In many ways, the COVID-19 pandemic increased the business opportunities available to clinical labs, including molecular and respiratory labs. As the nation—and the world—struggled to develop adequate testing infrastructure, the federal government loosened restrictions on labs. However, as time went on, instances of fraud and misconduct increased. As a result, the Federal Bureau of Investigation (FBI) and the Health and Human Services Office of Inspector General (HHS-OIG) quickly changed positions and are now investigating and prosecuting labs with greater vigor than before the pandemic.

Anyone who owns or operates a respiratory or molecular lab that even tangentially handles COVID-19 testing should be on high alert. The FBI and OIG are both aggressively pursuing cases against these labs, which can lead to a host of serious civil—and, in some cases—criminal penalties. Given the recent crackdown on clinical laboratories, it is imperative that labs plan for an investigation and take the necessary steps to ensure compliance.

Avoiding an FBI or OIG Investigation in the First Place

The Department of Justice and OIG are constantly on the lookout for respiratory and clinical labs that are out of compliance. But what exactly does being out of compliance mean? As those who operate in this industry know, it is heavily regulated. Thus, there are myriad laws and regulations that clinical labs must adhere to. However, many FBI and OIG investigations are centered around how the lab bills for its testing, and more specifically, how the lab bills the federal government. However, there are also other potential risk areas that labs must be aware of.

Below are some of the most cited violations in FBI and OIG investigations of molecular and respiratory labs.

1. Lack of Medical Necessity

Clinical labs that bill the federal government through Medicare can only do so for testing that is medically necessary. Of course, in the context of many lab tests, physicians order the tests, and the labs are only the ones to carry out the testing. However, this face does not absolve a lab from performing a medically unnecessary test. In other words, labs responsibility must make an independent determination that testing is medically necessary before billing Medicare. Additionally, COVID-19 testing raises additional issues because many patients seek testing of their own volition. This guidance is to address the general safety equipment concerns of laboratory personnel during the COVID-19 pandemic. In these situations, it is imperative that lab personnel ensure testing is medically necessary. Otherwise, a lab runs the risk of raising the government’s eyebrows, which can trigger a lab-wide investigation. All laboratory equipment must function effectively and efficiently, as per the manufacturer's specifications.

2. Improper Referral Relationships

The healthcare field is rife with all types of relationships between labs, doctors, pharmacists, hospitals, and so on. Most of these relationships are permitted, provided the terms of any remuneration agreement comply with the applicable laws. However, in an effort to rout out Medicare fraud and related government waste, the federal government has the means to hold all involved parties accountable. Thus, labs must closely scrutinize their relationship with physicians, marketers, and consultations to ensure all terms are above the board.

3. Billing and Coding Errors

Improper billing, upcoding, double billing, unbundling and other types of Medicare billing fraud have increased significantly over recent years, and the federal government is aware of this. Thus, respiratory and molecular labs should review all billing and coding procedures yearly to ensure ongoing compliance. The Medicare billing and coding requirements are complex and ever-changing, making this a top priority for labs nationwide.

5. Review Hastily Drawn-Up COVID-19 Policies

In the wake of the COVID-19 pandemic, labs scrambled to meet the demand thrust upon them. Understandably, this resulted in many labs quickly developing COVID-19 testing policies that, while laudable in intent, may not be as ironclad as the lab’s other procedures. However, now that the federal government has shifted its focus onto labs, it is imperative that labs revisit all COVID-19-related policies to ensure that they are compliant with current laws and regulations.

By addressing each of the above issues, labs significantly decrease the likelihood of an FBI or OIG investigation into their practices. Of course, avoiding an investigation may not be available in every situation. However, to the extent possible, developing a robust compliance program absent a pending investigation is the best way to avoid an investigation. Not only will a compliance program reduce the likelihood of an investigation, but it can also frame the investigation. Labs that have taken the time to develop a comprehensive compliance policy start the investigation off on the right foot.

5. What to Do if an FBI or OIG Investigation Is Pending

Ideally, labs will have acted to implement the appropriate procedures to avoid an investigation in the first place. However, that isn’t always possible. For labs already under investigation, the best practice is to immediately reach out to an experienced healthcare defense attorney.

It is a common misconception that a lab or other healthcare provider does not need an attorney unless and until the filing of charges. However, by the time the federal government initiates a civil or criminal action, some of the best opportunities for an attorney to quickly resolve the problem have passed.

For example, if a lab reaches out to a clinical laboratory defense attorney as soon as it learns of an investigation, an attorney has the ability to be proactive rather than reactive. The attorney can immediately intervene in the investigation, potentially influencing the outcome. And if a lab is able to contact a lawyer before investigators arrive, the attorney can conduct a thorough review of all practices and procedures in advance of the investigation. This will give management an idea of what—if anything—investigators may uncover, giving them an opportunity to develop a comprehensive defense strategy to address the potential risks.

Dr. Nick Oberheiden, a federal healthcare defense attorney with Oberheiden, P.C., explains:

“When it comes to FBI or OIG audits, clinical labs should focus a significant amount of effort on avoiding the audit in the first place. While it may be tempting to wait to address any deficiencies until there is a sign of a pending investigation, by that point, much of the benefit a compliance program would provide is lost. In some ways, a compliance program is like an insurance policy; it costs money up front, and you hope to never need it, but if you do, you’re darn glad it’s there. Of course, a robust compliance policy does more than protect against adverse findings in an investigation, by educating employees and mid-level managers, it also decreases the chances of committing any violations. While compliance is the best line of defense, it isn’t the only one. Respiratory and molecular labs subject to an FBI or OIG investigation which apply in their particular situation.”

The bottom line is that anyone learning that their lab is subject to an FBI or OIG audit probably isn’t having a good day. But, it doesn’t necessarily mean that it’s a doom-and-gloom scenario, either. The important thing is to be proactive and reach out to an experienced clinical laboratory defense firm as soon as possible to work on a comprehensive defense strategy.