Labcorp Agrees to Pay $14.5 Million to Resolve Medicare Billing Allegations Over Urine Drug Testing

Key Takeaways

• $14.5 Million Settlement: Labcorp agreed to pay $14.5 million to resolve False Claims Act allegations involving Medicare Part B billing for urine drug testing.
• Testing Panel at Issue: The government alleged that Labcorp's ToxAssure Comprehensive panel resulted in medically unnecessary claims for some Medicare beneficiaries by combining presumptive and definitive testing in the manner it was performed and billed.
• Admissions in Settlement: As part of the agreement, Labcorp admitted, acknowledged, and accepted responsibility for specified facts concerning its testing and billing practices between January 1, 2018, and November 22, 2023.
• Billing Practice Changed: Labcorp represented that it has ceased billing Medicare using the combination of CPT code 80307 and HCPCS code G0483 for beneficiaries tested through the ToxAssure Comprehensive panel.
• Cooperation Credit: The Justice Department said Labcorp received credit under its False Claims Act guidelines for disclosure, cooperation, and remediation efforts.

Deep Dive

Laboratory testing is supposed to answer a medical question. The Justice Department says one of Labcorp's testing panels became something else entirely, serving not only as a diagnostic tool but also, according to the government, as a vehicle for billing Medicare in ways that produced medically unnecessary claims for some patients. The laboratory diagnostics company has agreed to pay $14.5 million to resolve allegations that it submitted false claims to Medicare Part B for medically unnecessary urine drug testing performed through a panel marketed as ToxAssure Comprehensive.

The settlement, announced Wednesday, covers conduct between January 1, 2018, and November 22, 2023, and centers on a deceptively technical question that has become increasingly familiar in healthcare fraud enforcement: when does the way a service is packaged and billed make parts of that service medically unnecessary? What makes the case notable is not an accusation that Labcorp invented tests or billed for work it never performed. The government's complaint is more specific, and in some ways more revealing. It focuses on how the company assembled, performed and billed a single testing panel.

Urine drug testing generally comes in two forms. Presumptive testing serves as an initial screen, detecting whether particular classes of drugs may be present. Definitive testing goes further, identifying specific substances and, where applicable, their concentrations. Medicare reimburses the two differently. Laboratory-based presumptive testing is paid at a flat rate under Current Procedural Terminology code 80307, regardless of how many drug classes are included. Definitive testing involving 22 or more drug classes is reimbursed under Healthcare Common Procedure Coding System code G0483.

According to the settlement agreement, ToxAssure Comprehensive combined both approaches. For some substances, the panel used presumptive testing. For others, Labcorp proceeded directly to definitive testing without first performing a presumptive test for those substances, even though a presumptive testing option existed for several of them.

The company admitted, acknowledged and accepted responsibility for a series of facts describing how the panel was billed. It routinely performed the presumptive and definitive portions of the panel simultaneously, using the same urine specimen from the same patient on the same date of service, then billed Medicare under both CPT code 80307 and HCPCS code G0483. In effect, the government alleged, Medicare was billed each time for both the all-inclusive presumptive code and the highest-tier definitive testing code whenever the ToxAssure Comprehensive panel was performed.

When Billing Design Becomes a False Claims Case

That billing pattern is where the dispute turned into an enforcement action. The United States alleged that, for some patients, performing and billing the full ToxAssure Comprehensive panel in that manner resulted in medically unnecessary claims being submitted to Medicare.

Federal officials framed the settlement as a reminder that reimbursement rules exist to reflect medical judgment, not billing opportunity.

"The government expects that any testing it pays for is medically necessary and not wasteful or structured in a way that maximizes billing opportunities for providers at the expense of the federal fisc," Assistant Attorney General Brett A. Shumate of the Justice Department's Civil Division said in announcing the resolution.

U.S. Attorney Leah B. Foley for the District of Massachusetts said the settlement demonstrates her office's commitment to combating healthcare fraud and recovering taxpayer funds, while Acting Deputy Inspector General for Investigations Miranda L. Bennett of the Department of Health and Human Services Office of Inspector General said providers who place profits ahead of patients and disregard Medicare's billing rules should expect enforcement action.

The settlement also looks forward rather than only backward. Labcorp represented that it has stopped billing Medicare using the combination of CPT code 80307 and HCPCS code G0483 for beneficiaries tested through the ToxAssure Comprehensive panel. The Justice Department further said the company received credit under its False Claims Act guidelines for disclosure, cooperation and remediation, factors that can reduce settlement amounts when organizations assist government investigations and take corrective action.

Healthcare fraud cases often revolve around services that were never delivered or claims that were plainly fabricated. This one is different. The testing occurred. The government's challenge was whether the structure of the testing itself, and the way it was translated into Medicare claims, made portions of that work medically unnecessary. That distinction explains why the settlement is less about whether a laboratory can perform sophisticated testing than about when it should, and who ultimately pays when clinical decisions and reimbursement incentives begin pulling in different directions.

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