Health department records show some pathology companies rorted Medicare during COVID pandemic, expert says

Some Australian pathology companies engaged in widespread and "systematic rorting" at the height of the COVID-19 pandemic, with new documents revealing accusations of fraud, cost-shifting and "opportunistic" claiming by companies conducting tens of millions of COVID tests.

One doctor requested 21,000 tests in a single day, in breach of rules that doctors must clinically assess each case individually, according to documents obtained by the ABC after a three-year battle with the Department of Health and Aged Care.

The 2022 compliance reports from the department's "Benefits Integrity and Digital Health division", obtained under Freedom of Information laws, showed the department received dozens of tips alerting it to potential frauds of COVID testing during the pandemic and that officials were concerned about reports of potentially "opportunistic claiming".

They also show cases where pathology companies were operating state-government funded pop-up and drive-through testing clinics — but instead billing the federal government's Medicare scheme.

These state-based centres were already half-funded by the federal government under a national partnership agreement, so billing Medicare in full was a cost-shift to the Commonwealth.

The reports showed testing had also occurred without valid referrals from a doctor or nurse practitioner.

Health economist Professor Stephen Duckett is a former Secretary of the Commonwealth Department of Health and Aged Care and said it was clear from the documents there was "systematic rorting on a very large scale".

Peak body Australian Pathology chief executive Liesel Wett said its members were subject to routine compliance audits and there was no evidence of rorting.

"To our knowledge, there has never been any significant findings of Medicare non-compliance against members of Australian Pathology during the period," she said in a statement.

She said there were also multiple checks and balances in the system and disputed the "notion" that a patient who presented without a referral should not have been tested.

"The overwhelming public health messaging from all tiers of government was to get tested if you felt you had symptoms, or felt you had been exposed, particularly given they were required to isolate till they got the results of a test. It would have been absurd to refer patients back to a GP."

'Looks to be deliberate'

The documents showed the Department of Health and Aged Care received 47 calls and emails to its fraud hotline about COVID testing.

Professor Duckett said that quantity of calls to a departmental hotline should have set alarm bells ringing.

"That seems to me to be absolutely remarkable. You very rarely get calls about fraud (in the department)."

In a statement however, a spokesman for the federal department of health said the 47 tips only made up about 1 per cent of the overall tips it received during the height of the pandemic.

Professor Duckett also said testing centres should have known whether they were set up by the state government or not, and who to bill.

"My own view is that it looks to me deliberate," he said.

Ms Wett said they were in routine engagement with health ministers, departments and public health officials about their work.

Ms Wett said the claims of cost-shifting — the practice of billing the federal government's Medicare scheme instead of the state government partnership — was in relation to a dispute between the federal and state governments about financial responsibility for testing.

"At various points, some states refused to pay providers for the delivery of services," she said.

"Service providers could not wait for it to be resolved as we required cashflow to sustain record levels of testing."

Co-claiming for other viral tests common

For members of the public the non-compliance was only evident when they received an SMS text with their COVID test results after going through a drive-through.

Sydney mother-of-three Kate, who didn't want to use her surname for privacy reasons, said her son's results showed he was also tested for influenza A and B and RSV after attending a drive-through clinic in November 2020.

"It was confusing when we first saw it, because we were quite used to just having the one result on there," she said.

"We actually had to go through it a couple of times to sort of figure out which bit was the COVID result," she said.

As a parent she appreciated the extra information, but said as a taxpayer she was concerned.

"Especially at a time when the labs were having to process so much stuff, it would have put a lot of extra pressure on the labs as well. It's really disappointing."

Professor Duckett said data showing co-claims for flu and RSV tests at drive-throughs should also have been a red flag to the department, which described them as potentially "opportunistic" claiming.

Under the rules pop-up and drive-through clinics were solely for surveilling the spread of COVID-19 through testing, not for diagnosing other illness.

"It's just not consistent with those rules," he said.

Ms Wett said "co-claiming" of tests would have been impossible because state governments asked the industry to focus on COVID-testing exclusively and the practice didn't restart until the second half of 2022.

However, Kate's son's SMS test results provided to the ABC showed a major pathology chain running a drive-through clinic did exactly that as early as November 2020.

Department responds with warning letters

The documents show that in response to these compliance concerns the Department of Health and Aged Care wrote letters to nine pathologists and four pathology companies in October and November 2020 "reminding them … that tests needed to be clinically relevant to be claimed through Medicare".

They sent more letters to six pathology companies in September 2021 telling them that asymptomatic or surveillance testing had to be claimed through the state government, not through the federal government's Medicare program.

The warnings continued in December 2021 with letters sent to seven pathology companies.

The documents don't indicate which companies it wrote to or whether companies were contacted more than once.

Professor Duckett said it was clear that enforcement was poor.

"These are very powerful operators, but it looks like they're not being held to account and they ought to be."

Professor Duckett said the case of the doctor who requested 21,000 tests in a day should have prompted a major investigation.

"This doctor could not have seen that number of patients and made an informed decision, whether this was a routine test, whether this was a symptomatic test, it just is not possible for that to have happened."

The Department of Health and Aged Care spokesperson said it had "robust" compliance programs and while it was unable to share details of its "investigations and treatments" it should not be assumed that writing to pathology companies was the full extent of its compliance work.

"The department does not assume non-compliance from data alone. Generally, there is a need to assess additional information with the rendering health professional, testing provider or state government," it said.

"Compliance activities undertaken at the time resulted in a significant shift toward compliant billing. Consideration of compliance in this area is ongoing."

So how much was lost?

The documents don't indicate exactly how much money was lost to non-compliance during the pandemic.

What we do know is the bulk-billing rate for a private pathology COVID test was $72.25. The one doctor who claimed 21,000 would have taken $1.5 million from Medicare alone.

By January 2022 there had been approximately 27.8 million bulk-billed COVID-19 tests nationally since the start of the pandemic, at a cost of around $2.3 billion to Medicare.

Even if just 1 per cent of claims were fraudulent that would be $23 million.

The documents do indicate the department sent warning letters to up to seven pathology companies at different stages, and there are only seven companies who are members of peak body Australian Pathology and two are IVF companies — which suggests non-compliance was widespread.

There are a range of other smaller pathology businesses but most of the pop-up testing was done by major operators.

At the start of the pandemic Australian Pathology negotiated lucrative deals with the Commonwealth to do large-scale COVID testing required to track the viruses spread and keep cases under control.

As this table shows, in the years that followed they made millions of dollars in profits after getting a four-fold increase in the Medicare Schedule Fee for COVID tests due to the urgent nature of the pandemic.

Money talks continue

The revelations come as the industry wages its "Keep Pathology Free" campaign amid new negotiations with the federal government to end a 24-year freeze on the fees Medicare pays for tests that they bulk-bill, despite improved technology making the industry more efficient.

In this year's Federal Budget pathologists were granted an indexation on one-third of pathology tests from July 1 next year, along with a suite of other changes.

The figures above show how profits in the pathology sector surged from large scale COVID testing during the pandemic.

Peak body Australian Pathology is a regular donor to both the Labor and Liberal parties under its name Pathology Australia and during the pandemic donated about $50,000 to each side of politics.