Genetic Testing – Health Plans Should Develop a Proactive Plan to Prevent Fraud

July 24, 2020 HMS

In the area of laboratory services, fraudulent claims are all too familiar. Genetic testing is a relatively new, in terms of mainstream lab services. It should come as no surprise, however, that bad actors have seized upon new opportunities to use these tests for their own gain.

Kickback arrangements are one common type of fraud associated with genetic testing. Providers accept payments from labs in exchange for ordering tests that are medically unnecessary. Billing for services that have not been provided is another practice that plans should be aware of.

Certain types of genetic tests are more appealing for fraud than others. For example, genetic diagnostic tests present a unique opportunity for bad actors. While Medicare covers only one genetic screening test, it covers many genetic diagnostic tests. As a result, vast numbers of older adults are potential targets for genetic diagnostic testing abuse.

Pharmacogenomics is another category of genetic tests that is growing in popularity. Pharmacogenomics tests evaluate specific genes to predict how individuals will react to certain medications. When providers order these tests, they often tell patients that the results will reduce the risk of adverse drug events. UTC Laboratories, for example, paid $42.6 million in a settlement for allegedly paying kickbacks to physicians for ordering pharmacogenetic testing and for billing for testing not medically necessary.

In response, health plans should consider expanding their fraud screening and prevention strategies to include genetic tests. Examples of proactive steps include:

  • Regularly running analytics and searching for suspicious patterns in the data. For instance, do certain providers routinely order genetic diagnostic tests for patients covered by Medicare? Another way that analytics can help identify fraud is to conduct peer comparisons. Does one provider order genetic tests in higher volumes than his or her peers?
  • Screen providers. For all lab providers that are currently billing, plans should confirm that they have screened them appropriately. Screening processes should include a review of licenses, inspection history, CLIA records, CMS 116 application forms, and more.
  • Implement payment policies related to genetic testing. Health plans may consider developing formal policies related to the testing codes they will cover. More generally, plans may also want to add terms to provider contracts that bar pass through billing.

There’s no doubt that advances in medical diagnostics can deliver significant benefits to patients. It’s essential, however, for health plans to stay one step ahead of the organizations and individuals who want to take advantage of the system for their own profit. This means staying alert to signs of fraud and abuse related to genetic testing and other new types of laboratory procedures. HMS can help your organization reduce waste associated with unnecessary tests, while continuing to provide essential services to members.


To learn more about this opportunity area, download our white paper – Investigations 101: Laboratory Services Fraud and Abuse.

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