Lab Finances to Become More Challenging

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When you finish reading our story about how Medicare spending for molecular and genetic tests jumped by as much as 700% in certain states during 2019, you’ll be among the first in the nation to understand why a financial crisis is soon to wash over those clinical laboratories and pathology groups that perform genetic tests.

We thank Bruce Quinn, MD, PhD, principal of Bruce Quinn Associates LLC, in Los Angeles, for sharing his early findings with us. After the Medicare program made public the 2019 claims data in September, Quinn accessed it to analyze spending on molecular and genetic tests. He determined that abusive billing for a number of CPT codes is one logical conclusion for why payment for genetic test claims shot up exponentially in 2019, compared to 2018. Quinn also noted that Medicare genetic test payments for 2018 were 100% greater than 2017. You can visit brucequinn.com to read his blog on these findings.

There is a simple economic fact: no healthcare system in the world can sustain a spending increase of 700% in one year for some services. Thus, what will be the response of the Medicare program to the flood of molecular and genetic test claims? Particularly when, as Quinn notes in his blog postings, one obvious conclusion from a study of the billing data is that billing fraud is rampant.

Data shows some lab companies bill large volumes of certain genetic CPT codes and a large portion of those claims are being reimbursed by a handful of Medicare Administrative Contractors (MACs) whose test coverage criteria are not as comprehensive as, for example, the MolDx program. It would also be safe to assume that the same lab companies filing large numbers of claims for medically-unnecessary genetic tests are doing the same to private payers.

If true, then the stage is set for government and private payers to have a rational reason to do what they always do when some sector of the clinical lab market taps the fee-for-service piggybank with huge numbers of false claims. They will: a) stop coverage of specific tests; b) slash their reimbursement for those tests to make them unprofitable; c) audit abusive labs and seek huge recoupment; and/or, d) bring legal action against the most egregious offenders.

Unfortunately, as payers take these steps, it is the law-abiding labs and pathology groups that suffer. The market developments described above are the reason why all labs can expect their finances to be more challenging going forward.

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