Feds Target Providers Who Took Free Test Cup Kickbacks from Millennium Labs

Free point-of-care test cups from Millennium Labs have become radioactive. So far, at least six different providers have agreed to fork over significant amounts (ranging from $40K to $186K) to settle kickback charges stemming from accepting those freebies from the now bankrupt lab, including two settlements in just the past six weeks. Fallout from the continuing scandal is an instructive tale of how something as seemingly harmless as a test cup can form the basis of an improper relationship tainting subsequent referrals between a provider and lab.

The Millennium Case
It all started with the notorious Millennium Health case. While the key charges against Millennium Health centered on use of custom profiles to bill Medicare for medically unnecessary tests, prosecutors also claimed that Millennium provided free POCT cups with embedded testing to physicians in exchange for referral of urine specimens in violation of the Anti-Kickback Statute (AKS) and Stark Law. Physicians allegedly agreed not to bill any insurer for the cups and return the specimen samples in each cup to Millennium for additional, often more expensive lab testing. Millennium also charged physicians who did not return the cup for further testing.

Ameritox LTD, a competitor, got the ball rolling by suing in Florida federal court and winning an $11.26 million judgment. Millennium appealed.

Why Free Test Cups Crossed the Kickback Line
The focus of the appeal was whether offering free cups to physicians violated the AKS and Stark Law ban on paying “remuneration” for referrals. The Stark Law specifically says that banned “remuneration” does not include “[t]he provision of items, devices or supplies that are used solely to (i) collect, transport, process, or store specimens for the entity providing the item, device, or supply, or (ii) order or communicate the results of tests or procedures for such entity.” Although there is no such “carve out” for de minimus remuneration in the AKS, the OIG has made clear in starting with its 1994 Laboratory Fraud Alert that provision of supplies and equipment under those limited circumstances will not implicate the AKS.

Accordingly, Millennium argued that it did nothing wrong because the supplies were “used solely to (i) collect, transport, process or store specimens for the entity providing the item, device, or supply, or (ii) order or communicate the result of tests or procedures for such entity.”

Although not a party to the case, the DOJ took the unusual step of intervening to counteract what it claimed were Millennium’s “erroneous” arguments. In its amicus curiae (“friend of the court”) brief, the DOJ brief focused on the word “solely” in the statute. “Solely” means that the freebie may not convey to the receiving physician even a tiny benefit that is not related to permissible collection, transport, and storage purposes. Millennium’s actions did not fall within the exception, the DOJ argued, because the test strips embedded in the free POCT cups were not integral to collecting, transporting, processing or storing specimens; they were there to help the physicians make treatment decisions more quickly at no cost. Accepting Millennium’s argument would open an “enormous” loophole in the Stark Law enabling labs to attach anything, even five-dollar bills, to cups. According to the DOJ:

“The ‘cup agreements’. . . create exactly the sort of intertwined financial relationships in the health care system that the Stark Law and AKS are designed to prohibit. . . .The purpose and effect of this arrangement was to give doctors a significant financial incentive to obtain laboratory testing of each sample collected in a POCT cup and to obtain such testing from Millennium rather than a competitor. That is precisely the sort of inducement that the Stark Law and the AKS forbid.”

Feds Turn Downstream
In October 2016, Millennium tossed in the towel and agreed to settle all claims for $256 million, a record high settlement involving health care fraud by a lab. Almost inevitably, prosecutors then began to target the downstream providers who accepted the free cups from Millennium.

So far, six different providers—mostly pain management and drug treatment centers and in a couple of cases, individual physicians associated with the provider—have been caught up. The latest example is Michigan-based opioid addiction clinic, Recovery Pathways, LLC, which on May 24, agreed to pay $64,555.

Takeaway: The moral of the Millennium case is not that free test cups are illegal remuneration but that they can be. Many if not most such arrangements can be justified under the “used solely” exception language referred to above. What made the test cups in Millennium radioactive was the embedding of testing strips. Rightly or wrongly, by adding an extra feature to what would normally have been treated as an item of minimal value raised suspicions that Millennium was trying to using the de minimus exception as an end-run around AKS and Stark Law referral prohibitions.