OIG Continues Crackdown on Genetic Testing Fraud as Medicare Spending Spikes

NEW YORK – In step with growing Medicare spending on genetic testing, the US Department of Health and Human Services' Office of Inspector General is also tracking increases in fraudulent billing practices. 

The OIG reported in August that spending by the Centers for Medicare & Medicaid Services on laboratory testing increased 6 percent in 2018 to $7.6 billion compared to $7.1 billion in 2017, despite rate reductions stipulated under the Protecting Access to Medicare Act. While payment rates decreased for 75 percent of lab tests from 2017 to 2018, spending on genetic tests doubled year over year to approximately $1 billion. 

Although 2018 had the largest lab test spending increase for CMS since the passage of PAMA in 2014, some of the spending increases were the result of changes in test volumes and the move to a national fee schedule, OIG said. Meanwhile, OIG attributed spending increases for genetic tests – which comprised 13 percent of Medicare spending on lab tests in 2018 compared to 7 percent in 2017 – to new and expensive tests entering the fee schedule and greater utilization.

Increased spending and utilization points to the need for greater oversight of genetic testing utilization, OIG said in its report, because "even a small number of inappropriate tests could expose Medicare to extremely high spending." 

Widespread fraud also accounts for at least a portion of the higher spending seen in the genetic testing sector. According to Mike Cohen, an operations officer at OIG's office of investigations, fraud in the genetic testing space has been escalating since 2013, beginning in the pharmacogenetics space and cancer screening because the payments are higher and "criminals tend to migrate toward the highest area of reimbursement."

Last year, a laboratory owner in Pennsylvania was charged with fraud after allegedly paying kickbacks to marketers to acquire samples from Medicare patients across the US and to a telemedicine company that paid doctors for writing corresponding prescriptions needed to bill Medicare for cancer genomic testing and pharmacogenetic testing. The lab owner allegedly paid physicians to authorize genetic testing without conducting proper telemedicine visits, and those physicians weren’t qualified to interpret the results and did not use the results to treat the Medicare patients.

Genetic testing has been an area of increased focus at OIG over the past few years as the genetic testing industry has expanded and coding and payment frameworks have evolved. When new analyte- and procedure-specific codes went into effect for molecular diagnostic tests in 2013, OIG had a clearer view of not only which tests were being ordered more and paid for at higher rates, it could also more accurately track fraudulent billing practices.

One common form of fraud in genetic testing that Cohen noted involves hiring recruiting firms to gather large numbers of patients via health fairs and social media and then having doctors use telehealth to sign off on testing without actually examining patients or following up with them about their test results. Fraudsters have also "descended upon assisted living areas," Cohen said, going "door to door soliciting patients," testing them, and submitting claims regardless of whether the testing met CMS' medical necessity criteria. "They will swab hundreds and hundreds of people whether they needed the test or not and then go out and search for what test they want to bill for that," he continued. Cohen even noted that one scheme involved marketers going to an assisted living home's bingo night and taking patients out to be swabbed.

OIG announced in September 2019 that it would be cracking down on genetic testing fraud and many of these schemes were picked up in a joint operation last year between OIG, the US Department of Justice, and the Federal Bureau of Investigation. The operation ended up charging 35 people with allegedly billing $2.1 billion for unnecessary cancer genetic tests.

Not all of the increased spending in the genetic testing space are necessarily fraudulent, Cohen explained. "It's a combination of legitimate care along with fraud," he said. It's also not just prevalent in genetic testing. In all areas of healthcare, fraud "weaves in and out of legitimate care. … In fact, the more they can hide inside the legitimate care, the easier it is for them to operate."

Differentiating between legitimate and fraudulent billing and deciding when to take enforcement action can often be challenging for CMS, Cohen said, because the agency doesn't want to "impinge upon [tests with] legitimate medical necessity." CMS has "a tight rope to walk," he recognized.

Since CMS doesn't want to shut down legitimate genetic testing that patients actually need, it may also be easier for fraud schemes to slip through the cracks.

Those fraud schemes permeate more areas than cancer genetic screening and pharmacogenomic testing. Cohen said he's also seen illegal testing schemes in which elderly people have been tested for noninvasive prenatal testing intended for pregnant women, as well as genetic testing for diseases prominent in specific groups in patients outside of those groups. 

Part of the difficulty with catching these bad actors, however, is that their fraudulent activity is often reliant on a complex web spread across multiple states. Many labs will see patients across multiple states and submit claims in states the laboratory isn't based in to avoid scrutiny. Some labs even try to register in certain regions where they feel they might get more favorable reimbursement, Cohen said.

A recent analysis of state billing and payment patterns suggest that jurisdictions covered by Medicare Administrative Contractors Novitas and First Coast Service Options, which are jointly held by Guidewell, a subsidiary of Florida Blue Cross, may be particularly profitable reimbursement jurisdictions for certain types of genetic tests. Novitas covers Arkansas, Colorado, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas, while First Coast covers Florida. 

In an analysis of 2018 Medicare claims data by reimbursement expert Bruce Quinn and published on his blog, two CPT codes for genetic testing covered by Medicare saw significant overpayments in jurisdictions covered by these two MACs. Those codes were 81408, a nonspecific code for genetic testing that is primarily used for genes associated with rare diseases, and 81162 for assessment of BRCA1/2 genes. 81408 — a level nine, tier two molecular pathology CPT code that describes analysis of more than 50 exons in a single gene by DNA sequence analysis — isn't payable at the five other MACs or at many commercial payors, such as Aetna, Quinn said. 

These two codes that have seen "explosive growth" since 2018 are particularly ripe for exploitation, Quinn said. Code 81162 for BRCA1/2 testing is "well recognized" and likely wouldn't spark investigation since it is a common code likely assumed to be medically necessary in patients with breast cancer. "If you have that code and you put down a diagnosis of breast cancer, that code will pay," Quinn said.

Cohen also noted that generally popular tests and codes are easier for fraudsters to manipulate, since if it's a code no one's using they'd "stick out like a sore thumb."

Meanwhile, CPT code 81408 has no edits under Novitas and First Coast, allowing for auto-payment of the code. If a code has no edits, the MAC doesn't have to review the claim before reimbursing for the claim, which Quinn compared to "swiping a credit card and it automatically pays."

Twenty percent of all payments from the MACs, approximately $290 million, were for CPT code 81408 in 2019, Quinn said, and about $120 million was paid for code 81162.

In the data Quinn compiled, many of the laboratories submitting claims for CPT code 81408 under the two MACs had no web presence and were "pop-up labs" that disappeared the next year, he said. "Every lab you could see doing 81408 looked suspicious and none of them were any of the major labs," he continued.

Quinn regularly conducts this type of analysis and publishes them on his blog aiming to shed light on Medicare spending patterns on genetic tests. Earlier this year, one of Quinn's investigations into inappropriate billing activity based on document procured from CMS via the Freedom of Information Act garnered a cease-and-desist letter from Palmetto. The incident raised questions about the extent to which a government contractor can legally restrict public access to information obtained under FOIA, as well as to information about how the government disburses taxpayer funds. 

CMS, meanwhile, has made some efforts to curtail billing abuse in the genetic testing space as it has become more of an issue, with the agency's Centers for Program Integrity consistently conducting medical billing reviews and audits. The agency's Unified Program Integrity Contractors specifically monitor genetic testing codes for spikes in excessive billing and patients who receive multiple genetic tests. 

In 2019, a CMS review found "a high level [of] claims" within the MolDx program, but the high number of claims have since tapered off in 2020, and there have been decreases in payments for CPT codes 81408 and 81162 within Novitas and First Coast. However, billing "is still occurring in a manner where there are still some concerns in cases that include billing for multiple molecular diagnostic tests and billing without demonstrating medical necessity, especially molecular pathology level nine" codes, a CMS spokesperson said. Level nine codes, which have the highest billing rates, represent a third of claims for all genetic testing so far this year.

Ultimately, Quinn said, there have to be stronger controls implemented to detect fraud when it's happening, or at the latest, within a few months, rather than having to wait years for billing data to determine areas of interest. "CMS should have basic controls to pick up sudden explosions in genetic code use within a couple months, not a couple years," he said.