Settlement Reached: MAC Audit of Diagnostic Labs to Pay Back Only 17%

Regulated Facilities

Primary Issue:
Two diagnostic laboratories in Michigan received a request from a drug rehabilitation center to conduct comprehensive toxicology screens for its residents. The primary goal of these thorough tests was to ensure that the residents remained free from all types of narcotics, thereby supporting their journey towards recovery.

Following a MAC Audit of the laboratories’ billing, a Medicare Administrative Contractor (“MAC auditor”) communicated its decision to halt further payments for the 22-panel toxicology screens that had been previously invoiced to both Medicare and Medicaid. The MAC auditor deemed all the tests as “medically unnecessary” and subsequently demanded a reimbursement of $875,000 from the laboratories.

In response to this situation, and despite a previously denied Request for Reconsideration, the laboratories engaged Senior Attorneys Aaron J. Kemp and Jonathan C. Lanesky with a determined effort to contest the substantial clawback amount.

After the prior counsel’s attempt to secure a hearing with the Michigan Office of Administrative Hearings and Rules was denied, our team inquired about the availability of a further appeal, or mediation, to seek a resolution.

It was evident that the appeal’s prospects relied on establishing a strong basis of documentation between the rehabilitation center and the laboratories. Unfortunately, Attorneys Kemp and Lanesky faced an uphill battle, as the laboratories lacked the tangible documentation to validate the necessity of the conducted tests. To bridge this gap, they initiated contact with the physician responsible for ordering the tests to obtain a signed affidavit.

This affidavit outlined that, while the 14-panel tests were cost-effective, they did not encompass the diverse range of substances for which the rehabilitation center’s residents were being tested. Hence, the 22-panel tests were deemed indispensable due to their comprehensive scope.

This constituted the core argument in their appeal: the outright rejection of the necessity of each individual test was arbitrary and unreasonable, given the absence of a valid foundation to conclude that every test lacked medical validity.

Upon submitting the appeal to MAC auditor, Attorneys Kemp and Lanesky were contacted and informed that the auditor was open to a settlement. Recognizing this opportunity, Attorneys Kemp and Lanesky proactively pursued the invitation to discuss a potential resolution.

Through the strategic efforts of Attorneys Kemp and Lanesky, a complex and challenging situation was navigated, resulting in a negotiated settlement that alleviated the financial burden on the laboratories. The MAC auditor accepted the proposal for quarterly payments, equalling to 17% of the total clawback amount.

Area of Law:
Medicare Provider Appeals
Healthcare Audit Defense
Medicare Compliance

Aaron J. Kemp
Jonathan C. Lanesky

Disclaimer:This is not legal advice. Everything described in this case result is for informational purposes only and not for the purpose of providing legal advice. You should contact our attorneys directly to obtain any and all legal advice with respect to your particular issue or matter. Nothing here should be construed to form an attorney-client relationship.

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