Urine drug screen revenue up 19,164% in CA worker’s comp cases in 8 years

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I have posted before about the urine drug screen industry and how lucrative it is…as well as how ripe it is for abuse and fraud (Calloway Lab’s $20 million settlement for Medicaid fraud, Kickbacks and other abuses, Ameritox’s $16.3 million settlement with the DOJ for kickback allegations, Ameritox’s suit against Millennium Laboratories for alleged kickbacks, etc).

Well, there is a new report from the California Workers’ Compensation Institute that looked at the number and cost of drug screens and how much employers and insurance carriers in the state of California paid for urine drug screen tests for injured workers during the years 2004-2011.

The study uncovered some interesting things:

  • The number of drug testing dates of service increased 4,537%
  • The total amount paid by employers and insurance companies for drug testing increased 19,164%
  • The average amount paid per date of service increased 315%
  • Extrapolating the results to the entire worker’s comp system, it is estimated insurance companies and employers will have spent nearly $100 million in 2011 and is expected to reach $150 million this year

Why the massive increase?  While there has been an increase in the number of prescriptions for Schedule II opioids, people that study the industry say there is more to it than that (emphasis added):

But industry experts say the soaring cost of drug screens is not just a reflection of the increasing use of narcotic painkillers. It’s also caused by unnecessary testing, overbilling and outright fraud by doctors and drug screening companies.

“They’re billing for too many drugs. They’re doing it too often and in many cases they’re getting results that don’t mean anything,” one industry source told American News Report.

Doctors perform on-site drug screens of dubious accuracy that costs them a few dollars, and then turn around and charge insurance companies and employers hundreds of dollars.  And from where can they get these handy-dandy on-site drug testing kits?  From the same large drug testing companies that will later perform confirmatory testing on the same sample, and bill another $1,000-2,000.

So you’re running two tests, when in fact you really only need to be running one. The doctor is billing for one test and the laboratory is billing for a second test, on the same patient, on the same date of service. Only one of them really may be necessary. And in many cases they’re doing it far too frequently and for too many drugs.

Keep in mind a few things about this study.  One, we don’t know whether the narcotics patients are being prescribed are absolutely necessary for pain management or are being prescribed so someone can have a reason to perform lucrative drug testing later.  Two, this study only looked at the worker’s comp system in California, which is why the numbers are relatively small.  Extrapolated to all patients across the country and now you’re talking real money, not just a “measly” $100-150 million.  Three, doctors and large drug testing companies will bill patients for the balance they are not paid by insurance companies and employers for the tests, and that revenue is not accounted for in this study.  The out-of-pocket costs for patients that get balance billed can be massive (thousands of dollars), and sometimes there is shockingly little transparency as to what is being ordered and whether insurance plans will cover any of it before the tests are ordered.

Here is a link to the original study.  Just click on the .pdf icon on the far right of the first line.

Courtesy of American News Report:

A new report by the California Workers’ Compensation Institute (CWCI) documents an astonishing increase in the number and cost of drug screening tests.  Insurance companies and employers in California paid nearly $100 million for drug tests in 2011, almost 200 times what they paid eight years earlier. The annual cost of drug testing in the state’s work comp system is expected to approach $150 million this year.

“This huge increase in drug testing coincided with the dramatic growth in the volume of Schedule II opioid prescriptions (major narcotics such as OxyContin, fentanyl, morphine and methadone) dispensed to injured workers,” the CWCI said in a statement.

But industry experts say the soaring cost of drug screens is not just a reflection of the increasing use of narcotic painkillers. It’s also caused by unnecessary testing, overbilling and outright fraud by doctors and drug screening companies.

“They’re billing for too many drugs. They’re doing it too often and in many cases they’re getting results that don’t mean anything,” one industry source told American News Report.

The CWCI study found that between 2004 and 2011, the average amount billed per drug test rose from $81 to $207 (+156%).

The number of drug screens in the study also soared, from 4,012 tests in 2004 to 186,023 tests in 2001 (+4,537%).

“This study confirms a viral-like growth rate in the volume of drug testing and in the amounts billed and paid for these services,” the CWCI report said. “Data analysis and anecdotal evidence from managed care specialists suggest an implied strategy of serial testing at the point of service for many opioid prescriptions and refills. This creates an environment in which tests must continually be conducted to determine the presence or absence of specific pharmaceuticals, which according to experts and treatment guidelines, often should not have been prescribed in the first place.”

Overbilling for Drug Tests

The “serial testing” often involves Point of Care Tests, so-called instant tests that doctors can perform in their offices with a urine sample from a patient. Instant tests, which are not always accurate, screen for about a dozen different drugs.

A source with wide experience in the drug screening industry told American News Report that an instant test may only cost a doctor a few dollars, but physicians can bill insurers hundreds of dollars for the service. Doctors are encouraged to do this by drug test laboratories that sell instant tests and provide drug screening of their own.

“It’s a very competitive industry. They want that doctor’s business, so say they say ‘Hey doc you can buy this test for $5, you can bill it out for $800 to $1000’ or whatever the fee schedule is for that state’s workers comp,” explained the source, who says the testing laboratory often conducts a second confirmation test on the same urine sample. That test may cost another $1,000 or $2,000, which is also billed to insurers.

“So you’re running two tests, when in fact you really only need to be running one. The doctor is billing for one test and the laboratory is billing for a second test, on the same patient, on the same date of service. Only one of them really may be necessary. And in many cases they’re doing it far too frequently and for too many drugs.”

Overbilling for drug tests is not limited to the worker compensation system. Ameritox, Calloway Laboratories, Quest Diagnostics, Labcorp and other drug testing companies have been charged or are under investigation for defrauding Medicare and Medicaid with a variety of billing and kickback schemes.

Value of Drug Tests Questioned

In 2009, California’s Division of Workers’ Compensation adopted guidelines that recommend doctors test injured workers who are prescribed opioids. But the guidelines don’t spell out how often the tests should be conducted or what a doctor should do when they get the test results.

“Workers’ compensation insurers have a reputation of denying payment for procedures which show little benefit, yet they continue to pay for drug testing which has not been proven to reduce costs and improve patient care. It is astounding they continue to reimburse for this procedure,” said Mark Cullen, a patient advocate who authored a recent report claiming that profits, not patient care, were the driving force behind the soaring number of drug tests.

“I believe drug labs exploit the ‘war on drugs’ and physicians’ fears of prosecution and overdose deaths to make a fortune.  In addition, people with pain may be disabled or poor and are very easy targets,” said Cullen, who maintains that drug screens have never been proven to help patients and that “insurers are pissing money down the drain” by reimbursing for them.

The CWCI report also raised questions about the value of drug screens.

“Research is needed to determine whether, in the long run, these tests actually lead to better outcomes for the injured worker. Are injured workers who are tested more or less likely to become addicted or overdose?” the authors asked.

via Cost of Drug Testing Soars | American News Report.

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