Official Site of The State of New Jersey

TRENTON—The Office of the State Comptroller (OSC) released an audit report today finding that Star Laboratory routinely billed for urine drug testing services without adequate evidence of a doctor’s approval and should repay the state Medicaid program $3.3 million.

OSC’s Medicaid Fraud Division reviewed a sampling of claims from July 2017 through March 2021 and found that in more than 54 percent of instances, Star Laboratory, a Piscataway, New Jersey-based lab, conducted and charged for drug testing services without a signed order showing that a doctor or other medical provider ordered the testing. Additionally, in five of those instances, the lab billed for more costly tests than were requested.

Star claimed to have an arrangement in which the provider would submit requisition forms that contained pre-printed labels with the provider’s initials affixed to them. “There is no dispute that [the physician] intended and requested the lab tests by printing and affixing the label,” Star said. However, in sworn testimony, the provider told OSC that he did not review each test order and was not involved in ordering individual tests. New Jersey Medicaid regulations explicitly require orders for laboratory tests to be approved through a signature or electronic means by a licensed medical provider.

“The State adopted these regulations to prevent fraud, waste, and abuse in an industry that had been rife with corruption and grift,” said Acting State Comptroller Kevin Walsh, noting state investigations into the clinical lab industry dating back to the 1970s. “A printed label—that could be affixed to a form by anyone—violates the law and opens the door to excessive, unnecessary testing and to profiteering. Star Laboratory had an obligation to reject those test orders because they create high risks of fraud, waste, and abuse. The State will deny payment to Medicaid providers who do not follow rules that protect taxpayer funds.”

Star Laboratory, an independent clinical laboratory, was one of New Jersey Medicaid’s highest-paid labs, getting paid $7.5 million for 113,742 claims during the audit period. In addition to submitting claims without the required documentation, the laboratory also frequently failed to do some of the tests that had been ordered. In 34 percent of the instances reviewed, Star neglected to perform at least one specific drug test ordered, OSC found. For example, a provider’s test requisition called for a definitive test for cocaine, and the laboratory failed to do that test. OSC is not seeking reimbursement for these lapses since they didn’t cause Medicaid financial harm. However, such failures may well have harmed patient care.

OSC directed Star Laboratory to submit a corrective action plan to address these deficiencies. Star failed to do so and instead said it amended its processes in March 2020 and no longer accepts testing requisitions without signatures. Star also maintained that all testing conducted was medically necessary and as a result, it should not have to repay the funds. OSC disagrees, noting that Star is legally obliged to show through appropriate documentation that a licensed provider deemed the tests medically necessary. “Star does not even attempt to meet that standard but instead concedes that it arranged a system that on its face violates the requirements,” according to OSC’s report.

OSC made several recommendations and directed Star to repay Medicaid $3.3 million.

Read the report.

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To report government fraud, waste, mismanagement, or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.