A roundup of recent cases and enforcement actions involving the diagnostics industry

Massachusetts Drug Testing Lab Shells Out $84K to Settle SVT False Billing Charges

Case: A urine drug testing lab in Massachusetts is the latest to settle self-disclosed charges of falsely billing Medicare for specimen validity tests (SVTs). While Medicare covers drug testing as part of medically necessary treatment, it doesn’t cover SVTs, which are performed as part of a quality control process to catch drug test cheaters by verifying that a urine drug screen sample is consistent with normal human urine and hasn’t been adulterated, diluted or substituted. The Massachusetts lab will pay $84,393 to settle the case with the OIG. Significance: In 2018, the OIG issued a report contending that Medicare made $66.3 million in improper SVT payments to nearly 4,500 labs and physician offices. In response, CMS ordered Medicare contractors to take measures to get that money back. Since then, at least a dozen urine drug testing labs have come forward to self-disclose improper SVT billing, generating nearly $3 million in total recoveries. Here’s the settlement rundown in order of settlement amount.

Urine Drug Testing Lab SVT Billing Settlements

Lab	Settlement Amount
Ethos Laboratory (Newport, KY)	$1,345,959
American Toxicology Lab, LLC (Johnson City, TN)	$175,889
Northern Kentucky Center for Pain Relief	$126,799
VerraLab JA, LLC (Louisville, KY)	$125,983
Wheelersburg Internal Medicine Group + Mohammad Mouhib Kalo, MD (Ohio)	$111,706
Discover Diagnostic Laboratory, LLC (Oak Ridge, TN)	$95,882
Commonwealth Pain Associates, PLLC (Louisville, KY)	$88,214
New Horizons Medical, Inc. (Framingham, MA)	$84,393
Aeon Global Health (Gainesville, GA)	$75,000
Medical Specialist of Kentuckiana, PLLC (Louisville, KY)	$69,776
American Clinical Solutions, LLC (Boca Raton, FL)	$61,546
Ohio River Laboratories, LLC (Houston, TX)	$49,493

Genetic Test Company Pays Over $2.5 Million for Role in Nursing Home Scam

Case: Federal prosecutors accused a molecular testing lab owned by California-based AutoGenomics of carrying out a scheme to generate illegal referrals of tests on residents of 76 nursing homes that were then billed to Medicare. According to the complaint, AutoGenomics agreed to pay marketing firm a specified percentage of Medicare reimbursement for each genetic test patient. The fee was contingent on Medicare’s paying for the test. Rather than risk a trial, AutoGenomics agreed to settle the charges for $2,538,000. Significance: Prestige Healthcare, the owners of nursing homes in Wisconsin and other states, allegedly participated in the scheme by helping the marketing firm identify and gain access to their Medicare patients to collect buccal cell samples to send to AutoGenomics for testing. Prestige got off somewhat lighter, having paid about $1 million to settle its role in the scheme, which unfolded before Prescient Medicine acquired AutoGenomics in 2019.

Patient Recruiter Found Guilty of Running Telemarketing CGx Testing Scheme

Case: After a four-day trial, the owner of an Orlando telemarketing call center was found guilty of running a $2.8 million cancer genetics screening test scam (CGx) targeting seniors in Medicare. The firm owned by 34-year-old Ivan Andre Scott called beneficiaries and persuaded them to take CGx tests costing up to $6,000 pop on the assurance that they were covered by Medicare. Scott also paid kickbacks to telemedicine companies to get physicians to order the tests regardless of medical necessity and often without even speaking to the patient. He then submitted invoices to the labs for hourly marketing services to conceal the kickbacks. Significance: The Orlando case is part of the Operation Rubberstamp national takedown initiative targeting telemarketing fraud unveiled by the Justice Department last fall. Many of the schemes in the takedown, the largest in DOJ history, involve payment of kickbacks and false billing of lab tests.

Talking to Competing Lab Doesn’t Violate Marketing Manager’s Employment Contract

Case: In 2017, S&G lab hired a market manager at a base salary plus 35 percent of net profits generated by his accounts. But then came EKRA in 2018 and S&G felt compelled to redo the deal as a straight salary arrangement as a result of the new law’s ban on incentive-based compensation pegged to medical tests volume. But the manager was happy with his current contract and refused to renegotiate. Suspension and a unilateral pay cut didn’t change his mind. And when S&G learned that the manager had been talking to a competitor, it served him up a pink slip and summons to a lawsuit. Significance: The Hawaii federal court tossed S&G’s case without a trial. There was no case for disclosure of trade secrets because there was no evidence that the manager revealed any confidential information about S&G while discussing employment opportunities with the competitor. While they did talk about how fast the lab turns around tests and the kinds of equipment it uses, S&G doesn’t treat that information as secrets and even features it on its website, the court explained. Nor did those discussions violate the manager’s non-compete because nothing he divulged gave the competing lab a competitive edge over S&G [S&G Labs Haw., LLC v. Graves, 2021 U.S. Dist. LEXIS 29248].