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

Failure to Reimburse Government for Overpayments Is a Reverse False Claim

Case: A dermapathology lab sent a pair of retraction letters notifying TRICARE about overpayments of nearly $4.2 million in the form of reimbursement on nearly 50,000 “erroneous” claims for toxicology and DNA cancer screening tests. The lab repaid about $900,000 of the money, while it pursued the lab system that actually billed for the tests. The sides reached a settlement agreement to fully repay TRICARE. But when the lab then stopped making payments, whistleblowers filed a qui tam lawsuit contending that the lab’s failure to repay was a reverse false claim under the False Claims Act. The government took over the case and the lab moved to dismiss without a trial

Significance: The Texas federal court denied the lab’s motion. Liability for a reverse false claim arises when an individual or entity violates a duty to pay money due to the government. The lab insisted that failure to repay an overpayment didn’t cross the line because it had no duty to pay the government. But the court begged to differ, noting that the lab acknowledged that it had received the overpayments and that the settlement constituted a duty to pay the government, even though the government wasn’t a party to the agreement [United States v. Cockerell Dermatopathology, P.A., 2021 U.S. Dist. LEXIS 201997, 2021 WL 4894173].

Federal Court Dismisses Quidel’s False Advertising Claims against Siemens

 Case: The nasty litigation between Quidel and Siemens continued with both sides accusing the other of false and deceptive advertising. The touchstone of the suit are ads run by Siemens referring for its TSI and TBI detection assay Immulite. The latest installment of the case raises the question of whether even if the statements in the ads were false, they influenced the decision of major lab customers LabCorp and Sonic/CPL to purchase Immulite rather than Quidel’s Thyretain qualitative assay.

 Significance: The Ninth Circuit Court of Appeal affirmed the lower court’s decision to dismiss Quidel’s claims. “There is no direct evidence in the record for which a reasonable juror could find that Siemens’ allegedly false statements were material to the decision-making processes of the two laboratory customers.” Both LabCorp’s and Sonic’s decision to switch from Thyretain to Immulite were based not on Siemens’ scientific presentations, press releases and marketing materials, but a comprehensive and rigorous internal validation process, the Court concluded decisions [Quidel Corp. v. Siemens Med. Sols. USA, Inc., 2021 U.S. App. LEXIS 30144, 2021 WL 4622504].

Ex-CEO of NWPL Settles Urine Drug Test Kickback Claims for $1.1 Million

Case: The former CEO of now-defunct Northwest Physicians Laboratories (NWPL) has agreed to shell out $1.1 million to settle charges of accepting millions in illegal payments for referring Medicare and TRICARE patients to a pair of labs owned by Cordant Health Solution for urine drug testing. Because NWPL was physician-owned, it couldn’t test urine samples for patients covered by government health programs. The kickbacks were allegedly disguised as fees for marketing services, even though no marketing services were performed.

Significance: This is the third settlement in connection with the NWPL kickback scheme. In July 2020, Cordant Health settled with the DOJ for $11,942,913, 20 percent of which went to the relator who filed the whistleblower suit that brought the scam to the government’s attention. And in December 2018, Vancouver/Washington testing lab MTL agreed to pay $1,777,738 to settle charges stemming from its role in the scheme.

Billing Medically Unnecessary Nuclear Stress Tests Costs Urgent Care Practice $1.25 Million

Case: A physician-owned primary and urgent care practice with clinics across South Carolina has agreed to pay $1.25 million to settle claims of billing Medicare, Medicaid and TRICARE for medically unnecessary nuclear stress tests (NSTs) over a seven-year period. The feds also claim that the practice systematically billed for unnecessary Crystatin-C lab tests for detecting kidney dysfunction by allegedly adding the test to its Basic Metabolic Panel that it ran on most patients, even though the test is covered only for a limited set of patients.

Significance: Before the pandemic, federal enforcers were turning up the heat for false billing of SSTs ordered by cardiologists. There are three things about NSTs, which use radioactive dyes to measure blood flow to the heart both when the patient is resting and stressed either via exercise or chemical inducement, that put them high on the list of FCA enforcement priorities:

• They’re very expensive;
• They expose patients to significant doses of radiation; and
• They can generate false positives resulting in the ordering of medically unnecessary invasive procedures.