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The genetic laboratory testing sector was flipped upside down this week as a sea of payment suspension letters hit the mailboxes of molecular labs throughout the Novitas region.

The letters indicate a new stance by the CMS central office in Dallas to deny payment for labs performing Cancer Genetic Tests (CGx) for patients with a familial history of cancer. This appears to be an attempt to stop the bleeding as genetic labs continue to ring up the bill to Medicare for cancer genetic tests, which reimburse well in an environment in which most lab tests have seen reimbursement cut to the bone. See an excerpt from the letter below.

The stop payment letters follow a sweeping Federal Lab Enforcement action involving cancer genetic labs and as many as 380 individuals. Read the Department of Justice letter here. While there are several individuals listed that seem to surface whenever there is a quick buck to be made, the list also includes many labs that have taken a cautious and legally informed approach. The allegations of corruption seem reaching and the announcement seems to be written in an inflammatory tone whose objective is to spook the market to stave off another $2B in CGx Medicare lab bills in the second half of the year. Lab owners are left wondering if meeting the medical necessity guidelines set forth by Medicare is no longer enough to be considered “medically necessary”.

If you view these actions in the context of CMS’s stated objective to reduce laboratory expenses by $5B through a series of PAMA cuts over the next 10 years you start to get the whole story. Despite PAMA cuts, laboratory spending increased last year and looks like it will be even higher in 2019. The only course of action left to CMS until the next fee schedule is rolled out is to scare labs from performing this testing via Federal investigations and limit the number of tests being ordered by narrowing the medical necessity requirements.

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This quick overview was written by the Founder of Lighthouse Lab Services, Medical Laboratory Industry Disruptor, Jon Harol