Medicare Audit Finds Up To $888M in Improper Payments for Genetic Tests

A blue door with two small holes in it.

Inadequate oversight by the Centers for Medicare & Medicaid Services (CMS) of payments for the highest paid genetic test risked up to $888 million in improper payments, according to a recent audit by the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG).

OIG reviewed Medicare Part B claims for more than 450,000 genetic tests billed under CPT code 81408 with dates of service between 2018 and 2021. CPT codes ranging from 81400 through 81408, are general genetic testing procedures arranged in order of increasing complexity, with 81400 being the least complex and time-consuming and 81408 being the most complex. In addition to the review, OIG also interviewed CMS and Medicare contractor officials.

These tests were provided to approximately 240,000 enrollees. Of the $888.2 million, $865.7 million (97 percent) was paid by two of the seven MACs. In addition, of the $888.2 million, $413.2 million (47 percent) was paid to the 10 laboratories (of 237 laboratories in total) that received the most Medicare payments for CPT code 81408 during the audit period.

What the agency found was CMS and the Medicare Administrative Contractors’ (MACs’) oversight of Medicare payments for CPT code 81408 did not:

  • Ensure that all Medicare enrollees had established relationships with ordering providers. (OIG analyzed the top 10 ordering providers’ relationships with the enrollees on these claims. It showed that seven providers in 2018 and eight providers in 2019 did not have established relationships with any of the enrollees for whom they ordered genetic tests billed under CPT code 81408. Two of the top 10 ordering providers were part of a fraud scheme involving genetic testing.)
  • Ensure that Medicare payments for CPT code 81408 were related to diseases associated with genes that would generally be tested and billed under that CPT code.
  • Include adequate monitoring of the number of tests billed under CPT code 81408, a Tier 2 molecular pathology procedure (MPP) code, to determine whether that number exceeded the number of tests billed under Tier 1 MPP codes.
  • Not all MACs could identify the specific gene tested by laboratories that billed CPT code 81408

Although five of the seven MACs had Local Coverage Article guidance that prohibited or limited use of CPT code 81408, two MACs’ Local Coverage Articles did not limit its use.(Local coverage Articles are a type of educational document published by the Medicare Administrative Contractors (MACs). Articles often contain coding or other guidelines that complement a Local Coverage Determination (LCD).

OIG noted that although CMS officials stated that the agency conducts data analysis (e.g., to identify high-risk providers), it failed to ensure that the MACs provided enough oversight of billing and payments for CPT code 81408.

As with all audits, OIG made a number of recommendations. In this case it said that CMS direct the appropriate Medicare contractors to:

  • Review claims billed under CPT code 81408 for the audit period to determine whether they complied with Medicare requirements
  • Determine the number of improper payments for the claims that did not comply with Medicare requirements and recover up to $888.2 million for claims that were at risk of improper payment during the audit period.
  • Notify appropriate providers (i.e., those for whom CMS determines this audit constitutes credible information of potential overpayments) so that they can exercise reasonable diligence to identify, report, and return any overpayments in accordance with the 60-day rule and identify any of those returned overpayments as having been made in accordance with this recommendation.

CMS concurred with the first and third recommendations but not the second but provided information on actions that it planned to take to address this recommendation.

OIG said it conducted this audit because prior work identified increased spending on Medicare Part B genetic testing, as well as fraudulent billing of genetic tests. OIG noted that although there may be legitimate reasons for the increased spending, the increases indicate the potential for improper payments.

A previous analysis showed that, for 2016 through 2019, CPT code 81408 was the genetic-testing procedure code with the second highest total Part B payments and was the molecular pathology procedure with the highest Medicare payment amount ($2,000). This code may be billed when testing for multiple genes associated with rare diseases. Because these diseases generally show up in childhood, the genes associated with them would not generally be tested for in the Medicare population. Therefore, there is a risk of Medicare improper payments for this CPT code, OIG noted.

The Health Law Offices of Anthony C. Vitale can assist your practice should you become the target of an audit or an investigation into overpayments. Our team of skilled attorneys also can assist you in making sure that you are billing properly for services.  For more information call us at 305-358-4500 or email

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