiotic resistance tests,” the report says.

“Other potentially unnecessary tests being billed along with a COVID-19 test include genetic testing and cardiac panels CPT (current procedural terminology) codes. Providers are also billing respiratory, gastrointestinal, genitourinary, and dermatologic pathogen code sets with the not otherwise specified code CPT 87798,” the report states.

Different Types of Healthcare Organizations Investigated in 2020

Beyond clinical laboratories, the HHS’ 124-page report also shares criminal and civil investigations of other healthcare organizations and areas including:

  • clinics,
  • drug companies,
  • durable medical equipment,
  • electronic health records,
  • home health providers,
  • hospice care,
  • hospitals and healthcare systems,
  • medical devices,
  • nursing home and facilities,
  • pharmacies, and
  • physicians/other practitioners.  

According to the DOJ, “enforcement actions” in 2020 included:

  • 1,148 new criminal healthcare fraud investigations opened,
  • 440 defendants convicted of healthcare fraud and related crimes,
  • 1,079 civil healthcare fraud investigations opened, and
  • 1,498 pending civil health fraud matters at year-end.

“Federal Bureau of Investigation (FBI) investigative efforts resulted in over 407 operational disruptions of criminal fraud organizations and the dismantlement of the criminal hierarchy of more than 101 healthcare fraud criminal enterprises,” the DOJ reported. 

Furthermore, the report said OIG investigations in 2020 led to:

  • 578 criminal actions against people or organizations for Medicare-related crimes,
  • 781 civil actions such as false claims, and
  • 2,148 people and organizations eliminated from Medicare and Medicaid participation.

Implications for Clinical Laboratories

In 2020, OIG issued 178 reports, completed 44 evaluations, and made 689 recommendations to HHS divisions.

Clinical laboratory leaders may be most interested in those related to patient identification as a means to combating fraud and Medicare Part B lab testing reimbursement.

The HHS report says, “Medicare Advantage (MA) encounter data continue to lack National Provider Identifiers (NPIs) for providers who order and/or refer … clinical laboratory services,” adding that, “Almost half of MA organizations believe that using NPIs for ordering providers is critical for combating fraud.”

Additionally, the report states, “Medicare Part B spending for lab tests increased to $7.6 billion in 2018, despite lower payment rates for most lab tests. The $459 million spending increase was driven by:

  • “increased spending on genetic tests,
  • “ending the discount for certain chemistry tests, and the
  • “move to a single national fee schedule.”

Medical laboratory leaders may be surprised to learn that federal healthcare investigators were so vigorous in their investigations, even during the worst of the COVID-19 pandemic.

Vigilance is critical to ensure labs do not fall under the DOJ’s scrutiny. This HHS report, which describes the types and dollars involved in fraudulent schemes by clinical labs and other providers, could help inform revisions to federal compliance regulations and statutes.

Donna Marie Pocius

Related Information

Annual Report of the Departments of Health and Human Services (HHS) and Justice Healthcare Fraud and Abuse Control (HCFAC) Program FY 2020

DOJ Recoups a Total of $1.8 Billion from Healthcare Fraud in 2020, Laboratory Recoupments Alone Account for Hundreds of Millions

Healthcare Fraud and Abuse Control Program Protects Consumers and Taxpayers by Combatting Healthcare Fraud

2020 National Health Care Fraud Takedown

The Joint Commission Explains Patient Identification Requirement Changes

Response to comments from Dennis Ernst of the Center for Phlebotomy Education

Recently Dark Daily alerted clinical laboratory readers to a decision by The Joint Commission to change their requirements for patient identification. Included was the opinion of Dennis Ernst,  MT(ASCP), long time Director of the Center for Phlebotomy Education, that The Joint Commission’s decision to change patient identification requirements was a step backwards in patient safety. (See Dark Daily, “Joint Commission Changes Requirement for Patient ID during Blood Draws” ).

In particular, Ernst was troubled that the new patient identification protocols no longer require a healthcare worker to have the patient state his or her name before blood is drawn. He contacted The Joint Commission to inquire about this change. He related to Dark Daily that officials at TJC had informed him that, in their surveys of clients, there was a feeling that this specific requirement was “burdensome and unnecessary.”


Joint Commission Changes Requirement for Patient ID during Blood Draws

Center for Phlebotomy Education says new requirement is step backward for patient safety

When The Joint Commission recently changed the patient identification requirement for drawing a blood sample, one national phlebotomy leader considered it a step backward in patient safety.

“Per a revised policy issued by The Joint Commission, it is no longer required for the phlebotomist or person drawing the blood to actively involve patients by, for example, asking them to state their name,” commented Dennis Ernst, MT(ASCP), the long-serving Director of the Center for Phlebotomy Education. He’s one of the leading observers of phlebotomy trends and he’s concerned about what this means to patient safety.


New Patient ID Systems Use RFID Technology

Move over bar codes! RFID (radio frequency identification) may be ready as a patient identification solution for hospitals and other healthcare settings. Advocates promote RFID as a way to improve patient safety without the problems common to manual or bar code patient ID systems.

Overseas, the U.S. Navy uses an RFID-based patient ID system, called “Smart Band”, to track the status and location of wounded soldiers, prisoners, refugees, and others arriving at the Navy’s Pensacola Fleet Hospital in Iraq. Here in the United States, 473-bed Jacobi Medical Center in New York City has begun using the Smart Band system in its two acute care departments. Smart Tag is manufactured by Precision Dynamics Corporation of San Fernando, California.

RFID uses electronic chips embedded on tags to transmit radio waves. Tags can be encrypted with any type of information. Tags attached to products, assets or medical records and or embedded in security cards and wristbands allow early adopters to track medical devices, drugs, and people, according to a report on RFID technology applications from the Health Industry Business Communications Council (HIBCC), an industry-sponsored nonprofit organization dedicated to developing standards to facilitate electronic data exchange among all facets of the healthcare industry.

The technology can also be used to encrypt wristbands with information critical to patient safety and for quality assurance purposes, encrypting medical supplies and drugs with information like lot numbers and expiration dates and test samples and other laboratory items with special instructions or critical data like the temperature for monitoring sensitive products like blood. It also could improve tracking of instruments for infection control, allowing RFID-enabled trays to be followed through sterilizing departments, and high-cost medical devices like defibrillators, pacemakers and prostheses.

Unlike conventional labeling technologies, such as barcodes, RFID tags have both read and write capabilities, can be read simultaneously rather one at a time, allow invisible and resistant marking for special applications like patient wristbands, require no line of sight to read them, and permit reading orientation directly through materials like cardboard boxes and cloth.

RFID technology, however, is viewed as an enhancement-rather than a replacement-for current labeling systems, as it has disadvantages. It is expensive because it is not yet plug-and-play. Reliability is an issue in large-scale implementations. Additionally, current RFID tags cannot withstand extreme heat without special housing and their reliability can be affected by humidity, metal surfaces and other environmental conditions. Additionally, there are interoperability issues because the technology uses different RFID standards. For example, no single reader exists that can read from the multiple frequencies used in different RFID technologies.

Dark Daily expects rapid advances in RFID technology. Phlebotomists and lab staff know that use of bar codes comes with its own set of headaches. Thus, as RFID performance improves and its cost to use declines, hospitals will have a motive to incorporate RFID solutions for patient identification. Clinical laboratories will be interested in using RFID solutions to track specimens. Such an application is already in use between the gastroenterology surgery suites and the histology laboratory at the Mayo Clinic.
– P. Kirk

Related Information: