Taming the ‘Wild West’: Enforcement Trends and Reimbursement Issues Facing Independent Clinical Laboratories

BY LAURA G. HOEY AND DEBORAH K. GARDNER I n 2014, San Diego-based Millennium Health LLC, one of the nation’s largest drug-testing laboratories, employed approximately 1,000 people, tested over 2.5 million specimens annually, and generated roughly $680 million in annual revenue. On the other side of the country, Health Diagnostic Laboratory Inc. (HDL), a Virginia-based company specializing in cardiovascular blood tests, generated over $375 million in annual revenue and processed over 3,600 samples per day in 2013. By the end of 2015, both had reached multi-million dollar settlements with the U.S. Department of Justice (DOJ) and promptly declared bankruptcy. The rise—and swift fall—of Millennium and HDL signals a new juncture for independent clinical laboratories. Rapid advances in science and technology coupled with increased demand for personalized medicine led independent clinical laboratory testing to outpace the regulatory and reimbursement framework governing its services. Some even characterized the independent clinical laboratory industry as the ‘‘wild west.’’ Yet, that may be changing: recent DOJ enforcement actions, whistleblower-launched False Claims Act (FCA) lawsuits, commercial payer preand post-payment claim reviews, new local coverage determinations (LCDs) restricting Medicare coverage of laboratory tests, recent legislation reducing reimbursement for covered laboratory tests, Centers for Medicare & Medicaid Services (CMS) payment suspensions based on purported credible allegations of fraud, and enhanced scrutiny from the Food and Drug Administration (FDA) as it considers regulating laboratory developed tests (LDTs) suggest a heightened focus on independent clinical laboratory practices and even a threat to their livelihood and survival.