Case of the Month: Physicians Come Under Fire for Taking Blood Processing Fee Kickbacks from HDL

Like the tango, it takes two to break the anti-kickback laws: one to offer and pay the kickback and the other to accept it. When a major scheme involving payment of kickbacks for lab testing referrals is broken up, the lab, the lab that made the payments is the primary target. But once the lab is disposed of, the enforcers turn their attention to the downstream providers that accepted the payments. This was the pattern in the Millennium Labs case. And now it seems to be playing out in the other lab kickback mega-scandal, the one involving Health Diagnostic Laboratory, Inc. (HDL).

The Millennium Case

The Millennium scam, the largest lab kickback scandal in history, featured free point of care testing cups given to physicians for urine drug test referrals. In 2015, Millennium settled by agreeing to pay $256 million. But the case was a long way from over as federal enforcers targeted the referring physicians and practices that accepted the free cups from Millennium. Since September 2017, more than a dozen physicians have been charged resulting in settlements of over $2 million.

The HDL Case

The case against HDL and its lab business associate Singulex, Inc. began as a qui tam whistleblower lawsuit alleging payments of kickbacks disguised as processing fees of $10 to $17 per test to physicians in exchange for orders of medically unnecessary blood tests; then, by billing Medicare and TRICARE for tests provided under the arrangement, the labs violated the False Claims Act (FCA). In April 2015, the case settled with HDL agreeing to pay $47 million and Singulex $1.5 million. Both labs also entered into Corporate Integrity Agreements with the government.

Next on the hot seat were the corporate principals of each company. Rather than settle, HDL’s former CEO and two high-ranking marketing officials decided to fight it out in court. The strategy backfired when a federal jury found all three jointly and severally liable for kickbacks and false claims violations and handed down a $114.1 million verdict. [See National Intelligence Report (NIR), July 3, 2018].

The Next Wave of the HDL Case

Now it looks like it’s the physicians’ turn to be held to account. On May 20, a pair of physicians and their Missouri practice entered into a $96,880 settlement agreement for accepting “process and handling” payments related to blood collection services from HDL in exchange for referring patients for testing. It’s a pretty good bet that there will be many more such settlements in the weeks and months ahead.