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

Use of Hospital’s NPI Enough to Establish Testing Labs’ Liability for Pass Through Billing

Case: Licensees of Blue Cross and Blue Shield Association sued individuals and entities allegedly involved in a pass-through scheme for toxicology and blood tests billed from a small rural hospital in Putnam County, Missouri. The question in this particular ruling was whether the hospital CEO, whom had already pleaded guilty to criminal conspiracy charges in connection with the scheme, could be liable for civil fraud claims. The federal district court said yes and granted summary judgment, i.e., judgment without a trial.

Significance: The CEO himself didn’t contest the motion. The defense came from the testing labs whose own liability was on the line. The labs contended that they had no connection with the hospital since they didn’t identify it in the billing. But the court brushed aside the argument, noting that the labs did use Putnam’s National Provider Identifier and Tax Identification Number to bill claims on behalf of patients who had no connection to Putnam. And that was more than enough to establish the connection required to prove liability.

RightCHOICE Managed Care, Inc. v. Hosp. Partners, Inc., 2021 U.S. Dist. LEXIS 153605

 Medical Group Pays $94.4K to Settle HDL Process and Handling Payment Anti-Kickback Law Charges

Case: A physician and his Texas medical group have agreed to fork over $94,440 to the OIG for accepting kickbacks from now defunct Health Diagnostic Laboratory, Inc. (HDL) in the form of processing and handling payments for collecting patient blood samples in exchange for referrals of Medicare patients for lab testing.

Significance: This case is the most recent in a long line of enforcement actions against providers on the receiving end of the biggest lab testing kickback scheme in history. In April 2015, HDL paid $47 million to settle its role in the scheme. Chapter 11 bankruptcy followed shortly thereafter. In February 2021, the U.S. Court of Appeals for the Fourth Circuit upheld a massive $114.1 million jury whistleblower case verdict against a former blood lab CEO and two sales consultants who acted as principles. Settlements with downstream physicians have been in the range $60,000 to $150,000, depending on the volume of referrals generated.

Court Rules that Hologic Didn’t Steal Minerva’s Patented Technology

Case: Minerva Surgical Instruments sued Hologic for illegally incorporating Minerva’s patented technology for endometric ablation into its NovaSure ADVANCED and CLASSIC devices. Hologic argued that it based its NovaSure devices on a plasma delivery system that had already been reduced to practice for at least a year. The federal district court agreed and tossed Minerva’s claim for a declaration of the validity of its patent.

Significance: Under the so-called “on-sale bar” of patent law (35 U.S.C. § 102(b)), a person is entitled to a patent unless the invention was “in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States.” The evidence clearly demonstrated that the technology had been reduced to use for years before the NovaSure products launched. Minerva itself displayed a prototype of what would later become its Aurora product incorporating the technology at the American Association of Gynecologic Laparoscopists trade show in 2009. As a result, it granted Hologic’s motion for summary judgment on the invalidity of the Minerva patent.

Minerva Surgical v. Hologic, Inc., 2021 U.S. Dist. LEXIS 138474, 2021 U.S.P.Q.2D (BNA) 789, 2021 WL 3161477

 Texas Toxicology Lab Settles Self-Disclosed Anti-Kickback Law Charges for $1.54 Million

Case: The American Institute of Toxicology, Inc., d/b/a AIT Laboratories has agreed to pay $1,541,062 to settle charges of violating the anti-kickback law. OIG alleges that AIT, through its agent, paid remuneration by placing specimen collection personnel in 18 sober home clients. The problem is that the AIT specimen collectors performed those services free of charge. The OIG also claims that AIT’s agent forged contracts and lab test orders for federal health care beneficiaries residing in the sober homes.

Significance: OIG has repeatedly warned that placing personnel who perform free services in the facilities of referral sources raises a bright red flag under the anti-kickback laws. The good news for AIT is that it likely saved itself a lot of money by self-disclosing the violations to OIG, especially when you consider that the rogue practices involved no fewer than 18 different client facilities.