False Billing of Lab Tests and Two Dismissed Lawsuits

Maryland Pain Clinic Pays Nearly $1 Million to Settle Urine Drug Testing False Billing Charges

Case: Gonzaga Interventional Pain Management (GIPM) and its father and son owners have agreed to shell out $980,000 to settle claims of billing Medicare, Medicaid, and the federal Railway Retirement Board for medically unnecessary urine drug tests (UDTs). Rather than determine patients’ individual needs, the feds contend that the Maryland pain clinic used blanket testing to test all patients for the same 22+ drug classes. Patients had to produce urine samples even before seeing a provider. Meanwhile, GIPM providers allegedly ignored unexpected UDT results and continued to prescribe opioids despite “obvious warning signs” that the patients were abusing drugs.

Significance: False billing of UDTs remains a focus of federal enforcement activity. Medicare covers two types of UDTs: presumptive tests to detect drugs and tests to confirm the results of presumptive tests and identify the types of drugs used. Confirmatory tests are far more costly and deemed medically necessary only when ordered by a physician after reviewing the results of the presumptive test. Providing confirmatory testing on a blanket basis thus violates coverage rules and has been the subject of recent high-profile settlements:

• $11.6 to $16 million: The yet-to-be-determined price that Reno, Nevada-based MD Spine Solutions LLC, d/b/a MD Labs Inc. and its principal owners will have to pay to settle claims of falsely billing confirmatory UDTs over a five-year period;
• $11.6 million: What North Carolina-based Radeas LLC paid in March to settle similar charges;
• $3.9 million: How much the Texas physician owners of now defunct Austin Pain Associates had to shell out last October to settle UDTs false billing claims.

Lab Can’t Sue Private Insurer for Failure to Meet CARES Act COVID-19 Test Reimbursement Obligations

Case: In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) requiring private insurers to provide patients free COVID-19 testing without copays or other cost sharing and reimburse the testing lab at the “negotiated rate.” If there was no negotiated rate, the reimbursement amount would be equal to the “cash price for such service as listed by the provider on a public internet website.” GS Labs sued Medica Insurance for violating the CARES Act, contending that instead of paying its Minnesota labs for COVID-19 tests at the required cash-price rate, the private insurer withheld payment and then requested medical records for each test. The Minnesota federal court dismissed the case.

Significance: Even if Medica actually did violate its reimbursement duties under the CARES Act, GS Labs’ claims were legally invalid. Private persons can’t sue another person for violating a federal statute unless the law provides for a “private right of action” to enforce the law. The CARES Act includes no such express provision, the court reasoned; nor can a private right of action be implied by the terms of the law. “There is no private right of action or remedy under the CARES Act for diagnostic-testing providers to recover reimbursement for COVID-19 testing at the publicly-posted cash price,” the court concluded [GS Labs, Inc. v. Medica Ins. Co., 2022 U.S. Dist. LEXIS 169307].

Former Lab CEO Gets 4 Years in Prison for PGx Kickback Conspiracy

Case: A Texas federal court sentenced Vincent Marchetti, Jr. to 48 months in prison for his role in a $28 million pharmacogenetic (PGx) testing kickback scam. After a month-long trial, a jury convicted Marchetti, age 58, of conspiring to pay “distributors” for referring PGx tests to labs in California in violation of the Anti-Kickback Statute (AKS). The tests were then illegally billed to Medicare and private insurers.

Significance: PGx, a type of testing that identifies genetic variations affecting how individual patients metabolize certain drugs, has become a central focus of federal enforcers in recent years. In addition to kickback scams like the one in the Marchetti case, enforcement efforts have targeted improper billing of medically unnecessary PGx tests. Medicare covers PGx tests only for patients who’ve been prescribed or may be prescribed drugs for an already identified illness. Things labs can do to guard against improper billing of PGx tests include encouraging the ordering practitioner to send a letter of medical necessity to the payor for pre-approval and requiring him/her to sign an acknowledgement:

• Of the limits on the use of PGx testing
• That the practitioner is treating the patient and considering (or already prescribing) medications that are medically necessary and have a known gene-drug interaction that is clinically actionable
• That the ordering practitioner is qualified to diagnose the condition being treated and prescribe the relevant medication.

Federal Court Nixes Whistleblower’s Kickback Claims against LabCorp

Case: A firm headed by a former LabCorp sales executive filed a whistleblower lawsuit accusing the second largest testing lab in the US of providing kickbacks to private insurance companies in the form of discounted lab testing rates and then charging Medicare and Medicaid programs prices “substantially in excess” of those private insurance rates. The scheme also illegally influenced in-network doctors to refer their Medicare and Medicaid patients to generate “pull-through” business for LabCorp, the whistleblower claimed. The case dragged on for over a decade with LabCorp getting most of the claims dismissed. In February 2022, LabCorp asked the New York federal court to dismiss the remaining claims, and that’s just what the court did.

Significance: The whistleblowers didn’t have a valid AKS claim, the court reasoned, because the law’s ban on offering “remuneration” to “induce” a referral doesn’t apply to “a discount…obtained by a provider,” so long as the “reduction in price is properly disclosed and appropriately reflected in the costs claimed or charges made by the provider or entity” (AKS, Section 1320a-7b(b)(2)). The alleged facts, which were much like the previous version of the complaint that the court dismissed, “could just as easily support an inference of legitimate business…agreement under which LabCorp secures exclusivity agreements in exchange for discounted prices, or directly or indirectly recommends that doctors send all their business to LabCorp absent inducement by remuneration,” the court concluded [United States v. Lab'y Corp. of Am. Holdings, 2022 U.S. Dist. LEXIS 155337, 2022 WL 3718265].