Lab Allegedly Billed Medicare for Tests It Did Not Perform

Following up on a Sept. 19 intelligence briefing, an attorney told The Dark Report that a federal case alleging genetic test fraud showed hallmarks of pass-through billing. 

As such, it raises questions about whether reference laboratories associated with this case had obligations to report to federal authorities that they performed tests for Medicare beneficiaries, but did not bill Medicare for those tests, as required by law. 

Danielle Tangorre at Robinson & Cole
Danielle Tangorre

“Under certain circumstances, reference work might be permissible, but only if properly disclosed when billed, reported to the provider and patient, and all other relevant rules and regulations are followed,” said Danielle Tangorre, JD, a partner at law firm Robinson & Cole LLP in Albany, N.Y. 

The case involves Missouri resident Jamie McNamara, who was indicted in July on various counts of fraud and kickbacks. (See TDR, “Feds Target Genetic Test and Telemedicine Fraud,” Sept. 19, 2022.) 

McNamara operated four lab companies in Louisiana and Texas, which the government collectively called McNamara Labs. Federal prosecutors said that from 2018 to 2020 McNamara allegedly submitted to the Medicare program $174 million in false claims for genetic tests. McNamara did not perform the tests, instead sending the specimens to reference labs. 

“The federal indictment alleges that the reference rules were not followed, and that McNamara Labs billed for the tests as if they performed them,” Tangorre observed. “These appear similar to allegations in pass-through billing schemes because of allegations of failing to identify the lab performing the testing, or a failure to follow the 70/30 rule for billing, or both.” 

Under Medicare’s 70/30 rule, if a clinical laboratory refers out more than 30% of its testing, it cannot bill Medicare for work that it refers. (See TDR, “Attorney Explains 70/30 Rule, Pass-Through Bill Arrangements,” July 9, 2018.) 

“Many pass-through billing schemes involve allegations of rural hospitals and labs using higher-paying, in-network hospital rates. Such allegations are not present in the McNamara indictment,” Tangorre noted. However, the indictment mirrors concern identified in a 2020 genetic test fraud paper published by the Healthcare Fraud Prevention Partnership, in which the federal government participates. 

The U.S. Attorney’s Office for the Eastern District of Louisiana said it had no comment on the McNamara case’s pass-through billing implications. 

Reference Lab Relationships 

It’s unclear whether the reference labs involved with McNamara Labs had an obligation to report the situation, Tangorre said. Improper relationships amongst reference labs might result in similar allegations as found in the McNamara indictment. 

“Any reference labs working with McNamara would have an obligation to review the nature of that relationship as it relates to all applicable regulatory rules, but we do not have enough facts here to assess their reporting obligations,” she explained. “Such reference relationships might be permissible in certain circumstances.” 

Labs that refer genetic tests to other labs must tread carefully over the 70/30 rule, while reference labs must be mindful of the situations in which tests are sent to them.  

Contact Danielle Tangorre at dtangorre@rc.com. 

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