One Genetic Test CPT Code Earns ‘Fraudomatic’ Title

Medicare claims paid under this code soared from 5,817 in 2017 to more than 146,000 in 2019

CEO SUMMARY: Several genetic testing companies have noticed that some of the nation’s Medicare Administrative Contractors (MAC) pay about $2,000 for test claims billed with CPT code 81408. From 2018 through and 2019, the number of 81408 claims rose dramatically at just two of these federal contractors: Novitas Solutions and First Coast Service Options. This increase led one nationally-known genetic test expert to describe CPT 81408 as the “fraudomatic code.”

EVIDENCE SURFACED RECENTLY THAT—when it comes to submitting genetic test claims to the Medicare program—the bonanza CPT code is 81408. The number of claims that Medicare paid for this code increased more than 25-fold in 24 months from 2017 and 2019, totaling $413 million, according to an analysis by Bruce Quinn, MD, PhD, a lab strategy and payment consultant in Los Angeles.

On his blog, Discoveries in Health Policy, Quinn reported that certain molecular testing labs have used the billing code 81408 to generate levels of payment that grew by 13 times in one year (2017 to 2018) and by 30 times over three years (2017 to 2019). 

In a blog post on Sept. 25, Quinn labeled 81408 as the “fraudomatic” and “most unbelievable” CPT code in terms of increased payment over those three years. For this code, the federal Centers for Medicare and Medicaid Services has paid $2,000 per claim since 2017. By contrast, in the past year or more, at least two commercial health insurers (Cigna and UnitedHealthcare) have said they would not pay for this code.

The American Medical Association designates code 81408 as a CPT tier-two level-nine code. As a level-nine molecular pathology procedure, this code is used to analyze more than 50 exons in a single gene by DNA sequence, according to the utilization review company eviCore.

Quinn reported the following Medicare payments for 81408:

• In 2017, CMS paid $9.55 million for 5,817 claims filed.

• In 2018, CMS paid $123 million for 62,000 claims.

• Last year (2019), CMS paid $290 million for 146,000 claims. 

“Among all genetic codes in Medicare Part B, it’s the highest paid code,” he said in an interview with The Dark Report. “It’s just head-spinning how much CMS pays out for that one code.”

In a blog post published on Sept. 16, Quinn reported that CMS had released data in spreadsheet format showing Medicare Part B spending by CPT code for every state. Less than a week later, he published a follow-up blog post after analyzing that data. 

“On Sept. 22, I released some deep dive analysis of Medicare’s molecular and genetic test spending by state. It showed massive increases in spending for what, in some cases, may be fraudulent test claims,” he wrote. Based on his analysis, CMS data showed that spending was concentrated in some states and under certain CPT codes.

‘Most Egregious’ Case

He also reported that the most egregious cases—meaning “the ones that popped out as being high to the naked eye”—were in the District of Columbia, Florida, and Oklahoma. Only two MACs—Novitas Solutions and First Coast Service Options (FCSO)—made nearly all of Medicare’s payments to labs filing claims for 81408, Quinn noted. Both Novitas and FCSO are affiliated with Blue Cross and Blue Shield of Florida. 

FCSO serves Medicare providers in Florida, Puerto Rico, and the U.S. Virgin Islands. Novitas is the MAC for Arkansas, Colorado, Delaware, Louisiana, Maryland, Mississippi, New Jersey, New Mexico, Oklahoma, Pennsylvania, Texas, and the Washington D.C. metropolitan area. Also, Novitas serves the Indian Health Service and Department of Veterans Affairs.

“In my analysis, I found specific codes and specific states that stood out,” Quinn said in the interview. “Those states were Florida and Texas, but also some odd places that Novitas serves, such as the District of Columbia and Oklahoma.”

For his analysis, Quinn reviewed the Medicare spreadsheet data from all 50 states showing spending for 81408 in 2019 by MAC. Based on his analysis, he explained that the data, “seems to show that some MACs were completely resistant to this rare-gene CPT code and others gushed out money like a firehose.

Apparent ‘Fraudulent’ Use

“For example,” he said, “despite two years of explosive fraudulent use of this code, according to the CMS coverage database, the Novitas MAC still has a billing article (titled A52986) that says, ‘81408 has no edit codes at this time.’ ”

Later in the same blog post, Quinn went into more detail about this code. “81408 seems to be the most popular code with fraudsters, based on other analyses I am doing,” he wrote. “There are only 24 allowable rare genes listed under 81408. These include ‘LAMA2 congenital muscular dystrophy, full sequence,’ and ‘CEP290, Joubert syndrome, full sequence (a cerebellar malformation that causes gross maldevelopment in infancy with mean age at death age seven).’ ”

In May 2020, CMS was expected to have released data on payments in 2018 broken down by which physicians and labs CMS had paid. But that data were not released when Quinn wrote this blog post in late September. It could be that CMS did not wish to release that data after the federal Department of Justice published information on the $6 billion worth of overpayments in fraud cases it uncovered under Operation Double Helix. (See, “Medicare Pays 500% More for Molecular Test Claims,” TDR, Oct. 5, 2020.)

“I don’t know if CMS will release the 2018 data that showed what it paid individual lab companies or when it will release the 2019 data,” he said. “Normally CMS releases provider-level data on what it pays physicians and labs in May. When it’s released, that data would be almost 18 months old. So, the 2018 payment data would have come out in May of this year.”

Consultant’s Analysis of Medicare Payment Data Provides Insights on Clinical Lab, Pathology Claims

FOR HIS ANALYSIS OF MEDICARE’S PAYMENTS FOR MOLECULAR MICROBIOLOGY IN RECENT YEARS,Bruce Quinn, MD, PhD, reviewed Medicare payment data from all 50 states. 

Quinn sorted all the pathology and clinical laboratory codes by total payments (meaning allowed amounts), including payments for the technical and professional components and other payments if such were added. The total pathology and clinical lab payments came to $7.1 billion.

$4 Billion for 14 CPT Codes

When Quinn sorted payments by allowed charges, labs received 56% of the total, or $4 billion for 15 codes. It will come as no surprise to pathologists that the highest-paying CPT code was 88305 (surgical biopsy) with 20 million claims filed and $1 billion in allowed charges, Quinn reported.

“The next highest CPT code was 80053 (routine chemistry panel), with 29 million claims and $342 million in allowed charges. “As you can see by eyeball, with around 30 million in services provided and around $300 million in payments, that’s in the ballpark of about $10 per service,” he noted.

Also in the top 15 were three molecular pathology codes. One was the aforementioned 81408, and another was 81528 for Exact Sciences’ Cologuard test at about $500 per case, 482,000 claims, and $245 million in payments, he noted. The next highest code was 81479, an unlisted molecular code. This code is used almost exclusively in MolDx states with 109,555 services and $202 million spent. 

When Quinn analyzed the molecular pathology codes, he combined that spending with payments for PLA (or U) codes. Those are codes 81162 through 81599. “For these codes, the allowed charges were a colossal $1.7 billion in 2019, almost double the $1 billion that CMS spent on these codes in 2018,” he reported. 

The top 15 codes in this category accounted for 78% of payments, or $1.3 billion, he noted. The largest of the payments went for code 81408 due to a rapid rise in payments in three areas (Florida, the District of Columbia, and Oklahoma) from two Medicare Administrative Contractors (Novitas Solutions or First Coast Service Options).

The next largest payment ($245 million) went to Exact Sciences for its Cologuard test, Quinn reported. “Next was an unlisted code, 81479, that has been used only in MolDx states. For this code, labs received $202 million. Third was BRCA testing (meaning BRCA1 and BRCA2 and deletion and duplication analysis), under code 81162. For this code, labs filed 60,000 claims and received $120 million in allowed charges. 

The fifth highest payment in this category was for code 81519 for Genomic Health’s Oncotype Dx test. For this test, CMS paid out $85 million for 22,000 claims.

Most PLA Codes Unused

In conclusion, Quinn reported that for other microbiology MolPath codes (such as 87471 to 87801 and 87900 to 87904), CMS paid $365.8 million. Also, he reported, most PLA codes are unused and that the total amount CMS spent for these codes was $116 million. This amount includes the top two tests in this category, one for Foundation Medicine and one for Genomic Health’s Oncotype Prostate. Excluding those two tests reduces spending for PLA codes to $16 million, he noted. 

Contact Bruce Quinn, MD, PhD, at 323-829-8637 or



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