Qui Tam Complaint Alleges Duplicate Testing At the Nation’s Largest Laboratories

Government prosecutors are having a hard time deciding whether or not to intervene in a Medicare-Medicaid qui tam lawsuit filed by a former Quest Diagnostics phlebotomist who claims that both Quest and Laboratory Corporation of America (LabCorp) have been conducting duplicative tests and billing for them since at least 2002. The case is filed on behalf of the United States and the state of California by the relator Elisa Martinez, a former Quest phlebotomist, and covers both Medicare and Medicaid beneficiaries. According to the original complaint filed in the U.S. District Court in the Eastern District of California, both labs routinely conduct duplicate testing on the same patient, on the same date of service, and bill for both sets of tests, when they receive orders from two different physicians. Martinez also alleges that, in some cases, extra samples were collected or samples were split in order to have enough specimen to conduct both sets of tests. Defendants in the case are Quest Diagnostics Inc., Quest Diagnostics Clinical Laboratories Inc., Quest Diagnostics Inc. of Nevada, Quest Diagnostics Nichols Institute, Laboratory Corporation of America Holdings, and Laboratory Corporation of America. Allegations The whistleblower alleges that defendants have knowingly submitted, and continue to submit, false claims for the unnecessary duplicate tests ordered by different doctors instead of taking a more reasonable approach such as performing the tests once and sending copies to each of the ordering physicians. The complaint gives specific details of examples and includes documentation of these specific events attached to the complaint as exhibits. Martinez says she complained about the practice and questioned other phlebotomists about it but was told to ask her supervisor. When she asked her supervisor, Martinez alleges that she was told to “listen more and back up everybody.” Martinez took it on herself to try to confirm her suspicions about the practice and to confirm that duplicate claims were actually being filed by asking other employees. She was told by other phlebotomists who work at other Quest patient service centers that it was done at their facilities also. The billing was confirmed for Martinez by an employee in the billing department who told her that each of the tests had unique accession numbers and was billed separately. LabCorp was brought into the suit because one of the phlebotomists who used to work there told Martinez that LabCorp had the same policy and was doing the same thing that Quest was doing. The counts and potential damages listed in the complaint include:

• Defendants have knowingly presented or caused to be presented false claims under federal FCA laws and are subject to treble damages and penalties under the FCA;
• Defendants knowingly made false statements, created false records, and omitted material facts in order to get claims paid that otherwise would not have been eligible for payment;
• Defendants did not remit overpayments even though they were aware that the claims were in violation of Medicare billing rules and the FCA; and
• The complaint repeats each of the above counts except that they are in violation of California’s False Claims Act and requests the penalties prescribed under that law.

The plaintiff is also seeking attorneys’ fees and court costs. How Whistleblower Cases Work A whistleblower case is filed under seal to allow government prosecutors an opportunity to evaluate the lawsuit to determine if the case involves matters the government is already investigating or whether it is in the best interest of the government to intervene in the case. Often, the government may choose to reveal the suit to the defendant to allow an opportunity for a response and to cooperate with the government investigation. The law allows 60 days for this process, but there are provisions for seeking extensions of that time frame if more time is needed to properly evaluate the case and to seek documents to facilitate that decision. In this case, government prosecutors have requested five six-month extensions of the date they must decide to intervene in the case while they conduct their discovery to help make the intervention decision. Judge Kimberly J. Mueller accommodated the first four requests because the supporting statements made by Assistant U.S. Attorney Catherine J. Swann showed enough progress to reasonably expect that more discovery was necessary and appropriate. However, in her comments when approving the fourth extension, Mueller warned prosecutors that the next request must include, “a detailed explanation with dates and specific timelines, which will be subject to this court’s scrutiny. The explanation should detail what prejudice will result if the seal is lifted, and why the United States needs to evaluate defendants’ respective positions before it can decide whether to intervene.” In her order denying the extension and unsealing the case, Mueller said the government did not meet her criteria. What the Government Has Done Behind the Sealed Case During the extensions, the government has been gathering documents and conducting audits on samples of claims from the Medicare and Medicaid files. It has involved a Zone Program Integrity Contractor and the Medicare Administrative Contractor in these audits and used their expertise to evaluate samples of claims to try to substantiate the allegations. The government has also used the claims audits to develop a settlement model and it has revealed the suit to the defendants, as was allowed by the court, in an effort to begin negotiating an informal settlement agreement. Conclusion The case can go either of two ways. The defendants can settle with the government, admitting no liability and be done with it, or they can choose to take the case to court. Considering the potential magnitude of these allegations, the defendants may choose to fight it out in court if they have a reasonable expectation of winning. There are circumstances where the described billing practice may be justified if billed correctly using appropriate modifiers, but these exceptions are limited. There is also the possibility that the relator has not been thorough in her limited investigation and she may be wrong about what she believes. We will not know for sure until the case settles or goes to court, but it is certainly a case that must be watched by the laboratory compliance community. Takeaway: Labs must be cautious about performing duplicate testing on patient specimens when ordered by different physicians