Labs In Court: A roundup of recent cases and enforcement actions involving the diagnostics industry

Aetna Settles with States of Victims of HIV Meds Envelope Privacy Snafu

Case: Aetna is still paying for a disastrous miscalculation that may have revealed the HIV status of 12,000 beneficiaries that occurred in July 2017 when it mailed them information about their HIV medications in envelopes with a transparent window. Last January, the insurance giant settled a class action lawsuit for a staggering $17.2 million. (For the details of the case, see GCA, March 12, 2018). And now Aetna has agreed to shell out an additional $640K to settle three more claims brought by state attorneys general on behalf of the residents whose PHI may have been revealed as a result of the breach, including New Jersey ($365.2K), Connecticut ($100K) in Connecticut and Washington, DC ($175K).

Significance: You don't need to be reminded of the seriousness of HIPAA breaches. The real takeaway for lab managers: The measures the settlements require Aetna to take to ensure the privacy of patient mailings containing PHI, including:

• Using envelopes that obscure the contents;
• Ensuring that the return address contains no identifying information other than a P.O. box, city, state and ZIP code; and
• Putting a statement on the envelope front stating: "Confidential Legal Information—To Be Opened Only By the Addressee.".

Lab CEO Pleads Guilty to Distributing Medically Unnecessary Opioids

Case: The CEO of Tri-County Wellness Group and owner of labs and pain clinics in Michigan and Ohio, pleaded guilty to criminal charges for his role in $300 million health care fraud scheme involving distribution of over 6.6 million doses of medically unnecessary oxycodone, hydrocodone and other controlled substances to Medicare patients, some of whom were drug addicts. to narcotics. Some of these opioids were allegedly resold on the street. In addition to $51 million in cash, the CEO will forfeit the other fruits of the scheme including $11.5 million in real estate and Detroit Pistons season tickets.

Significance: The Tri-County case is one of the earliest and biggest of the opioid schemes involving labs and pain clinics. In September 2017, a 72-year-old physician pled guilty to conspiring with two other Detroit-area providers, to carry out the scheme by:

• Prescribing the drugs;
• Directing physicians to make Medicare patients that wanted an opioid prescription to first undergo medically unnecessary facet joint injections and lab tests; and
• Telling physicians to refer those services to labs, clinics and other facilities in which he had secret ownership interests.

Kentucky Lab Owner Indicted for Medicaid Testing Felonies

Case: A Kentucky grand jury indicted the 44-year-old owner of an Indiana cytology lab of falsely billing the state Medicaid program for tests. Specifically, the indictment claims that the lab didn't have a qualified medical director as required by Medicaid billing rules.

Significance: The lab owner faces two charges: i. theft by deception of over $10K, a Class C felony; and ii. devising or engaging in a scheme to defraud the Kentucky Medical Assistance Program of $300 or more, a Class D felony.

Alabama Hospital and Lab Subsidiary Agree to $4.25 Million Kickback Settlement

Case: Aperian Laboratory Solutions and its parent East Alabama Medical Center will fork over $4.25 million + legal costs to settle charges of paying kickbacks for referrals and then falsely billing Medicare for the ill-gotten tests. The case contends that Aperian paid percentage commissions kickbacks to a pair of nationwide marketing companies in exchange for arranging doctors to refer toxicology tests to the lab. The companies, Summit Diagnostics and Compass Laboratory Solutions, entered into separate settlements of nearly $2 million.

Significance: The case began when a former Aperian employee told his supervisors about the scheme and asked them to stop it. When those calls fell on deaf ears, he brought a qui tam whistleblower lawsuit and now stands to collect between 15% to 25% of the total recovery.

Florida MD Practices Shell Out $58.3K for Accepting Millennium Test Cup Freebies

Case: The round-up of physicians that accepted free point of care test (POCT) cups from Millennium Laboratories continues with a pediatrician and internist and their respective Jacksonville practices the latest to get roped in. The now bankrupt lab used the freebies as a form of remuneration paid to physicians in exchange for referrals of custom profile panels and other tests to carry out what the feds claim is the largest ever kickback scandal involving lab services.

Significance: After collecting $256 million from Millennium, the feds have spent the past 12 months targeting the physicians on the receiving end of the POCT cup scandal. (For more on the physician crackdown, see, GCA, June 18, 2018). The $58,300 the Jacksonville defendants agreed to pay in this case is the second lowest of the settlements so far.

Opko Health, CEO Named in Pump-and-Dump Stock Fraud Scheme

Case: The U.S. Securities Exchange Commission charged billionaire drug entrepreneur Phillip Frost and his company, Opko Health, for participating in a market manipulation scheme allegedly organized by investor Donald Honig. According to the SEC complaint, Honig and his associates planted puff pieces about three companies they controlled and then dumped their shares leaving investors the who ponied up $27 million to purchase them with grossly overvalued stock. Opko denies the charges and plans to fight it out in court.

Significance: As surely as day follows night, SEC stock fraud charges lead to private shareholder litigation. Accordingly, as many as 10 law firms are lining up to file class action lawsuits against Opko for failing to disclose the firm and Frost's role in the scheme. The market reaction to the SEC announcement forced Nasdaq to suspend trading in Opko stock for a week.

Rural Hospital Lab Outreach or Fraudulent Overreach?

Case: In February 2017, hospital management firm LifeBrite paid $400K to acquire a bankrupt rural outreach hospital in North Carolina with network status in Blue Cross Blue Shield North Carolina (BC). Fourteen months later, BC kicked LifeBrite out of its network after discovering what it saw as $11 million worth of fraudulent lab billings. LifeBrite sued the insurer for reneging on $15.5 million in lab reimbursement payments. BC filed a counterclaim accusing LifeBrite of using the hospital as a false billing "front" to "turn a trickle of legitimate monthly billing [for toxicology urine drug tests] averaging $37,400 into an $8.5 million fraudulent river of gold." The suit contends that LifeBrite billed BC at inflated rates for 500,000+ urine toxicology tests which were "conducted by an affiliated lab that had no relationship with BC, or any connection to the hospital's patients, the community or medical necessity."

Significance: This isn't your conventional fraud case. Neither side disputes that the tests were ordered or delivered. Nor does BC contend that LifeBrite tried to conceal what it was doing. The real question is whether LifeBrite had the right to bill for the tests given that they were performed by an outside lab for non-hospital, out of network patients. BC argues that the "plain language" of the contract limits reimbursement to "tests performed by the hospital, at the hospital and for hospital patients." LifeBrite says that BC is just trying to get out of the contract and doesn't understand its business model as a provider of "outsourced high complexity testing" to other hospitals, which it says is permitted by Medicare. BC may not like the lab outreach model but that isn't the basis for a fraud claim, according to LifeBrite. It also contends that the higher reimbursement rates charged to insurers that BC cites as false billing is a legitimate part of the operational appeal of a for-profit hospital to operate a critical-access rural hospital and keep it financially viable.