SIDEBAR: The OIG Laboratory Compliance Guides - 1997, 1998

SIDEBAR to a broader article.

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• OIG (1997) Model Laboratory Compliance.   62 Fed Reg 9435 (7pp), 3/3/1997. Here.
• OIG (1998) Laboratory Compliance Update.  63 Fed Reg 45076 (12pp), 82/24/1998.   Here. 

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Sidebar: The 1997–1998 OIG Laboratory Guidance — Why It Was Written, What It Said, and Why It Still Matters

When the Office of Inspector General issued its clinical laboratory compliance guidance in 1997 and then again in 1998, it was responding to a technology shift that now feels quaint but was genuinely disruptive at the time: the widespread adoption of automated, multi-channel analyzers. These platforms could run many chemistry tests simultaneously, often more efficiently than running a single analyte alone. The policy problem was immediate and practical. Medicare payment rules were built around individually ordered tests, but laboratory technology was increasingly optimized around bundled or parallel testing.

OIG recognized that it could not regulate laboratories by pretending this technology did not exist. Instead, the agency focused on what it viewed as the real compliance risk: billing and utilization behavior, not the internal mechanics of the analyzer. Across both guidances, OIG made clear that laboratories were not prohibited from running multiple tests together, even when only a subset was ordered for a particular patient. What mattered was that only those tests that were ordered, medically necessary, performed, and reported were billed to Medicare

This principle runs throughout both documents. OIG repeatedly emphasized that laboratories do not practice medicine and do not decide medical necessity, but they are nonetheless responsible for ensuring that claims submitted to Medicare reflect only services that meet Medicare’s coverage standards. Laboratories were expected to design requisitions, billing systems, and utilization monitoring processes that discouraged overordering and prevented the automatic billing of unnecessary test components. Running a “superset” of tests was not itself problematic; billing indiscriminately for that superset was.

Seen from today’s vantage point, this guidance maps cleanly onto modern molecular workflows. A laboratory may find it efficient to run genes A, B, and C together because they are ordered together most of the time. The OIG’s position—then and now—is not that this efficiency must be undone, but that the laboratory must ensure that gene B or C is not reported or billed when it is not ordered or medically necessary. That is the core continuity between the era of chemistry analyzers and the era of sequencing panels.

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What the Two Documents Share

Taken together, the 1997 and 1998 guidance articulate a unified regulatory stance. First, physicians may order any tests they believe are appropriate, but Medicare will only pay for tests that are covered, reasonable, and necessary. Second, laboratories are expected to structure their operations to support conscious ordering, not passive or default overutilization. Third, laboratories must have internal controls—requisition design, notices to physicians, utilization monitoring, and billing safeguards—to prevent automated technology from driving inappropriate claims. And fourth, OIG made explicit that laboratories could face False Claims Act or kickback exposure if their pricing, marketing, or billing practices encouraged unnecessary testing

Importantly, neither document treats automation as inherently suspect. The tone is pragmatic, even permissive. OIG’s concern is not how many assays an analyzer can run, but whether the laboratory’s business practices undermine Medicare’s medical-necessity framework.

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What Is Distinctive About the 1997 Guidance

The 1997 guidance is best understood as a first-generation response to automated testing. It is closely focused on multichannel chemistry panels, CPT-defined profiles, and requisition design. OIG spends considerable time on the mechanics of ordering—encouraging laboratories to design requisitions that force physicians to actively select tests, document diagnoses, and understand the billing consequences of profiles and customized panels. The document also introduces detailed recommendations around physician notices, acknowledgments for customized profiles, and internal monitoring of utilization growth, including the now-famous suggestion to investigate test volume increases exceeding 10 percent year over year

In short, the 1997 guidance is granular and operational. It reads as OIG’s attempt to translate a new technological reality into concrete compliance behaviors for laboratories that were still learning how automation intersected with Medicare rules.

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What Is Distinctive About the 1998 Guidance

The 1998 guidance does not reverse the 1997 conclusions; instead, it refines and institutionalizes them. By 1998, OIG had issued compliance program guidance for hospitals and home health agencies, and it sought to align laboratory guidance with a broader, cross-industry compliance framework. The 1998 document is therefore more explicitly structured around the seven elements of an effective compliance program, drawing on the Federal Sentencing Guidelines and corporate integrity agreement experience.

Substantively, the 1998 guidance updates the discussion to reflect policy changes, including the elimination of certain multichannel chemistry billing codes from CPT, and it places greater emphasis on standing orders, reflex testing, and confirmation testing. OIG is more explicit about discouraging standing orders as a default practice and stresses that even where standing orders exist, laboratories must periodically revalidate their medical necessity

 The tone is less about teaching laboratories how automation works and more about embedding laboratory billing into a mature compliance culture.

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Why This Still Matters

Read together, the 1997 and 1998 OIG guidances show an agency grappling—deliberately and incrementally—with the consequences of automation. They do not prohibit efficient testing platforms. They do not require laboratories to cripple their workflows. Instead, they insist on a separation between what technology can do and what Medicare will pay for. That distinction remains foundational today, whether the platform in question is a chemistry analyzer, a sequencing pipeline, or a digital diagnostic workflow.

Understanding this history helps explain why modern debates about molecular panels and reflex testing feel familiar to regulators. The questions are old. Only the machines have changed.