With $1.2B in improper lab payments projected, payers are ramping up audits—putting clinical labs under intense scrutiny.
In our recent webinar, Labs Under the Microscope: Staying Ready for Payer Audits, Ann Betzel (AVP of Client Engagement at Quadax) and I shared practical strategies to help labs stay ahead of audit risks—covering what triggers payer scrutiny, what auditors are really looking for, and how to ask the right questions of your revenue cycle management vendors.
Why Payer Audits Are Targeting Labs
Labs are currently the most audited healthcare sector, due to billing complexities and a high volume of claims submitted with insufficient documentation. They also had the highest projected improper payments across all healthcare service types. That puts a target on your back.
Audit activity includes:
- Medicare TPE (Targeted Probe and Educate) audits
- UPIC (Unified Program Integrity Contractor) investigations
- RAC (Recovery Audit Contractor) reviews
- Commercial payer audits based on data mining and AI tools
These reviews focus on trends like test frequency, missing requisition signatures, incorrect coding, and a lack of clear medical necessity which can trigger recoupment or billing suspensions.
Common Audit Triggers for Clinical Labs
Auditors are increasingly relying on data analytics and artificial intelligence to flag outliers. Labs may be selected for audits if they show:
- High utilization of uncommon lab codes
- Incomplete or unsigned test requisition forms
- Missing documentation for medical necessity
- Sudden spikes in volume or billing patterns
- Tests ordered outside payer policy guidelines (e.g., MolDX, LCDs)
“We’re seeing insufficient documentation and missing medical necessity across the board,” shared Ann Betzel. “Labs rely on providers to supply this information, but if it’s missing or vague, it creates a significant compliance risk.”
How to Respond When Audits Happen
When a lab receives an audit request or ADR (Additional Documentation Request), how you respond can directly impact financial and legal outcomes. I recommend using a detailed, structured approach: Tell the reviewer exactly where the order is, where medical necessity is supported, and how the results were used in treatment.
Make sure to confirm that all required documentation—such as test orders, results, and proof of medical necessity—is complete and accurate before submission. Take time to review the specific policy requirements of the payer to ensure compliance. When responding to an audit, include a cover letter that clearly walks through the supporting evidence to help guide the reviewer. If additional time is needed to collect documentation, don’t hesitate to request an extension. Most importantly, use the audit process as an opportunity to evaluate your broader billing and documentation practices for potential gaps or systemic issues.
Build an Audit-Resilient Revenue Cycle
The best way to avoid audit penalties is to stay audit-ready. That means:
✅ Conducting regular internal audits on lab billing workflows
✅ Educating provider clients on payer documentation standards
✅ Monitoring denials to identify patterns or payer policy changes
✅ Using data analytics to assess billing trends and reduce risk
✅ Staying up-to-date on Medicare, MolDX, and commercial payer guidelines
Watch the Full Webinar
Interested in learning more? You can access the full session recording here, Labs Under the Microscope: Staying Ready for Payer Audits.
Let Quadax Help You Stay Compliant
Quadax has over 30 years of experience supporting clinical lab billing, audit response, and revenue cycle optimization. Contact us today to learn how our tailored solutions can help you reduce audit risk and accelerate reimbursement.
Danielle Tangorre is a partner in Robinson & Cole LLP’s Health Law Group advising clinical laboratories, health care providers, and hospitals on operational, compliance, and business transaction issues. She takes a holistic approach guiding clients through federal and state regulations, focusing on fraud and abuse laws. Danielle also represents clients in payment disputes and investigations before federal and state agencies and collaborates on internal investigations for healthcare entities.
