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

Fort Worth Hospital Settles Upcoding Charges for $3.3 Million

Case: A compliance officer morphed into a whistleblower when hospital leaders ignored her warnings about widespread billing and coding abuses. Specifically, she sounded the alarm that the hospital was improperly appending modifiers -25, -59 and -XU to secure improper payments. It wasn’t just a small glitch. The modifiers were misused between 70 and 95 percent of the time, meaning the hospital was essentially double billing for these kinds of claims. While not admitting liability, John Peter Smith Hospital has chosen to settle the claims for $3.3 million, $912,635 of which will go to the whistleblower.

Significance: Modifiers -25, -59 and -XU indicate that a provider delivered significant care on the same day as another medical procedure performed on the same patient. The modifier signals that the care was above and beyond the preoperative and postoperative care “bundled” into the main procedure code and should thus be reimbursed separately. In addition to allegedly misusing the modifiers on hundreds of claims, the hospital failed to reimburse payors for the resulting overpayments it received.

Georgia Lab Shells Out $200K to Settle Genetic Testing Kickback Claims

Case: A psychiatrist brought a qui tam whistleblower lawsuit claiming that the consulting firm he worked for was taking kickbacks from Georgia genetic testing lab Alpha Genomix Laboratories in exchange for Medicare patient referrals of medically unnecessary tests that weren’t actually ordered by physicians. According to the claim, the lab gave the firm illegal remuneration in the form of paying the salary of one of its employees. Rather than risk a trial, the lab will pay up to $200,000 to settle the case.

Significance: Genetic testing kickbacks and false have become a new favorite target for government enforcers and whistleblowers. One of the more interesting aspects of this case is the structure of the settlement, dictated by the fact that Alpha Genomix went bankrupt after the events of this case took place and was subsequently acquired by new ownership. The lab will pay $35,000 upfront and a percentage of gross annual company revenues of up to $200,000 later. The whistleblower is in line for 15 percent to 30 percent of whatever the government recovers.

Payor Can’t Use Alleged Co-Conspirator’s Settlement as Evidence Lab that Engaged in Pass-Through Billing Scheme

Case: Imagine this. Insurers sue you and other labs for conspiring with a hospital to commit a fraudulent pass-through billing scheme for lab tests. You think the case is garbage and are determined to wage a vigorous defense at trial. But the other labs aren’t willing to risk a trial and decide to settle. Question: Can the insurer use the fact that the other labs settled as evidence? A Missouri federal court recently confronting this issue ruled no.

Significance: Federal rules of evidence ban the use of settlement offers, agreements and negotiations to “prove or disprove the validity” of a disputed claim at trial. The insurer cited an exception allowing information about a settlement that explains why a party has suddenly disappeared from a trial. But the labs in this case settled way before the case began and were never introduced to the jury. So, the exception didn’t apply.

Rightchoice Managed Care, Inc. v. Hosp. Partners, Inc., 2021 U.S. Dist. LEXIS 177176

 Federal Court Upholds $46.7 Million Medicare PHPs Fraud Conviction

Case: In 2015, the former president of a Texas hospital was ordered to pay restitution of $46,753,180 and spend 45 years in prison after being found guilty of 10 counts for his role in a $158 million Medicare Partial Hospitalization Programs (PHPs) fraud scheme. Now age 76, the president made a bid to get the convictions set aside but the Texas federal court said no dice and let the convictions stand.

Significance: The laundry list of defenses that the court rejected included, among others:

• Defense counsel was ineffective because it didn’t research federal law on PHPs or object to certain evidence;
• The evidence supporting his convictions was insufficient;
• The prosecution’s evidence gathering wasn’t an illegal search and seizure under the Fourth Amendment;
• He wasn’t denied his Fifth Amendment due process rights;
• The prosecution’s failure to call a certain witness didn’t deny him of his Sixth Amendment right to confront witnesses against him; and
• The government didn’t commit entrapment.

United States v. Gibson, 2021 U.S. Dist. LEXIS 179712