As the Trump administration intensifies its effort to reign-in soaring Medicare healthcare costs, the task forces led by Vice President JD Vance and CMS Administrator Dr. Oz have turned their sights on a segment of the market that exploded during the COVID-19 pandemic: molecular testing labs. Once demand for coronavirus PCR testing dropped, thousands of start-up labs pivoted to offer respiratory, UTI, wound, nail, and gastrointestinal testing services. Against this backdrop, claims for CPT 87798 increased dramatically.
After Years of Paying, CMS is Now Suddenly Denying CPT 87798 Claims
For the last several years, Medicare routinely paid CPT 87798 claims for testing of up to 13 distinct pathogens. Beginning in or around February 2026, however, CMS and its Medicare Administrative Contractors (MACs) began imposing 9-unit caps, followed by even lower, 5-unit limits. These recent restrictions have occurred absent any formal rulemaking, local coverage determination, or other notice from CMS or its MACs.
More concerning, CMS’s efforts foreshadow a vigorous enforcement initiative in its infancy. Despite the receipt of signed orders from prescribers, labs have had claims denied for lack of medical necessity, experimental or investigational determinations, and documentation sufficiency. Notably, CMS’s citation of ambiguous and inapplicable rationales mirrors its approach in other high-reimbursing areas, such as wound care or skin substitute reimbursement claims, that are currently the target of Medicare UPIC audits and investigations. This suggests that CPT 87798 enforcement is only beginning.
A Country Divided: MolDX and Non-MolDX Regions
The MACs themselves are split on how molecular diagnostic services should be reimbursed. Specifically, labs in regions governed by the Molecular Diagnostic Services (MolDX) program, administered largely by Noridian, are required to obtain a unique DEX code z-identifier (Z-Code) to receive reimbursement for laboratory developed tests or expanded panels that test for more than five targets.
In contrast, labs in regions administered by Novitas, First Coast, and NGS are not subject to the MolDX program or Z-Code requirements. Not surprisingly, Medicare UPICs are now targeting this reimbursement difference between MolDX jurisdictions by initiating audits of labs with multi-state locations on the theory that they may be billing tests performed elsewhere to non-MolDX MACs. In short, the fact that Medicare is now auditing the very same reimbursement dislocations it fostered for years suggests one of two things: either the MACs are attempting to shift blame for their negligence or this was nothing but a trap designed to reduce the number of diagnostic labs enrolled in federal programs.
Enhanced Regulatory & Audit Capabilities for Labs
Against this backdrop, labs have increasingly turned to Health Law Alliance, a national healthcare defense firm, for assistance navigating “place of service” codes, reference lab and specimen-routing requirements, and “jurisdiction shopping” claims. The firm has built a strong reputation by delivering results in high-stakes matters involving Medicare and commercial payors, including the filing of public lawsuits in federal and state court, and the successful reversal of tens of millions of dollars in unjustified audit findings.
The firm recently announced the strategic expansion of its Audits and Investigations attorney team to better serve providers facing unprecedented federal and state suspensions, revocations, audits and investigations by CMS, Unified Program Integrity Contractors (UPICs), private payors, and state agencies. The firm’s attorneys include several attorney-clinicians and former government officials who draw on their experience in government enforcement, payor oversight, and healthcare operations, to help clients respond strategically when reimbursement, licensure, or reputation is at risk.
