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

Whistleblower Lawsuit Can’t Start Until Criminal Investigation Ends

 Case: Two former MedComp Laboratory Sciences employees filed a whistleblower lawsuit accusing the lab of concocting an elaborate scheme to pay kickbacks to a group of 61 physicians in exchange for sending Medicare patient urine samples to a sham reference lab for testing. As it happened, MedComp’s alleged scheme was also the subject of a federal criminal investigation. So, MedComp asked the Louisiana federal court to “stay,” i.e., delay the whistleblower case until the criminal matter resolved. And that’s just what the court did.

Significance: Courts can but don’t have to stay civil proceedings when the defendant faces criminal charges involving the same conduct. The court cited the following factors in deciding to exercise that discretion in this case:

• The whistleblower suit and criminal investigation involved the same issues;
• Even though nobody had been indicted, the investigation was still active; and
• Sure, the whistleblowers wanted a quick resolution, but letting the case proceed could force the defendants to invoke their fifth amendment rights against self-incrimination, which would serve only to delay the case.

[United States ex rel. Bruno v. Schaeffer, 2020 U.S. Dist. LEXIS 72603]

 Feds Arrest Ring Leaders of Alleged COVID-19 False Testing Scheme

 Case: Starting in October 2018, a small clique in Georgia made a pretty nice living by gaming Medicare for cancer genetic (CGX) testing. After persuading patients to complete genetic test kits and supply their doctor’s name, they’d get doctors’ orders for CGX testing by paying kickbacks to co-conspirators at telemedicine companies.In February 2020, the group pivoted to cash in on a new and exciting opportunity: COVID-19 testing. The deal: Payment of per-test kickbacks on COVID-19 tests; to jack up profits, they also insisted that COVID-19 tests be bundled with Respiratory Pathogen Panel (RPP) commanding a four-times higher reimbursement rate.

Significance: This may be one of the first enforcement actions targeting a fraudulent COVID-19 billing scam but it will certainly not be the last. That’s because COVID-19 fraud has become big business. On March 23, the OIG sounded the alarm on the consumer side by warning patients warning consumers of scammers seeking to exploit “unsuspecting patients” by offering bogus COVID-19 tests and treatments in exchange for personal information such as Medicare numbers (See LCA, March 30, 2020). Of course, it was only a matter of time before the feds focused on the billing arrangements downstream.

Lab Fires Microbiology Department Manager for Poor Performance, Not Age

 Case: A 65-year-old manager claimed LabCorp fired her because of her age; LabCorp contended that she was terminated for poor performance and cited detailed metrics documenting the continued failure of the microbiology department she ran to meet LabCorp performance metrics. But the federal district court didn’t buy it and tossed the manager’s Age Discrimination in Employment Act lawsuit for lack of hard evidence that age in any way factored into the termination decision.

Significance: Circumstantial evidence may be enough for a plaintiff claiming age discrimination to survive a motion to dismiss and win the opportunity to go to trial. And the manager in this case had one piece of circumstantial evidence that, at least on first blush, looked pretty powerful: the fact that two younger managers didn’t get terminated even though the departments they ran also missed their performance metrics targets. But upon closer examination, the smoking gun proved far less. The first younger manager was stripped of her responsibilities for running the department and the only reason she didn’t lose her job was that she had a previous assignment with a different LabCorp lab that she could resume after being demoted. As for the second manager with the inadequate productivity metrics, he understood that the handwriting was on the wall and resigned by email in the middle of the night before the ax could fall [Henderson v. Lab. Corp. of Am. Holdings, 2020 U.S. Dist. LEXIS 84732].

Pain Clinic, Owner Settle Kickback and False Claims Charges for $1.35 Million

 Case: A Wisconsin pain management and its owner agreed to shell out $1.35 million to settle charges of accepting kickbacks from a urine drug testing lab in exchange for ordering medically unnecessary tests for Medicare and Medicaid patients under an illegal arrangement that lasted five years and generated thousands of referrals.

Significance: Making the settlement that much harsher is its staying power. Both defendants had enter into an Integrity Agreement with the OIG and agree to make contingent future payments over the next five years based on specific financial criteria.