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

Rhode Island Lab Settles Urine Drug Test False Claims Allegations for $650K Case: The feds sued a Rhode Island doctor and the lab affiliates he owns for submitting tens of thousands of claims to Medicare and Medicaid for high-complexity urine drug screening tests that they did not and could not perform. According to the complaint, the doctor’s urgent care center first ran moderate complexity drug screens on the urine samples. Then, since the lab didn’t have the equipment necessary to perform high-complexity screen, the specimens were sent to an outside confirmation lab to obtain high-complexity results. Both the center and the outside lab then billed Medicare or Medicaid for high-complexity testing on the same specimen. Rather than risk a trial, the defendants have agreed to settle the claims for $650,000. Significance: The billing was carried out by a local billing firm owned by the doctor’s wife. In 2018, Rhode Island revoked the firm’s registration to carry out business in the state. California Pulmonologist Shells Out Over $200K to Settle Kickback Charges Case: The former CEO of a California hospital filed a whistleblower suit accusing the hospital and at least two of its affiliates of hiring a pulmonologist at above fair market compensation to serve as medical director in exchange for patient referrals in violation of the Anti-Kickback Statute and Stark Law. Rather than risk a trial, the medical director agreed to pay $215,288 to settle the charges, $42,529 of which will go to the whistleblower. Significance: This is the recent in a long line of cases targeting providers for paying excessive compensation to medical directors in an illegal bid to buy referrals. The hospital defendants named in the original whistleblower lawsuit settled in 2018 at a hefty $8.1 million price tag. The government’s decision to intervene in the case likely exerted enormous pressure on the defendants to settle. Texas Provider Pays $214K for Violating Federal COVID-19 Workplace Protocols Case: In what appears to be a first, the Texas parent of an Iowa nursing home has agreed to repay $214,200 in federal monies for not following COVID-19 safety protocols during an outbreak at the facility from April through July 2020. Among other things, the nursing home didn’t properly screen employees or require them to wear personal protective equipment. According to newspaper reports, three employees exhibiting COVID-19 symptoms and who subsequently tested positive for the virus were allowed to come to work and be near vulnerable residents, 11 of whom died during the outbreak. Significance: The relatively small settlement award belies the importance of this case in that it represents the first settlement with a health care provider for violating the COVID-19 workplace safety protocols during the pandemic. Labs that billed Medicare during the pandemic knowing that they were out of compliance with COVID-19 safety rules run the risk of liability under the False Claims Act. Notably, however, the settlement is based not on FCA liability but on “restitution,” which is typically used to describe repayment of money received by mistake. It’s also worth noting that the company in this case cooperated in the investigation, which is a highly advisable strategy if your lab comes under investigative scrutiny. In the meantime, continue to follow the screening, PPE and other safety rules scrupulously.    University of Miami Settles Lab Testing False Claim Charges for $22 Million Case: In this particular case, “The U” of the University of Miami might have stood for unnecessary, as in medically unnecessary lab tests billed to Medicare by the UM’s lab and off campus hospital-based facilities. The $22 million that the UM has agreed to fork over settles a trio of whistleblower lawsuits filed in 2013 and 2014, alleging that UM and its affiliates:

• Converted multiple physician offices to Off-Campus Hospital Facilities so it could bill Medicare for higher rates and without providing beneficiaries the required notice;
• Used its electronic ordering system to automatically prompt physicians to order multiple medically unnecessary tests for kidney transplant patients
• Submitted inflated claims for reimbursement for pre-transplant lab testing done by an affiliate that the affiliate should have billed for directly and then using the Medicare payments to pay the affiliate kickbacks for referring surgical patients.

Significance: The first takeaway of the settlement is to emphasize the importance of ensuring compliance with the Off-Campus billing of Medicare patients notice requirements. Such requirements count as conditions of payment and not complying with them can turn the claim into a false claim. The other moral of the UM story is that “standing” orders remain highly risky and are allowed only when strictly tailored to each patient’s individual circumstances and needs. Florida Telemarketers Indicted for $47 Million Genetic Test Fraud Scheme Case: A federal grand jury indicted three telemarketing company owners for a smorgasbord of fraud, kickback and money laundering violations that allegedly cost Medicare $47 million medically unnecessary genetic tests. Following what has become a familiar pattern, the schemers ran a telemarketing campaign designed to get Medicare beneficiaries to undergo genetic cancer screening, regardless of their medical need. They then recruited a network of physicians who were willing to order the tests without seeing the patients in exchange for kickbacks. Those orders were then sold to the labs that performed the tests and sent the bill to Medicare. Significance: Telemarketing schemes were just starting to penetrate the radar of federal enforcers before the pandemic hit. As utilization of telemedicine has increased, so has the level of enforcement scrutiny and activity, the culmination of which was last year’s Operation Rubberstamp, a massive federal takedown. While not specifically its focus, genetic testing labs often play a key role in telemarketing fraud cases, as in this most recent indictment.