Audit: State Hygienic Lab could have left more than $1M on the table

CORALVILLE — The University of Iowa-based State Hygienic Laboratory — which for the last nearly two years has been on the front lines of Iowa’s COVID-19 response — hasn’t been consistently charging customers or collecting documentation, leaving as much as $1.1 million on the table, according to a recent internal audit.

Lab director Mike Pentella told The Gazette his entity is looking into the audit’s findings and will provide a response, but urged the State Hygienic Lab is a “long-trusted steward of Iowans’ public health and the funding that supports its efforts.”

The lab — with facilities in Coralville and Ankeny that serve the entire state, processing more than 1,500 samples a day — tests for a range of infectious diseases, including sexually transmitted diseases like HIV, chlamydia, gonorrhea and herpes.

The lab is governed by a portion of the Iowa Administrative Code that outlines when tests should be run without charge “due to the direct threat to public health.”

“This code also details disease tests that should be billed for unless specific exemption criteria are met,” according to an internal audit recently presented to the Board of Regents, flagging findings that “could seriously affect a department” or produce “savings (perhaps in the thousands.)”

Although the lab is supposed to collect auxiliary data to determine if exemptions are met and whether the testing fee should be waived, it’s “not consistently charging for samples tested or receiving the auxiliary data for each sample, increasing the risk of incorrect billing and potentially decreasing the amount of revenue received,” according to the audit.

Diseases on the list for possible fee waiver include those sexually transmitted diseases like HIV and herpes. Auditors, through interviews with a senior lab accountant, learned the entity currently bases what tests to bill for not on auxiliary data but on a form “pre-populated to perform tests at no cost.”

A review of relevant diseases for the first six months of this year alone — from January to June — found 11,400 tests “with no associated auxiliary data were not charged.”

“These tests could have a billable value of more than $1.1 million,” according to the audit, which recommended the lab start using auxiliary data to determine eligibility for fee waivers.

Pentella told The Gazette that under agreements with the Iowa Department of Public Health, fees for sexually transmitted disease tests and others often are waived “because they constitute public health prevention efforts.”

“In those cases, SHL’s costs are covered by state and federal funding,” he said. “We believe the audit’s findings are related to paperwork issues rather than any actual loss of potential revenue.”

Lab respondents committed to meeting with state public health officials to determine what data is required to decide waiver eligibility and to use that data going forward.

Chief Audit Executive Debra Johnston told regents last week her team wasn’t able to determine exactly how much of the potentially-billable tests found could have produced revenue “because the data simply wasn’t available.” Auditors also found the lab lacks documentation of some policies, procedures, and agreements.

“The review of tests performed at no charge, with no auxiliary data to justify waiving the fee, determined that certain tests for UI Student Health were provided at no cost,” according to the audit. “An interview with the SHL senior accountant identified a long-standing agreement for this process. A copy of this agreement was not available.”

The internal audit did not touch on the lab’s role in the state’s COVID-19 response.

Regents in September did mention those efforts to process more than 1 million COVID-19 specimens throughout this pandemic in requesting a $1 million increase in legislative support for the lab in the next budget year beginning July 1.

That extra money — upping the lab’s appropriation from $4.8 million this year to $5.8 million next — would go toward staff compensation, retention and recruitment; updated lab instruments and equipment; and insurance maintenance contracts.

“Salary increases are critical as the statistics show that the public health lab workforce is aging and retiring with fewer new professionals seeking public health labs as a place of employment,” according to the board’s September appropriations request. “(The State Hygienic Lab) also faces strong competition for staff who often find better paying positions within other state or local agencies or industries.”

Comments: (319) 339-3158; vanessa.miller@thegazette.com