March 30, 2026

Submitted via www.regulations.gov

Mehmet Oz, MD, Administrator

Centers for Medicare & Medicaid Services,

U.S. Department of Health and Human Services 200 Independence Avenue SW

Washington, DC 20201

RE: Request for Information Related to Comprehensive Regulations to Uncover Suspicious Healthcare (CRUSH); CMS-6098-NC

Dear Administrator Oz,

Avalon Healthcare Solutions (“Avalon”) appreciates the opportunity to respond to the CRUSH RFI. We support the administration’s eƯort to better identify fraud, waste, and abuse (FWA) in federal health programs. Our deep expertise with the lab testing industry allows us to provide a unique perspective on the RFI’s section about how CMS can more eƯectively prevent FWA in lab tests, in particular, the impact of the Palmetto-administered Molecular Diagnostic Services Program (MolDX Program).

Avalon is a diagnostic intelligence company that helps stakeholders translate lab test data into evidence-based decisions. We combine expertise in pathology and software to capture, digitize, and analyze lab results, providing actionable insights that support earlier disease detection, appropriate treatment, and cost reduction. Working with health plans, Avalon manages lab benefits across 90+ million lives to deliver 10-20% outpatient lab benefit savings and reduce member out-of-pocket costs by 25%.

As you know, laboratory data drives downstream diagnosis, drug therapy, imaging and hospital utilization. Diagnostics are the starting point for high-cost clinical decisions. When tests are overused, underused, or misaligned with treatment, federal dollars are spent ineƯiciently, and Medicare beneficiaries receive suboptimal care. The goal is not simply more or less testing, but the right testing, at the right time.

CMS has articulated a clear goal to move away from the ineƯicient “pay and chase” model for health care fraud enforcement and scale a “caught and stopped” approach. CMS has already made progress advancing its strategy to combat FWA through data-driven analysis and real-time enforcement, as evidenced by the savings reported from its Fraud Defense Operations Center (FDOC). Real-time detection, however, remains structurally retrospective – it identifies inappropriate or unsupported claims after they have entered the payment pipeline. Avalon’s experience demonstrates that using the right data, tools, and frameworks – when available – is critical to enabling a proactive model.

Avalon’s Recommendation

Avalon recommends that CMS implement both a lab integrity framework and improved prior authorization process to shift adjudication upstream, preventing improper payments at the point of submission. Improving the quality and specificity of the data available, along with key policy changes that address perverse incentives to increase the cost and misuse of lab testing, will help ensure Medicare beneficiaries are receiving the right care at the right time.

Additionally, a lab integrity framework that prevents improper payments at the point of submission would produce better claims data overall. This, in turn, strengthens the foundation on which future AI models are trained on, which facilitates the development of the “fraud-fighting toolbox” CMS seeks. AI-enabled detection systems depend on the quality and completeness of the data that they are trained and developed on; when claims are adjudicated correctly on the front end, they generate a more reliable dataset for identifying FWA. Over time, this creates the data backbone needed to enhance the accuracy, efficiency, and return on investment of CMS’s program integrity efforts.

Our recommendations include:

• Create a program integrity framework for Medicare that addresses routine lab testing, which also presents a high opportunity for fraud, alongside higher-cost genetic and molecular tests.
• Require clinical utility of lab testing by adopting public policies that ensure lab tests add value to a patient’s diagnosis and outcomes.
• Mandate lab results be included on claims to address risk adjustment concerns in MA.
• Institute site neutral payment policies to ensure lab tests are not being inappropriately shifted to higher-cost settings.
• Educate consumers on opportunities for lower-cost lab tests.
• Require lab testing-specific codes so that providers can give payers better documentation and payers can make more informed decisions.

Avalon believes that these recommendations will also support CMS’s stated goals to streamline prior authorizations and to leverage AI in improving FWA detection systems.

Responses to Specific RFI Questions

To assist CMS with creating public policy that will support the goal of reducing costs while improving the patient experience, Avalon offers the following recommendations on the RFI section titled: Reducing Medicare Fraud Related to Laboratory Tests Including Genetic Tests and Molecular Diagnostic Tests.

What new statutory or regulatory authorities would empower CMS to more effectively prevent, identify, and address fraud in lab tests, including genetic tests and molecular diagnostic tests?

Institute a program integrity framework for lab testing. Existing tools to detect, prevent, and recoup improper payments for lab testing are insufficient in proactively preventing FWA in federal health care programs. CMS should consider a comprehensive program integrity framework dedicated to lab testing to promote more consistent and efficient administration of Medicare benefits.

For example, the National Correct Coding Initiative (NCCI) is too narrow to address widespread FWA in lab testing. It was developed to promote national correct coding methodologies and to control improper coding leading to inappropriate payment in Medicare Part B claims. NCCI’s purpose is to prevent improper payment when incorrect code combinations are reported, so while it identified black-and-white billing errors, it was not designed to identify the complexity and pattern-based nature of FWA that characterizes lab testing today.

In contrast, Avalon maintains approximately 65 routine outpatient lab policies for clients in its Routine Test Management program and 65 genetic outpatient lab policies covering 100% of genetic tests for clients in its Genetic Test Management program. This allows Avalon to assess utilization and billing patterns across both routine and genetic testing and identify larger trends across the lab testing landscape.

Examples from Avalon’s 2025 Lab Trend Report below illustrate why a more comprehensive program integrity framework is needed.¹

• As the most utilized medical benefit by patients in the U.S., there are approximately 14 billion lab tests performed in the U.S. each year. This drives $82 billion in spending, yet Avalon data finds that 30% of these tests are wasteful.
• Overall utilization of genetic testing increased from 2.05 (2020) to 3.20 (2024) tests per 100 members, representing a 56% increase.
• In a subgroup analysis of members who underwent both routine and genetic testing, genetic testing accounted for 10% of utilization, but over 30% of spend, as average per member spending on genetic testing ($1,138) was more than 4x that on routine test spending ($267).
• Non-diabetic patients with under 5% cardiovascular risk were 14 times more likely to receive GLP-1 treatment than those with over 10% risk — suggesting lab result data is not being used appropriately to guide prescribing. Linking lab biomarker data to downstream treatment decisions could help CMS identify misaligned ordering patterns that may constitute waste or fraud.

CMS should adopt a program framework for lab testing that will promote more consistent and efficient administration of Medicare benefits, consulting industry best practices, like those Avalon leads.

Require Clinical Utility of Lab Testing. A significant portion of lab testing-related waste comes from medically unnecessary lab tests. CMS should adopt evidence-based policies that ensure lab tests add value to a patient’s diagnosis and outcomes. Lab tests that lack clinical indication can lead to unneeded sample collection from patients, a higher risk of false-positive results, and avoidable costs.

Validating medical necessity of lab tests for federal programs is not optional. Since 1998, the HHS Office of Inspector General has required all labs to adopt procedures to confirm that tests are supported by documentation justifying their medical necessity.²

Right now, the lab industry develops test order menus from which physicians order labs. When developing panels, which should represent useful tests commonly ordered together, the labs will add additional tests that are wholly irrelevant to the physician’s diagnostic evaluation. This is known as “panel stuffing” in the industry and it generates significant waste—at an increased cost to patients, who are paying for these extra tests—without providing any additional clinical value. Large panel testing should align with professional and/or societal standards and at minimum, be supported by robust peer reviewed data.

Avalon analysis of national claims data indicates that approximately $2 per member per month in laboratory spending may be attributable to tests with limited or no clinical utility.³ Patients, on average, pay one-third of the cost at the point of service and payers pay the other two-thirds.

Avalon recommends that CMS institute the following policies to address this issue:

• Require labs to demonstrate clinical utility for their tests prior to receiving reimbursement codes.
• Even after coverage determinations are made, tests must be subject to medical necessity and appropriateness analysis because these specialized tests require individual patient analysis to mitigate against FWA.
• Establish appropriate pricing so the market may operate appropriately instead of incentivizing laboratories to set inappropriately high prices for their tests.

Ensuring clinical utility is a core component of an effective program integrity framework. When tests lack clinical indication, the result is avoidable cost and waste that compounds across the system.

Mandate lab results be included on claims. The existing Medicare Advantage (MA) risk adjustment methodology creates perverse incentives for health plans to inflate costs without clinical indication. Avalon recommends that CMS require MA plans to include lab results as part of the data submission requirements, which will help address this well-documented problem of upcoding.

The issue of “upcoding,” the practice of health plans recording diagnoses at a higher severity than the clinical record supports to inflate risk scores and payments, is well-known. Most recently, MedPAC’s March 2026 report to Congress highlighted how even after CMS applies the coding-intensity adjustment, diagnostic coding by MA plans overstates the diƯerences in health conditions between MA and FFS enrollees that are used for risk scores — increasing MA payments by an estimated 4 percent ($22 billion) above FFS spending in 2026.”⁴

Currently, CMS does not have objective clinical data to verify whether a diagnosis code reflects actual patient severity. Lab result data, however, would provide CMS with a mechanism for this type of verification and deter health plans and providers from submitting unsupported diagnosis codes in the first place.

• For example, MA plans command higher rates for patients who have severe diabetes. If CMS requires the collection of kidney function and hemoglobin A1C lab results, it would be clear whether a patient was actually suffering from a “severe” case of diabetes.

Requiring lab results alongside claims would give CMS objective, verifiable data to validate diagnosis codes. Medicare will save costs and improve the quality of care by increasing transparency, deterring unsupported coding, and strengthening the data foundation to better identify and predict future FWA.

Institute site neutrality policies. Under current Medicare rules, identical lab tests can be reimbursed at dramatically higher rates when performed in hospital outpatient departments (HOPDs) compared to physician offices or independent laboratories. This creates pressure and/or incentivizes for providers and health systems to refer patients to higher-cost affiliated hospital labs. CMS can help promote lab testing at the most appropriate location by implementing a transparent benefit design that ties out-of-pocket costs to place-of-service pricing. Ideally, this site neutral policy would offer lower (or no) out-of-pocket costs when enrollees receive testing at lower-cost providers.

Avalon data consistently demonstrates that the site of service — not the clinical complexity of the test — is the primary driver of cost variation in lab testing. While there is no evidence that the increased test costs are associated with clinical complexity or quality of care, particularly for routine tests that are standardized across settings. This represents a significant and addressable source of waste within the Medicare program and beyond:

• The cost gap is substantial. Lab tests performed at hospital-owned labs are generally 5-6 times the cost of an independent lab performing the same test and providing the same results. Avalon’s analysis of paid claims demonstrates that hospital outpatient labs are paid on average 300%-400% of Medicare’s independent diagnostic fee schedule.
• There is no justifiable reason for the price differential. There is no evidence that routine tests performed in hospital outpatient settings produce better outcomes than identical tests at independent labs. Yet, both public and private payers consistently pay a significant premium for the hospital setting. Hospital outpatient lab charges for a Comprehensive Basic & Metabolic Panel (CPT 80053), the most common routine test, can be up to 5.7x higher than independent lab rates with no evidence of added quality.
• Cost differential drivers are structural and compounding. The higher prices associated with hospital outpatient lab tests are likely driven by broader market power dynamics, including hospital and health system consolidation, which has been shown to increase prices. Increased volume in these consolidated labs may be seen as competition as controls decrease. This combination of scenarios, high diƯerential price per setting and high utilization of testing along with no evidence of improvement in quality of care, compounds the costs for health plans and their members.

Also, when physician offices have their own lab equipment, our analysis of paid claims demonstrates that physician offices are reimbursed on average 120% to 130% of

Medicare’s independent diagnostic fee schedule for those tests.⁵ This financial incentive also drives overutilization: the frequency of lab testing increases when testing is performed in the physician’s office.

Implementing site-neutral payment policies for lab testing is a logical correction that aligns reimbursement with clinical reality and reduces wasteful spending. Patients and taxpayers should not be paying a premium simply because of where a routine test was ordered.

Educate Consumers About Lab Testing. As consumers become more involved in their health care decisions, access to information about cost and clinical equivalence is essential for individual beneficiaries and to the integrity of the program. Avalon suggests that CMS require payers to educate members about lower-cost lab testing options and prohibit contractual terms from forbidding such education. Informed consumers are an underutilized check on unnecessary and overpriced lab utilization.

What types of tools, data analytics, and methods would assist CMS to increase program integrity related to lab tests, including genetic tests and molecular diagnostic tests?

As noted above, a lab integrity framework with lab-focused evidence-based policies would improve data for AI models that will better identify FWA. Avalon assists health plans in their determinations of what types of tests are not evidence-based and emphasize the appropriate units for routine and genetic testing. Avalon develops lab payment integrity programs that utilize the MolDX program, explained below, and offers quality assurance policies that are designed by our independent clinical board. Our process flags non-adherent tests (e.g., “panel stuffing” and inappropriate genetic test orders) as well as underutilized tests that should be ordered to inform patient care — particularly critical for cancer care diagnosis and treatment. As a result of Avalon’s processes, laboratories have an incentive to eliminate clinically useless testing and conduct proper studies showing clinical utility.

What prompted other payors and MA organizations to require registration in the MolDX program?

Lab Test Coding Is Inadequate. Health plans realize that the current lab test coding system — whether it is the traditional CPT codes or Proprietary Lab Analyses (PLA) codes –is inadequate. The CPT process is laborious and generally applies only to traditional laboratory services. PLA codes were established to address the rapid increase in the variety and scope of genetic, proteomic, and multi-analyte assays, but obtaining a PLA code does not guarantee the underlying laboratory service meets clinical standards for analytical validity, clinical validity, and most importantly, clinical utility.

Avalon’s 2025 Lab Trend Report notes that there are more than 40,000 genetic tests associated with one single CPT code (code 81479)—reflecting a known opacity problem that makes auditing and review extremely difficult.⁶ Addressing this coding concentration would significantly improve CMS’s ability to detect improper billing.

To avoid problems inherent with the current lab test coding system, Avalon has utilized the Molecular Diagnostic Services Program (MolDX) developed by Palmetto GBA. MolDX helps identify and establish coverage reimbursement for molecular diagnostic tests. Notably, it is also already in use by CMS within Medicare fee-for-service.

MolDX leverages a diagnostics catalog, a web-based service designed to identify tests and help establish evidence-based coverage for them by assigning a “DEX Z-Code” identifier (Z-Codes). The MolDX provides a level of coding specificity which, if combined with the technical assessments to ensure minimum standards for analytical validity, clinical validity and clinical utility, allows claims systems to automate more of the utilization management program as well as automate the validation that the lab service on the claim matches the lab service authorized by the plan.

Avalon Recommends Requiring A New Coding System for Lab Testing. To address the lack of specificity in existing lab test coding information, Avalon recommends that CMS consider requiring a process like MolDX for all Medicare Advantage plans for three reasons:

1. It will reduce the burden on health care providers by eliminating the need for lab-test ordering providers to submit large amounts of additional information with claims.

• It will guard against the significant potential for FWA identified by the HHS OIG. Without this system, Medicare Advantage is unprotected from FWA because MA plans’ claim processing systems are unable to diƯerentiate authorizations for testing with the lack of specificity in the current CPT coding framework. Accordingly, only post-payment reviews will identify FWA if MolDX codes, or more specific codes, are not utilized.

• It allows for the appropriate pricing of lab tests. The specificity of lab test coding under a MolDX program allows for individualized pricing of the test and the prevention of code stacking to increase the overall costs to the health plan. The direct link from the Z-Code to the unit price increases health plan efficiency by eliminating the need to manually price the unspecific CPT code that is more commonly used.

What safeguards or challenges has the MolDX program provided to your organization regarding laboratory testing?

As detailed above, the MolDx program offers substantial benefits, but those can be tempered by existing systemic limitations. Z-codes are not a standard data element and are captured in the CPT comment/narrative field of a claim. Today, not all claim adjudication systems store the CPT comment/narrative field, meaning that Z-codes may be stripped at some point in the claims review process. This creates a misalignment between the claim data submitted and what is reviewed by the payer. To avoid unnecessary payment denials, CMS should enforce a requirement that data clearinghouses transmit all data fields submitted by laboratories.

Conclusion

Avalon Healthcare Solutions appreciates the opportunity to respond to the Request for Information to inform future rulemaking for the Medicare Advantage Program. If you have questions or require additional information, please contact me at 813-751-3805.

Sincerely,

William L. Kerr, MD
Chief Executive Officer

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References

¹ Avalon Healthcare Solutions. 2025 Lab Trend Report. 2025. Avalon’s 5th Annual Lab Trend Report: The Sentinel Guide to Smarter Lab Testing | Avalon.

² https://www.federalregister.gov/documents/1998/08/24/98-22559/publication-of-oig-compliance-program-guidance-for-clinical-laboratories

³ Avalon Healthcare Solutions, internal analysis, 2025.

⁴ Medicare Payment Advisory Commission. March 2026 Report to Congress: Medicare Payment Policy. https://www.medpac.gov/wp-content/uploads/2026/03/Mar26_MedPAC_Report_To_Congress_SEC.pdf

⁵ Avalon Healthcare Solutions. 2025 Lab Trend Report. 2025. Avalon’s 5th Annual Lab Trend Report: The Sentinel Guide to Smarter Lab Testing | Avalon

⁶ Ibid