Labs Most Successfully Billing CMS for 81408, 87798 in 2021

This week, the Centers for Medicare & Medicaid Services (CMS) released billing data categorized by code and by laboratory (or physician) for the calendar year 2021 -  here

We closely examined the billing data for code 81408, Tier 2, Level 9, as it was the primary code used by numerous laboratories indicted by the Department of Justice (DOJ). A substantial number of these labs have either pled guilty or been convicted, with a significant concentration of the activity in Texas and Florida. For a detailed instance of a guilty plea involving 81408 billing in 2023, refer to this link.

Additionally, we scrutinized the billing data for code 87798, given that a large proportion of the billing occurred in Molecular Diagnostic (MolDx) states. Notably, these states transitioned from a notably lenient claims processing approach in 2021 to a tightly controlled methodology in 2022, as documented here.  We assessed potential Medicare savings under the new LCD, using 2021 data for MolDx states.

81408 / 2021

In 2021, the laboratory that achieved the greatest success in billing for code 81408 received a total of $188M from Medicare. This lab, located in Texas, billed almost exclusively with Tier 2 codes. Of this $188M sum, over half was paid under code 81408. Tier 2 codes were billed in multiples of two per patient, the only exception being 81407, which was billed in multiples of one.

The revenue this lab generated from 81408 in 2021 exceeded $100M, accounting for roughly a third of the national payments for this code in the same year, which totaled $280M. Interestingly, this lab exhibited a closely similar pattern of Medicare billing in the previous year, 2020, although the revenue generated then was significantly lower, at around $30M, 85% less. 

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87798 / 2021

We looked at 87798, and especially in MolDx states, due to the new MolDx LCD restricting this billing.  In 2021, the laboratory that billed most successfully for code 87798 was located in the Carolinas, receiving approximately $57M in total from Medicare. About half of its revenue for that year was derived from COVID-19 testing (codes U0003 and U0005).

Code 87798, denoting an "amplified probe, other", with a value of $35, accounted for $14M of the lab's total revenue. A variety of smaller codes - including those for candida, staph, strep, and AMR - constituted the remainder of its billings.

If we exclude the COVID-19 codes, roughly 40% of the lab's revenue was generated by 87798. Of the nationwide $208M in payments for 87798, this lab's $14M represented approximately 7%. This indicates that the payments for 87798 were broadly distributed across various labs.

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Based on these examples, for 2021, if we extrapolate in a simple way that high-billing 87798 labs bill about 1/3 of their non-Covid molecular micro billing as 87798, then their total non-Covid molecular micro billing would be in the range of 3x$208M (87798) or $600M.    Similarly, if 81408 labs bill around 1/2 in 81408 and 1/2 in other Tier 2 codes, then Tier 2 billing would be circa 2x$280M (81408) or  $500M-$600M.   Smile: Actual Tier 2 payments in 2021 were $594,949,414 (based on October 2021 Excel sheets released by CMS), e.g. close to $600M, so the back-of-envelope math and the exact methods foot pretty closely.  

 art: bing.com/create