Medicare OTC COVID-19 Test Demonstration Program Investigations Intensify

Aug 24, 2023
Munsch Hardt Legal Health Care Update

On May 11, 2023, the Medicare over-the-counter (OTC) COVID-19 test demonstration program concluded, ceasing reimbursement to providers for furnishing home tests to Medicare beneficiaries. This initiative allowed eligible providers to deliver OTC test kits directly to the homes of Medicare beneficiaries without charge. 

However, the program's cessation does not mark the end of regulatory scrutiny. The Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Justice (DOJ) are ramping up efforts to review provider compliance with program requirements, leading to intensified investigations and legal actions.

Expanded Investigative Avenues

Providers who received reimbursement under the program now face potential audits and investigations. These can manifest through various avenues:

  1. Administrative Audits: CMS-contracted auditors engage in administrative audits, aiming to verify compliance with the program's requirements. Insufficient documentation can lead to significant payment recoveries by CMS.
  2. Civil Investigations: The DOJ relies on the False Claims Act (FCA) to initiate civil investigations. It empowers the government to issue civil investigative demands (CIDs) for records and testimony, with non-compliance potentially leading to severe financial penalties.
  3. Criminal Investigations: The DOJ's criminal division has already begun pursuing indictments against those alleged to have engaged in fraudulent activity under the program. This includes charges against providers who submitted claims for medically unnecessary COVID-19 tests.

Nationwide Coordinated Action

On April 20, 2023, the DOJ revealed a coordinated nationwide initiative to combat health care fraud during the COVID-19 pandemic. This marked a significant step forward in addressing activities capitalizing on the pandemic for financial gains.

Central to this initiative are the criminal charges brought against 18 individuals across nine federal districts throughout the United States. These charges are rooted in the individuals' alleged involvement in a spectrum of fraud schemes related to health care services. It is alleged that these activities have not only led to false billing to federal programs funded to address the pandemic but also encompassed theft from these programs.

The government asserted the estimated total value of COVID-19-related false billings to federal programs and the misappropriation from federally funded pandemic initiatives exceeds $490 million. Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division underscored the importance of a coordinated effort, labeling it “the largest-ever coordinated law enforcement action in the United States targeting health care fraud schemes that exploit the COVID-19 pandemic.” Polite stated that the Criminal Division’s Health Care Fraud Unit, in partnership with other key stakeholders, remains committed to uncovering instances of pandemic-related fraud and ensuring accountability for those attempting to profit from the Public Health Emergency. 

Novel Charges 

Of note is the introduction of first-of-their-kind charges against suppliers of COVID-19 OTC tests, which Medicare began covering in April 2022 for those beneficiaries who requested them. The wrongdoers allegedly defrauded the system by supplying tests to deceased patients, to patients who did not request or want them or by supplying multiple tests to the same beneficiaries. 

Immediate Response and Preparedness

In summary, the termination of the Medicare OTC COVID-19 test demonstration program has ushered in a new phase of heightened investigations. Health care providers and pharmacies involved in the program are advised to be proactive in the face of this heightened scrutiny. Responding to requests for records from CMS contractors is crucial, as failing to do so can lead to a prolonged suspension of Medicare payments. Providers should be ready to submit documentation evidencing patient test requests, test delivery tracking data and any relevant supporting materials.

Consequences for Providers and Health Care Entities

Providers, health care practitioners, and pharmacies who participated in the Medicare OTC COVID-19 test program are currently facing an array of challenges. They are now grappling with a surge in record requests from CMS contractors, which is swiftly accompanied by an official notice from CMS about the suspension of Part B Medicare payments. CMS enforces the suspension simultaneously with issuing records requests, without even giving the provider a chance to produce requested records first. 

In the suspension letters,  CMS asserts that it has received credible allegations of fraudulent conduct. Specifically, the letters allege that beneficiaries enrolled in the program have either not initiated requests for the COVID-19 tests, are unfamiliar with the named provider, or have not received any tests whatsoever. The responsibility for refuting these allegations squarely falls on the providers. Amidst time constraints, providers are granted a brief 15-day timeframe to draft and deliver a comprehensive rebuttal letter directed to CMS.

In the aftermath of the program, we emphasize the importance of meticulous recordkeeping to substantiate compliance with the demonstration project. Given the substantial implications of regulatory actions, engaging legal counsel to navigate these complex legal waters is strongly recommended.

Contact the Munsch Hardt Health Care Team to discuss proactive steps that will help you prepare for investigations or requests from the regulating agencies.