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OIG Audit Report Finds $888.2 Million in Overpayments for Genetic Testing Code

30 Jun, 2023 F.J. Thomas

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Sarasota, FL (WorkersCompensation.com) – Let’s face it, medical billing is complicated! The regulations and payer rules change on a daily basis, and the volume of information reviewed and regulated is astounding, with incorrect claims easily falling through the cracks. To keep from paying improper claims, CMS creates payment policies and rigorous edits in their system.  Yet, according to the most recent OIG Audit Report, those efforts have still managed to miss over $888.2 million in improper claims payments. 

OIG analysts had noted a previous unusual trend in 2016 to 2019 for genetic-testing procedure code 81408. According to CMS policy, testing procedure code 81408 falls into a “Tier 2” testing category code, which represents rare diseases, and should rarely, if bever be used. Additionally, the genes associated in the testing manifest in childhood and should not apply to an aged population. However, OIG analysts in the previous audit had noted that the code accounted for the second highest total Part B payments with the highest reimbursement rate of $2,000.

The analysts reviewed more than 450,000 claims billed with procedure code 81408 for dates of service 2018 through 2021 to determine if CMS’s oversight processes were sufficient to reduce the risk of improper payments for this code. The patients involved in the audit totaled 240,000 enrollees. 

Overall, the OIG auditors found a total of $888.2 million paid in error for the genetic test code 81408. Two of the seven Medicare administrators paid out the bulk of the payments, at $865.7 million, equating to 97 percent of the payments. Ten laboratories received 47 percent of the overpayments, equating to $413.2 million. 

According to the report, in order for a clinical laboratory test to be covered under Medicare Part B, the ordering provider must be the treating provider and use the lab results in treatment. Essentially, the patient must have a relationship with the provider ordering the tests. The auditors found that in 80 percent of the claims that were reviewed, the patient did not have a relationship with the ordering provider listed on the claim. Of those 80 percent that didn’t have the relationship, 86 percent had not seen the patient in the year before the date of service. 

When the analysts reviewed the top 10 ordering providers, for 2018 there were 7 providers that did not have established relationships with any of the patients for whom they ordered genetic tests. For 2019, the total was 8 providers. 

The provider that received the top payments for code 81408 also did not have an established relationship for any of the patients he ordered tests for. This particular provider ordered a total of 4,942 genetic lab tests for code 81408, which totaled 8 percent of tests for 2018, and included 3,034 patients. Additionally, the 28  laboratories that performed the tests for this particular provider received $9.7 million in reimbursement. 

The auditors also found that the number of tests billed for Tier 2 code 81408 exceeded the number of tests for higher volume Tier 1 tests. In 2021, laboratories billed 137,138 genetic tests under CPT code 81408, which was a greater number of tests billed than for any of the Tier 1 codes. The number also equates to 4 times the volume of the top Tier 1 code, 81238.

As mentioned earlier, genetic testing code 81408 is typically billed with a diagnosis that indicates a rare genetic condition. The auditors found that 24 percent of the claims were billed with the diagnosis for Essential (primary) hypertension, totaling reimbursement of $215,850,538. 

CMS allows Medicare administrators to provide coverage guidance specific to their jurisdictions. The auditors reviewed the Medicare administrators coverage policies related to genetic testing code 81408, and found that 5 of the administrators had published guidelines that prohibited or limited the use of procedure code 81408. One region’s payment policy considered the code medically unnecessary, and four regions limited the use to once in a lifetime. 

Ninety-seven percent of the improper payments came from two regions whose policy stated that stated that there were no diagnosis-code limitations. By the last 2 months of the audit period, both regions issued coverage policies that limited the use of 81408 and there were no more payments made. One of the regions revised their guidance to include, CPT code 81408, “should rarely, if ever, be used unless instructed by other coding and billing articles.”

As a result of their findings, the OIG recommended that CMS advise Medicaid and Medicare administrators to review claims with code 81408 for the same time period of the audit. Additionally, the OIG recommended CMS open up the 4 year time period to recover the $888.2 million in overpayments, and notify the offending providers.

CMS replied that they will direct Medicare administrators to begin the audits, and will determine whether additional reviews are warranted based on those results. 


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    About The Author

    • F.J. Thomas

      F.J. Thomas has worked in healthcare business for more than fifteen years in Tennessee. Her experience as a contract appeals analyst has given her an intimate grasp of the inner workings of both the provider and insurance world. Knowing first hand that the industry is constantly changing, she strives to find resources and information you can use.

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