Rare-Disease Genetic Test Billing: The Gene Missing From the Medicare Claim

With 81408 genetic testing, Medicare billing can leave the payer unable to identify which rare-disease gene the laboratory tested. The code can represent testing for different genes, while the laboratory’s order, assay and result identify the particular work. If you work in accessioning, testing, billing or compliance, you may know what Medicare could not see from the claim. That connection matters when we examine genetic testing fraud: what the clinician requested, what the laboratory performed and what the government paid for.

Why CPT 81408 Can Leave the Gene Unclear

CPT 81408 is a Tier 2, Level 9 molecular pathology code, a category organized by testing complexity. In its June 2023 audit, the Department of Health and Human Services’ Office of Inspector General described 24 different genes that could be tested under that code. The claim’s code alone could therefore leave the actual gene unidentified.

The broader molecular laboratory reimbursement system supplies the price. A test identifier or claim narrative can supply the missing gene.

The Inspector General found markedly different identification practices among Medicare Administrative Contractors during its audit. These were the contractors processing and paying the claims:

The audit’s policy appendix shows the practical difference. Historical MolDX articles called for a DEX Z-code, while other articles called for the specific biomarker in the narrative. The name of the gene inside the laboratory and the information sent to the payer were separate things. We find the unenforced narrative guidance particularly striking: the contractor had asked the question, then paid without insisting on the answer.

Why Rare-Disease Testing Drew Scrutiny

The audit identified up to $888.2 million in Medicare payments at risk of improper payment for service dates from 2018 through 2021. The fee-schedule amount for the code was $2,000 per test in 2021. Ten of the 237 laboratories received $413.2 million, or 47% of the payments. Rare-disease testing had become a concentrated healthcare business.

The audit said most examples of diseases associated with these genes manifest in childhood, while Medicare predominantly serves older adults. The Inspector General therefore expected use of the code to be relatively infrequent. The volume made the missing gene more than an administrative detail: what were these laboratories actually testing?

Most of the top ten ordering providers in 2018 and 2019 had no established relationship with any of the patients whose tests they ordered, by the audit’s measure of at least two visits in the preceding six months. For an insider, that makes the source of the order part of the same comparison as the assay and claim.

Two contractors paid 97% of the total, then introduced guidance limiting the code’s use late in the audit period. The audit reported that payments had stopped by December 31, 2021, and considered the identified issues corrected. The service date matters when we examine what a laboratory told the payer under the policy then in force.

What Medicare’s Coding Rule Requires

Medicare’s coding rule connects the reported procedure to the work actually performed. The Centers for Medicare & Medicaid Services’ 2026 National Correct Coding Initiative manual says the code must describe the procedure with the greatest possible specificity, and every service described by that code must have been performed.

For molecular pathology, the procedure includes sample preparation, checks on the quantity of DNA or RNA, and the assay itself. When a genomic sequencing procedure already tests a gene, the manual bars separate payment for testing that same gene by another method. When one procedure evaluates multiple genes, the laboratory reports one unit of service for that code. A billing record that expands with the gene count needs to be compared with the procedure the laboratory actually ran.

The manual ties procedures reported together to medical necessity, the treating physician’s order and use of the results for the patient’s specific medical problem. Genetic test medical necessity asks why this patient needed the test. This page’s question comes earlier: which test did the claim describe?

What Evidence Is Needed to Prove Fraud?

Useful laboratory fraud evidence connects the requested test, the assay performed, the result, the submitted claim and the decision behind a mismatch. For rare-disease testing, the connection has to reach the actual gene or gene set. We work through those comparisons with the insider who understands how the laboratory’s records fit together and what they may show about health care fraud.

The requisition shows the clinician’s request, including any condition for additional testing. Accession and testing records connect the specimen to the assay, its method and the genes examined. The final result shows what the laboratory reported. We compare those records with the claim’s procedure code, units, narrative and identifier, using the version of the test and the contractor policy that applied to that service date.

The specimen can move through more than one business. Collection, testing and billing may involve different entities, so a send-out makes the performing laboratory’s records part of the comparison. The question remains concrete: does the description sent for payment match the work performed on that specimen?

The diagnosis has its own source. Medicare’s instructions require physician-supplied diagnostic information to support the diagnosis reported on a claim. A diagnosis the billing software picked cannot supply the clinician’s reason for testing.

This connection between the order form and the bill has a long history in laboratory compliance. Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in 1997, described the Inspector General’s recommendation for requisitions that let physicians document each test’s medical necessity. It also described telling physicians which tests a profile contained, which codes would be used and how Medicare would be billed. The practical point still fits: the ordering clinician and the billing department need to be describing the same work.

When the Order and Claim Tell Different Stories

The government joined a whistleblower case involving Tomoka Medical Lab and alleged an order-and-claim mismatch an employee could see. According to the complaint, an operations manager compared a Florida Medicaid claim with the actual requisition: the provider had ordered basic urinalysis with culture and sensitivity, while the claim billed a more expensive molecular test. The complaint described another change:

The government further alleged that the operator programmed Tomoka’s system to associate diagnoses with claims for molecular tests physicians had neither ordered nor supported with those diagnoses. The original requisition made the alleged software-driven change visible. That is the comparison an insider can bring to a genetic-testing claim whose description has lost its connection to the order.

The whistleblower’s complaint involving LabSolutions alleged a different manipulation of the paperwork. Medical assistants working for Integrated and HSS at physician practices allegedly received instructions from Integrated and the people directing referrals for those businesses to change dates on forms for cancer-genomic and pharmacogenetic testing performed on the same day to obtain reimbursement. The complaint also alleged that those directing referrals trained assistants to add false qualifying information to orders sent to LabSolutions and CLIO. Those allegations show why the service date and clinical description belong beside the assay and claim in the same comparison.

The Decisions Behind the Medicare Claim

The insider may know who selected the assay, changed the order information or approved the billing-system setting. A recurring discrepancy becomes more revealing when someone can explain the instruction behind it. We examine that decision alongside the laboratory records and the claims for government payment.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We bring the genetic-testing workflow and the people who controlled it into the same case strategy.

You Know What the Laboratory Tested

If you know which assay ran and why the claim described something else, speak with our whistleblower experts about the gap. We work beside you to connect the bench, the order and the bill into your strongest laboratory fraud case. We bring in laboratory fraud whistleblower lawyers who understand genetic testing, and we remain your partners throughout the case.