Enforcement Trends: The Top 5 Lab False Claims Act Settlements of 2019

Labs were on the paying end of at least eight million-dollar False Claims Act (FCA) settlements or judgments in the 2019 fiscal year. Here’s a review of the top 5 reported FCA recoveries against a lab or lab services company.

1. Inform Diagnostics Settles EHR Consulting Services Kickback Claims for $63.5 Million

 An Anti-Kickback Statute safe harbor and Stark Law exception allows non-physician providers to pay up to 85% of physicians’ costs to help them transition from paper records to EHR systems. But Inform Diagnostics (then known as Miraca Life Sciences Inc.) allegedly stretched the rules beyond the breaking point by offering physicians discounts on EHR consulting services in exchange for lab referrals. It even based individual discount amounts on the anticipated return on investment the particular physician’s referrals would generate and offered the deal only to physicians it targeted as high-volume referral sources. Three different whistleblowers filed qui tam lawsuits and when the Department of Justice (DOJ) decided to intervene, Inform saw the writing on the wall and has agreed to settle the claims for $63.5 million.

2. Jewish Hospital & St. Mary’s Healthcare Settles Qui Tam Claims for $10.1 Million

Ending a case that began as a qui tam whistleblower lawsuit, Jewish Hospital & St. Mary’s Healthcare Inc., d/b/a Pharmacy Plus and Pharmacy Plus Specialty, agreed to pay $10.1 million to settle claims of falsely billing for prescription drugs that weren’t medically necessary. In addition to serious documentation issues—orders unsigned by a physician and absence of records showing that medications were actually delivered, the hospital allegedly paid kickbacks to patients in the form of free blood glucose testing supplies and waiver of co-payments and deductibles for insulin. The pharmacist who brought the original qui tam claims received $1.85 million of the settlement.

3. Myriad Genetics Settles Hereditary Cancer Test False Billing Claims for $9.1 Million

This whistleblower suit alleged false billing for the Myriad myRisk Hereditary Cancer, a 25-gene panel that blends genetic test status and personal/family cancer history to identify clinically significant mutations affecting inherited risks for eight hereditary cancers. The billing problems may have stemmed from Myriad’s use of CPT Code 81211, which describes full sequencing analysis of BRCA genes together with CPT Code 81213, describing duplication and delection analysis of the genes. After a 17-month investigation, the DOJ declined to intervene. And Myriad firmly insisted that it was innocent. But faced with the uncertainties of trial and risk of treble damages, the company decided that discretion was the better part of valor and settled the case for $9.1 million.

4. Nevada Heart & Vascular Center Settles Genetic Test Fraud Allegations for $2.5 Million

The feds accused Nevada Heart & Vascular Center (NHVC) of taking kickbacks from a pair of now defunct genetic testing companies, Natural Molecular Testing Corp. and Iverson Genetic Diagnostics, Inc., in exchange for referrals of Medicare patients over a roughly two-year period starting in September 2012. Rather than risk trial, NHVC shelled out $2.5 million to settle the case. The $2.5 million recovered from NHVC is chump change compared to the $90 million in fraudulent payments ($71 million to Natural Molecular and $19 million to Iverson) allegedly made to the labs that declared bankruptcy before CMS could get any of that money back.

5. GenomeDx Biosciences Settles Genetic Testing False Billing Claims for $1.99 Million

In a case that began as a whistleblower suit filed by two ex-employees, GenomeDx Biosciences agreed to shell out $1.99 million to settle charges of improperly billing Medicare for its Decipher Biopsy which predicts the probability of prostate cancer metastasizing after surgery and classifies the tumor’s aggressiveness. The government claimed that over a nearly two-year period, beginning in September 2015, the San Diego-based genetic testing company made claims for Decipher tests performed on patients who didn’t have risk factors making the tests medically necessary. The whistleblowers got $350K of the settlement.

The 3 Takeaways

1. Whistleblowers: The first thing worth noting is that with the exception of NHVC, all of these cases began as whistleblower lawsuits. This is no deviation. Thus, of the total $2.6 billion the DOJ recovered in FCA actions against healthcare providers in 2019, $2.1 billion started as qui tam suits.
2. Settlements: Although recoveries include judgments and settlements, the vast majority of FCA cases settle without a trial. Combining this with the previous point about whistleblowers, the key to defending against qui tam lawsuits is to knock them out early. As in much civil litigation, the crucial point is the lab/defendant’s motion for summary judgment, i.e., request that the court dismiss the case without a trial. If the motion is denied, the risk calculus for the lab increases exponentially. It gets ratcheted up even higher should the DOJ decide to intervene. At this point, the costs of a defense and risks of liability tend to outweigh the benefits of proceeding, no matter how strong the lab feels its case is.
3. Genetic Tests: Three of the top 5 FCA lab settlements involved false billing of genetic testing. That is no coincidence. As genetic testing comes into wider use, the scrutiny of enforcers has intensified. 2019 was a breakthrough year with Operation Double Helix, the multi-state federal initiative targeting a $2.1+ billion nationwide genetic testing fraud scam. See National Intelligence Report (NIR), Oct. 29, 2019, to find out more about Operation Double Helix and its significance on lab enforcement. You can be sure that whistleblower cases against genetic testing labs will continue to increase in the years ahead.