Tested: How West Virginia incurred and paid heavy COVID test costs amid price gouging, procurement challenges | Health

West Virginia was among 14 states with a “high” average charge of more than $144.56 for diagnostic tests, according to a 2020 Johns Hopkins study covering the first four months of the pandemic. 

There has been “a lot of price gouging going on” across the country, said Jeremy Sanford, a University of California Santa Cruz biology professor who helped create a COVID testing company in California that no longer is in business.

In West Virginia, the responsibility for vetting and approving testing services fell to the DHHR. A departmental review initiated by Gov. Jim Justice found in a report presented in November that the agency had a “complicated funding environment” challenged by inconsistent processes and unclear roles, creating obstacles to service delivery.

The DHHR’s Office of Laboratory Services signed off on testing vendors, forgoing competitive bidding to enter into open-end contracts with test providers and paying for costs as they were incurred rather than a maximum payment amount.

To secure testing vendors, the Office of Laboratory Services completed documents under state purchasing guidelines justifying approving vendors without soliciting competitive bids. The office said that was necessary for expanded capacity and to guard against “catastrophic instrument failure” or major staff shortages.

States generally should conduct competitive bidding when choosing COVID testing vendors, said Ge Bai, an accounting professor at the Johns Hopkins Carey Business School.

“[That’s] the best way to control costs,” Bai said.

State expenses piled up quickly as officials scrambled to procure critical testing services in a public health emergency without modern precedent.

Partners picked and paid by DHHR

Three Kanawha County-based testing vendors have collected more than $71 million combined from the state. Another $40 million went to a lab based more than 1,300 miles from Charleston.

“It’s important to have testing sites that are, of course, qualified, but [also] to have qualified testing providers that are nearby,” said Cindy Liu, chief medical officer at the George Washington Milken Institute School of Public Health’s Antibiotic Resistance Action Center. “It’s about distance.”

An invoice for testing services spanning from July to November 2020 submitted to the Office of Laboratory Services by Charleston-based diagnostic test provider QLabs totaled $6.6 million for more than 88,000 tests performed at a cost of $75 each.

The tests were conducted for county health departments, hospitals and nursing and rehabilitation centers.

The state has paid QLabs roughly $48.4 million, South Charleston-based West Virginia Laboratories $16.5 million and Charleston-based Appalachian Labs $6.5 million for COVID expenses.

Representatives from those labs did not respond to requests for comment.

Florida-based Maverick Scientific LLC has been paid more than $40 million to supply thousands of COVID tests to emergency medical service providers, residential youth facilities and hospice agencies in West Virginia, according to state invoices.

In a July 2021 letter offering K-12 COVID testing to the Mississippi State Department of Health, Maverick Scientific sibling company Maverick Health LLC said it sends COVID polymerase chain reaction, or PCR, tests to a federally certified lab partner, the University of Minnesota Genomics Center.

In the letter, Maverick Health reported another lab partnership with Infinity BiologiX, a company that had federally certified labs in New Jersey and Minnesota and other labs that together could process more than 1 million samples daily.

Maverick Scientific has no laboratories in a listing of labs and other facilities certified by the federal government under its Clinical Laboratory Improvement Amendments, or CLIA, program. That program’s aim is to ensure laboratory quality through certification. The program lists three certified independent labs in New York belonging to Maverick Health.

When asked about Maverick Scientific’s lack of CLIA-certified labs, a company representative said Maverick partners with CLIA-certified reference laboratories to process tests.

Laboratories may refer patient samples to another CLIA-certified laboratory for testing. A reference laboratory receives a specimen from another laboratory that it tests. Maverick declined to say which of its reference laboratory partners have processed tests administered in West Virginia.

West Virginia paid more than $2.84 million to Maverick Scientific in shipping costs across 18 invoices covering more than 460,000 tests from December 2020 to January 2022. Shipping cost accounted for one of every $7 of the total $40 million Maverick invoiced the state.

Liu said partnering with test providers that have tests processed elsewhere “isn’t preferred” and would raise costs.

“I would not consider that to be a laboratory,” Liu said of labs that rely on other lab partners to process test samples. “They’re almost like a concierge.”

The University of Minnesota Genomics Center said it billed Maverick roughly $3.4 million from the start of testing in April 2021 through mid-August 2022 for services provided by the center under contract with Maverick, for roughly 175,000 samples. That amount doesn’t include new obligations from a contract that began then, according to the center.

The center said the primary test it performs costs $11 to $28, depending on the volume of samples committed per week.

Kentucky, Minnesota and Mississippi also have contracted with Maverick for COVID testing.

In a statement provided in response to a list of questions, Maverick Scientific said it supplied West Virginia with masks, gloves, gowns and other protective equipment in 2020 before the DHHR began contracting with the company in October of that year. Maverick said it has provided more than 1 million COVID tests nationwide.

The state agreed to pay Maverick for diagnostic COVID tests at $100 per test. Maverick lowered that price to $80 per test later in October 2020, a move the company said it made to price its service more competitively.

“Maverick is extremely proud of its service to West Virginia,” the company said in the statement provided by Charles Ryan Associates, a West Virginia-based communications firm. “It has provided a reliable source of testing that has helped protect the health of first responders, healthcare providers, the elderly, and West Virginians generally.”

Liu estimated that it should cost a high-capacity laboratory $15 to $25 to run individual COVID PCR tests. Bai similarly estimated that it costs testing companies about $20 per test.

West Virginia has paid testing vendors three to four times that amount for each of that kind of diagnostic test, generally in line with other states.

Bai coauthored a report published in the peer-reviewed Journal of General Internal Medicine last year estimating that independent laboratories experienced average monthly revenue growth of 8% from May to December 2020. The labs earned at least a $10 profit per test, the report found.

The study coauthored by a Hawaii State Department of Taxation representative and University of Hawaii at Manoa researchers predicted that high profits for testing providers would result in financial consequences for plan sponsors and higher insurance premiums, passing a greater cost burden to patients.

Maverick said service, levels of assistance, testing modalities and when contracts were signed affect prices.

Maverick’s largest invoice to the state totaled more than $6.1 million, covering more than 77,000 PCR tests at $80 apiece across 10 counties from November 2021 through January 2022.

Timothy Priddy, the director of the DHHR’s Center for Threat Preparedness, signed the invoice Jan. 28, 2022, certifying testing services were received and approved for payment. He signed another invoice the same day paying another $5.5 million to Maverick for roughly 70,000 tests at $80 each across another 18 counties.

The invoices included an additional $1 million for shipping, driving the total cost to more than $12.7 million for the two invoices. The date of payment covering those invoices was March 24, according to Auditor’s Office data.

Office of Laboratory Services Director Sharon Cibrik certified tests were received and approved for payment in other invoices.

A September 2020 QLabs invoice submitted to the Office of Laboratory Services and signed by Cibrik totaled $2.6 million for tests, the majority of which cost $75, conducted the month before at hospitals, universities and county health departments throughout the state.

Elsewhere, the pandemic has prompted widespread concerns about profiteering.

In March, Blue Cross and Blue Shield of Minnesota filed a federal lawsuit against GS Labs LLC alleging the Nebraska-headquartered COVID test provider pocketed millions of dollars in duplicative testing fees.

The insurance company said GS Labs systematically subjected insured patients seeking COVID screening to expensive and wasteful testing and then billed their insurers, including Blue Cross and Blue Shield. GS Labs has denied the allegations.

Last month, the U.S. Department of Health and Human Services Office of Inspector General released a report finding that 378 labs billed Medicare Part B – a program that covers lab tests – for additional diagnostic tests alongside COVID tests at questionably high levels. That total amounted to one of every 50 labs studied.

The Office of Inspector General concluded that further scrutiny of billing by those labs was needed and referred the labs to the Centers for Medicare and Medicaid Services for further review. The office declined to identify the labs and has not responded to a Gazette-Mail Freedom of Information Act request seeking that information.

The DHHR’s process for vetting and monitoring COVID testing vendors was designed by senior agency officials, according to spokeswoman Emily Hopta.

Prospective lab test providers had to register as a vendor whose lab certification information would be vetted by the Office of Laboratory Services, Hopta said. Their business status would be vetted by the West Virginia Fusion Center, a collaborative state agency combining law enforcement, public safety and private entities designed to analyze hazard and crime information, per Hopta.

The Center for Threat Preparedness would monitor statewide testing numbers and lab sample turnaround times. Hopta said if a contracted lab was taking longer than 48 hours on average to provide reliable results, they weren’t assigned other testing events until the turnaround time met that expectation.

Threat center staff monitored the number of tests filed into an electronic reporting system and compared that with lab invoices and numbers reported by incident commanders assigned to oversee community testing events, Hopta said.

Hopta said there were occasional cases in which minor discrepancies in reporting were discovered but no instances reached the level of a breach of contract.

Sanford noted the importance of the nearly 35-year-old CLIA program in setting up quality standards for laboratory testing.

But critics say the program hasn’t ensured high enough standards, allowing too many facilities to operate without routine inspections. During the pandemic, the Centers for Medicare and Medicaid Services has eased CLIA regulations.

The agency allowed non-certified facilities to be treated as operating under a certificate while their application is being processed and, because of supply concerns, allowed laboratories to use expired COVID test kits and swabs.

In January 2022, an Office of Laboratory Services supervisor was quoted as saying that “[a]nyone can obtain a CLIA Waiver” in a Consumer Reports article contending U.S. rules have allowed a “Wild West” in which for-profit labs charge whatever they want without health care experience.

“The process includes an application and payment, and applications are typically processed within five days,” Office of Laboratory Services supervisor Dana Stillwagon said in the Consumer Reports story.

When asked about the quote, Hopta downplayed the COVID connection.

“The CLIA Waiver has existed since 1988 and the quoted information is not specific to COVID testing,” Hopta said.

Laboratories with CLIA certificates like those held by QLabs, West Virginia Laboratories and Appalachian Labs typically are inspected every two years. Those with a lower-level certificate aren’t subject to routine inspection but may be inspected in response to a complaint or to otherwise determine it’s not posing a serious public health risk.

The DHHR has relied on a Division of Health Central Office fund also used to pay pension and retirement expenses and cover lab and office supplies in its payments to COVID test vendors, according to Auditor’s Office data.

Justice spokesman Jordan Damron said the DHHR often pays providers and seeks reimbursement from buckets of federal money like grant funding from the Federal Emergency Management Agency and the Centers for Disease Control and Prevention.

The DHHR received $180.2 million in CDC infectious diseases control funding for 2021 and 2022 and $52.7 million in FEMA Public Assistance grant funding for COVID testing covering most of the first two years of the pandemic, according to those two federal agencies.

Justice Deputy Chief of Staff Ann Urling said the state had spent roughly $70 million as of November on additional COVID-eligible expenses for which the state hadn’t been reimbursed. Damron said in October the DHHR had racked up $45 million in invoices to be processed just for testing.

“We’re continuing to get invoices coming in to us,” Urling said in a November phone interview. “There are still some federal grants that can be used for COVID testing and vaccinations and those kinds of things, but we don’t know, really, what’s outstanding there as far as invoices go in relation to the funding that’s there.”

The DHHR reported 1,565 active COVID-19 cases statewide Friday. New cases likely are being severely undercounted due to the rise of home testing and people opting not to test at all, experts say.

“It’s definitely important now to be quite stringent in ensuring important performance criteria are met,” Liu said.