An audit by the Office of the State Comptroller has found that the company Atlantic Diagnostics Laboratories regularly overcharged Medicaid for urine drug testing services. The state is saying the lab should pay back $7.3 million.

The Office of the State Comptroller released an audit report Oct. 3 after the Office Of the State Comptroller’s Medicaid Fraud Division examined a sampling of claims from January 2015 through June 2018 and found that Atlantic Diagnostics Laboratories violated Medicaid regulations when it charged Medicaid as much as $1,035 per drug test while charging other payers as little as $2.38 for the same test.

Medicaid paid between $63.40 and $180.40 for the same services. The company also improperly billed for tests that the physician or provider had not ordered or for which the company lacked sufficient documentation, according to the Office of the State Comptroller.

“Laboratories are legally required to charge Medicaid the lowest possible rate and only conduct and bill for medically necessary tests,” said Acting State Comptroller Kevin Walsh. “By violating Medicaid rules and state law, ADL was wasting taxpayer funds and draining resources from people who need them.”

The audit found that the company, which is based in Bensalem, Pa., violated one or more Medicaid regulations in all 261 instances sampled for the audit. In 88 of the 261 instances, the company either billed for tests the healthcare provider had not ordered or lacked required documentation or signatures. The audit also found that the company improperly unbundled claims, which is prohibited and typically results in a higher reimbursement rate for a provider.

Medicaid regulations prohibit laboratories from charging Medicaid more than other payers for identical tests. The state is seeking to recover $2,943,586 for documentation deficiencies, $1,140,043 for unbundling claims, and a $3,269,332 civil penalty for knowingly submitting claims that violated regulations.

During the audit period, Atlantic Diagnostic Laboratories was one of the New Jersey Medicaid program’s highest-paid providers of independent clinical laboratory services.

In addition to overcharging Medicaid, the company allegedly improperly sponsored three golf outings for one of its referring providers. State law prohibits laboratories from giving “refunds, discounts or kickbacks, whether in the form of money, supplies, equipment, or other things of value,” and it prohibits laboratories from providing “other considerations to a physician or other practitioner, whether or not a rebate is involved.”

As a result of the audit, the State Office of the Comptroller made 11 recommendations for Atlantic Diagnostics Laboratories to follow proper practices:

1. Reimburse the Medicaid program $7,352,961.
2. Ensure that the charge to the Medicaid program does not exceed charges for identical services to other groups or individuals.
3. Ensure that all orders for clinical laboratory services and all records and documentation are maintained and comply with state and federal laws, regulations, and guidance.
4. Maintain the necessary documentation and ensure that only those drug tests ordered by the physician or other licensed practitioner requesting services are tested and billed, and document all changes to the tests ordered.
5. Ensure that all of the tests orders indicate the tests to be performed, including the specific drugs or class of drugs.
6. Ensure that all drug tests ordered by a physician or licensed practitioner are performed and reported on the drug test results.
7. Ensure that all claims for drug tests comply with state and federal laws, regulations, and guidance.
8. Ensure that the company refrains from separately submitting claims for specimen validity testing from claims submitted for presumptive and definitive drug tests.
9. Refrain from offering rebates, including refunds, discounts, or kickbacks, whether in the form of money, supplies, equipment, or other things of value to its referring providers or any other entities. The company should not rent space or provide personnel or other considerations to a physician or other practitioner, whether or not a rebate is involved.
10. Provide training to staff members to foster compliance with Medicaid requirements under state and federal laws and regulations.
11. Provide the Office of the State Comptroller with a corrective action plan indicating the steps it will take to implement procedures to correct the deficiencies identified in this report.