What Happens When a COVID-19 Lab Shuts Down?
During the COVID-19 pandemic, demand for COVID-19 testing increased dramatically and many clinical laboratories either began operations or rapidly increased testing capacity to meet this demand. As the pandemic ends and the demand for COVID-19 testing fades, clinical labs are scaling back capacity for COVID-19 testing, pursuing other lines of business, or closing down entirely. These transitions may raise several regulatory issues for a clinical lab to consider. Note this is not a comprehensive list, but an overview of some common issues.
Did the lab bill Medicare, the HRSA Uninsured Program, or other federal healthcare programs? Federal authorities have indicated that claims for pandemic-related services or claims to pandemic-related programs will be a focus of fraud, waste, and abuse enforcement actions for years after the pandemic. The end of the pandemic or the end of widespread COVID-19 testing will likely not be the end of the need for regulatory compliance.
Was the lab in-network or out-of-network with payors? Commercial insurers have also increased scrutiny of claims for COVID-19 testing. During the public health emergency (PHE), commercial insurers were required by federal law to cover certain COVID-19 tests and insurers incurred significant costs providing such coverage. However, insurers have begun auditing labs and demanding significant repayments of claims for COVID-19 testing. A lab that is in-network with a payor will likely have rights and obligations in regard to such a dispute dictated by its participation agreement with the payor. However, many labs billed for COVID-19 testing while out-of-network, which may put the lab in a stronger position during a dispute because the payor likely does not have a contractual mechanism to collect an overpayment. Also, labs that stop billing a paying may want to consider formally ending their participation or enrollment with a payor. Especially in the case of Medicare, simply ceasing compliance with enrollment requirements can lead to an involuntary termination or revocation, which can have significant collateral consequences.