Diving Into Medicare Billing for Amniotic Tissues-BioLab Sciences

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biolab sciences medicare

My job as the medical director for the Regenexx network requires me to keep abreast of everything that’s going on in regenerative medicine. When it comes to amniotic tissues, we have companies who claim that they can get these products covered through insurance to treat things like knee arthritis. While I’m pretty sure this is a very dangerous billing fiction, I need to know if Medicare and other insurers have decided to extend coverage for these tissues. Hence, I did a deep dive into the claims of a company called BioLab Sciences. In my opinion, what I found was equal parts mind-blowing and dangerous. Let’s dig in.

Who is BioLab Sciences?

BioLab is located in Arizona. Based on it’s FDA Tissue Establishment Registration, it processes, packages/labels, stores, and distributes amniotic tissue and skin. They sell an amniotic fluid product called “BioLab FluidFlow”, which is stored at room temperature.

The biggest issue that our research team has seen when testing amniotic fluid products sold at room temperature is that the growth factors that make these products work degrade quickly at that temperature, so the products we have tested that are stored that way tend to be growth factor poor. Hence, we have avoided these products for that reason. However, it should be known that we, as a provider network, periodically use amniotic tissues to help enhance PRP in selected patients. Hence, if I liked BioLab’s product, they could be a potential vendor to our network.

Be that as it may, on September 1st of this year, an e-mail was sent to my office which said:

“BioLab Sciences Fluid Flow Amnio injections for pain management are now covered by payers (both CMS and commercial payers). This allows Amnio treatments to be available to many more patients while also providing a significant revenue stream to your practice.”

That intrigued me as this sales rep was claiming that I could get this amniotic product covered by using it to treat my patients who were in pain. Again, it’s my job as Chief Medical Officer for Regenexx to vet that claim.

Is any of that true? Is that legal? Will we get in trouble? Strap in for another Mr. Toad’s Wild Ride here as I tour what I came to understand is the dark underbelly of manufacturer suggested “insurance reimbursement”.

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Amniotic Tissues and Insurance Coverage

The claims of BioLab Sciences and other companies all begin with a simple premise. Medicare covers amniotic tissue when used in certain surgeries and for wound care. For example, if a neurosurgeon wants to use a piece of amniotic membrane (the covering of the birth sac) to patch a hole in the dura or an ophthalmologist wants to use some to treat a defect in the cornea, both of those products will usually be covered by Medicare. In addition, if a wound healing center wants to sprinkle some amniotic membrane onto a non-dealing diabetic skin wound, there is generally coverage for a narrow set of circumstances. However, outside of these clinical circumstances, there is usually ZERO coverage for amniotic products for things like arthritis, tendinitis, spine, or pain.

The Beginning of Creative Billing-The Q-Code

So if there is no coverage for amniotic products in “pain management” how could this work? Through what magic trick could this rep be claiming that Medicare will cover this stuff? It turns out that this happens through the obtuse sorcery of the product reimbursement coding system.

If you ask most physicians what a “Q-code” is you’ll likely get a blank stare. You would have the same blank stare from me 6 months ago as I had to look it up. Basically, it’s a billing code that allows a hospital, surgery center, or clinic to get reimbursed for a product used during a procedure. In my opinion, it’s also where this massive nationwide medical billing scam starts.

Getting a Q-code is pretty easy, especially if you have a product that’s covered for some Medicare indication. Because amniotic tissues are covered as above for use in certain surgeries and wound healing, all a new amniotic product manufacturer has to do is to hire an expert to submit the proper paperwork to Medicare. There is then a periodic meeting where the committee rubber stamps these requests and adds a specific Q-code that references a specific amniotic product.

The Next Step-Submitting the Right Codes and the Appeals Process

OK, so BioLab, like most other amniotic product vendors has a Q-code (Q4206), but that only applies to when their product is used in the above listed surgical and wound healing applications. None of that has anything to do with injections for pain management. How do you get from a Q-code to getting this reimbursed for a spine facet injection?

This is where the game playing really begins. Once you have your Q-code, the next step in what I came to eventually consider as a scam is to find the right diagnosis codes to submit with Medicare claims to get paid. Or you wait until the claim is denied and then appeal until one happens to go through and then point to that one paid claim as evidence that other claims should be paid.

Frankly, all of this is trial and error, but not hard to figure out. You just start submitting claims and see what the results are and keep a spreadsheet of the right code combinations. For example, as I have been told on the phone by one of the billing companies involved with BioLab Sciences or it’s sales reps (Total Ancillary in Atlanta, Georgia), if you submit a diagnosis code for a painful condition in the spine (like a pinched nerve), you’re less likely to get reimbursed. However, if you add other codes that are more like the ones that let’s say a neurosurgeon might submit in patching the dura, you’re more likely to get paid.

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Where Reality and a “Creative Coder” Award Meetup

At the end of the day, there are a few complex Medicare terms you need to know here if you’re a provider that wants to avoid federal prison. If you’re a patient, you should know about all of this because you may one day be responsible for this huge bill when Medicare wants their money back. So let’s jump in.

The first is “MAC”. That’s Medicare speak for one of 12 regional companies assigned government contracts to administer Medicare benefits. For example, Noridian is our MAC in Colorado. There’s a different one for Texas (Novitas) and yet another for New York (NGS).

The next critical term is “LCD”, which means “Local Coverage Determination”. That is a set of guidelines set up by each MAC that determines what they will cover or deny. Usually, you need FDA style clinical trials to get a Medicare MAC to issue any coverage through an LCD.

The problem with this creative amniotic billing arrangement is that no MAC (that I can find) has issued any LCD that says that amniotic tissue injections are covered for any indication involving painful things like arthritis or back pain. Hence, if you try to bill for amniotic tissue reimbursement to treat knee arthritis and play with the codes to get Medicare to pay, it’s the provider that’s in serious trouble. Meaning the medical provider is expected to know what is and isn’t covered.

For example, here are some statements from MAC documents:

Noridian: To date we have not received any evidence based, peer reviewed clinical literature published in the core medical journals to support any other use. Therefore Noridian considers clinical use outside of the care of DSU and VSU (venous stasis ulcer) as not reasonable and necessary and non-covered.”

Novitas– Injection of micronized or particulated human amniotic membrane is considered investigational for all indications, including but not limited to treatment of osteoarthritis and plantar fasciitis.”

Every major insurer I can find that has weighed in on this is below. “E&I” means Experimental and Investigational-which means this is NOT a covered benefit:

The Prior-Auth Delusion

One of the common themes in these creative Medicare billing ventures is that the billing company hired by the manufacturer selling the amniotic tissue product will get a special “Prior Authorization” or blessing from Medicare to ensure that the product gets reimbursed. The problem? After speaking a certified coder, there is no such thing as a Medicare Prior Authorization. There is no number to call, there is no form to submit. Nada. Hence, Medicare has no mechanism to grant special payment authorizations. In reality, what’s likely happening are multiple appeals when Medicare denies payment.

The RAC is Just Like a Medieval Rack

We’ve all heard about “The Rack” from Medieval times. This was a way to torture people and frankly, from a physician’s perspective, Medicare RACs aren’t much different. RAC stands for Recovery Audit Contractor. This is a company that makes a cut of every dollar they recover from a doctor who has inappropriately billed Medicare.

This process starts when the Medicare system flags a clinic. A RAC nurse then asks for medical records to review claims. Here that would be a procedure notes showing that the doctor injected amniotic membrane or fluid to treat knee arthritis. The nurse then looks up the LCD to see if that’s covered. If it’s not (which it isn’t), a letter is generated to the provider threatening legal action by the justice department if they want to dispute the RAC’s findings (i.e. you too can have your day in court) or lists amounts (many times in the hundreds of thousands of dollars) that the clinic must pay to reimburse the Medicare program. That request to pay the money back is called a “clawback”. The clinic at that point must spend tens to hundreds of thousands on an attorney to deal with the RAC. He or she can also take Uncle Sam to court, but the government has a very high conviction rate, and losing one of these cases can mean federal prison time for the doctor.

My Call to Biolab and Its Reps

BioLab and/or its contracted sales reps use an “Account Management” company called “Radiant Health Solutions”  and work with a company in Atlanta called “Total Ancillary” that focuses on “Reimbursement Optimization” and “Billing and Coding Guides”.

I first called “Total Ancillary” and spoke with a “sales rep”. I asked, “How could this be covered by Medicare?”. I basically got a song and dance about how their Q-code (Q4206) had yet to show up in the Medicare LCD documents, but that was coming. When I asked about the fact that there was no LCD s showing that I could use this product to treat knee arthritis and get reimbursed, the sales pitch went off the rails. When I asked how the coding worked, it was explained to me that the company was keeping a spreadsheet of which codes got reimbursed by Medicare, so they could advise me which codes to use or if the ones that I wanted to use would be likley to work. When I asked if Total Ancillary would guarantee against a Medicare RAC audit and clawback, I was told that I would need to speak to the higher-ups. At the time of this writing, I have not been contacted by anyone else from Total Ancillary.

I next reached out to the CEO of BioLab Sciences, Bob Maguire. I asked Bob whether the company stood by the concept that their Q-code allowed for reimbursement from Medicare for problems like knee arthritis. He stated that he wasn’t sure which presentation I was talking about because they have many sales distributors and they are trying to get a handle on what each is claiming. He said he would contact me back with a quote. I sent him an email to confirm my question, but as of this writing, I had not heard back.

A Rebate Agreement Allows Me to Pocket Medicare Dollars?

In my opinion, when things got really weird and possibly illegal is when I reached out to the BioLab sales rep who had contacted me. First, this was just a sales pitch, but then she sent me a contract that would allow me to pocket Medicare product reimbursement money. Let’s dive in here.

I wrote down what she told me (I’m paraphrasing here):  “All the commercial payers and Medicare are covering it. If for any reason there is a denial, and the company can’t get it reimbursed, the company will replace the fluid.” When I seemed dubious, she said she would send me EOBs (paid invoices). She also explained that there is an in house billing team at BioLab. She then told me that the profit for me per cc is running around $800-900. So for example, if I injected a hip, I would use 2 ccs and make just under $2,000.

However, what I found out next floored me. In the stuff she sent with the EOBs, was a contract called “BioLab Sciences Fluid Flow Fulfillment Agreement”. It seemed to be some sort of rebate back to me for 40% of the cost of the product. I was confused so I called her back and asked and she said, “We sell it for $1,200 per cc and you bill it to Medicare for $2,000. To make that more “kosher” (my word not hers), the company has come up with a rebate policy. This is to prop up our Medicare pricing.”

So as I understand it, the company can’t sell it for less than $2,000 per cc because that’s the price they have listed with Medicare. Hence, they would sell it to me for $1,200 and I would pocket the difference because Medicare would pay $2,000 (plus a small mark up). Huh?

Since I am not an attorney, I immediately called three attorneys who have experience in healthcare issues to vet this arrangement. While none reviewed the actual contract and provided a written legal opinion, two upon hearing about the arrangement thought it could violate the Medicare and Medicaid Patient and Program Protection Act. One thought that the devil would be in the exact details of how this was set up. What’s the act about? Rules that govern how doctors can make money while interacting with manufacturers of drugs, tissues, and devices.

The EOBs

EOB stands for “Explanation of Benefits”. This is the form you get back when an insurance company or a federal program like Medicare pays a bill you’ve submitted. Angela the sales rep sent a few dozen bills that had been paid, many of these were for amniotic fluid nebulizer treatments. On the pain management front, there were about a dozen EOBs that suggested payments from Medicaid, United Healthcare, Tricare, Blue Cross Blue Sheild, and the VA. In fact, since United appeared several times, I contacted their CMO for our region and he again confirmed in writing that United doesn’t cover this product to treat things like knee arthritis or for orthopedic applications.

My Conclusions

In my opinion, after thirty years of medical practice, I can’t rubber-stamp this for our provider network. I have very serious concerns that these claims are just a RAC audit away from this whole reimbursement house of cards falling down. For providers, when that happens, this will be a massive source of anxiety and real dollars lost in checks back to insurers and to attorneys. In addition, I have serious concerns about the legality of the rebate contract and pocketing money that comes from Medicare when the doctor is aware that as far as Medicare knows, that money is going to reimburse the doctor for the exact cost of the product.

For patients, most physicians have you sign a document that says if your insurer won’t pay, you owe that money. Hence, when the doctor gets a letter asking to repay hundreds of thousands of dollars he doesn’t have, who do you think is going to get that bill? In addition, that amount in any individual case could be sizable. For example, if the doctor injects 2 cc of this stuff in both knees and a hip, that’s almost $7,000 that you will owe.

Why is the Creative Reimbursement Plan Proliferating?

The biggest reason is that most physicians don’t know how Medicare billing works, they outsource that to some company. Hence when the amniotic product manufacturer offers up a billing company that claims to be getting special approval for these products to treat things like knee arthritis, most doctors just don’t know enough to ask the right questions.

The upshot? Again, it’s my job to know if it’s possible to get reimbursed from Medicare for an amniotic fluid injection. What I found is that while reimbursement may be possible, in my opinion, it’s likely not legal. Hence, we’ll steer clear of this one.



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