Genetic Testing Fraud Prosecutions are on the Rise around the Country. Are Your Genetic Testing Practices Compliant?

By Robert Liles bio

Over the last year, a number of genetic testing fraud investigations and prosecutions have been initiated by Medicare, Medicaid and TRICARE investigators and auditors. While the nature of the diagnostic services at issue are cutting edge, the wrongful conduct associated with these cases often involves old school fraud schemes that are easily identified and well known to law enforcement. This article covers the origins of genetic testing and examines a number of genetic testing fraud cases that have been pursued by Federal prosecutors around the country. In this article, we also discuss a number of the questions you should be addressing prior to engaging in the marketing, ordering or billing of genetic laboratory testing claims.

I. HISTORICAL BACKGROUND – THE DISCOVERY OF DNA:

The discovery of deoxyribonucleic acid (commonly known as DNA) can be traced to the efforts of Swiss chemist Freidrich Miescher in 1869. Over the next 75 years, Miescher and others established the scientific foundation for the groundbreaking molecular work of James Watson and Francis Crick in 1952. At that time, Watson and Crick first proposed that the DNA molecule was a double-helix structure. Watson, Crick and their colleague, Maurice Wilkins were subsequently awarded the Nobel Prize in Physiology or Medicine in 1962 “for their discoveries concerning the molecular structure of nucleic acids and its significance for information transfer in living materials.”[1]
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Over the next 20 years, scientists continued to research the nature and composition of the DNA molecule. This ultimately led to the 1990 formation of an international scientific research effort that became known as the “Human Genome Project” (HGP). The goal of researchers at that time was to identify and sequence more than 3.3 billion base pairs of the human genome.[2] By 2003, an initial draft of the human genome was completed. Over the last 16 years, refinements in mapping have continued to be made. As of June 2019, scientists report that there are still 89 “gaps” that remain to be sequenced.[3]

II. PRACTICAL APPLICATIONS OF GENETIC TESTING:

The successful mapping of the human genome has led to the development of literally thousands of tests that can now be used to determine whether there is any evidence of chromosomal abnormality that may be used to detect the possibility of illness or disease. Genetic testing is now commonly used for a number diagnostic and treatment purposes, including, but not limited to the following:

• Diagnostic Genetic Testing.Genetic testing can be used for diagnostic purposes. For example, it can be used to verify whether an individual has a diagnosis of cystic fibrosis or other disease that can be confirmed through a search for specific genetic abnormalities.
• Genetic Carrier Testing.If you have a family history of a specific disease that has been tied to one or more genetic defects, it may be possible to determine whether you are a carrier of this genetic abnormality. As a carrier, this genetic mutation may be passed along to your children.
• Predictive Genetic Testing.This type of genetic testing also examines a patient’s family history to determine whether an individual is at a higher of risk of developing certain illnesses and / or diseases.

III. THE EMERGENCE OF DIRECT-TO-CONSUMER GENETIC TESTING:

As the testing technology improved, the costs of conducting genetic testing procedures continued to drop to the point that it became commercially viable for a number of companies to offer direct-to-consumer test kits. These kits were heavily marketed and promoted to the public as an effective way to predict an individual’s risk of developing certain illnesses and/or diseases.

Allegations of deceptive marketing practices by direct-to-consumer genetic testing companies led to an investigation of these testing companies by the Government Accountability Office (GAO) in 2006. At that time, GAO found that a number of “egregious examples of deceptive marketing.” For example, four of the companies examined claimed that their assessment of an individual’s DNA could be used to create personalized supplements to cure diseases. Two of these companies further claims that their supplements could “repair damaged DNA” or even cure certain diseases. As the GAO noted, there was no scientific basis for these claims.[4] As a result of the GAO’s findings, in 2006 the Centers for Disease Control (CDC), in conjunction with the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) issued consumer alerts warning the public to be wary of the claims being made by many of these genetic testing companies.

IV. IMPACT OF GINA AND THE ACA ON THE USE OF GENETIC TESTING:

The development and expansion of genetic testing stoked the fears of many Americans that their specific genetic makeup could be used by health insurers and employers as a screening tool to weed out individuals who may be suffering from (or have the potential to develop) costly illnesses and diseases. To address these concerns, Congress passed the Genetic Information Nondiscrimination Act of 2008 (GINA) to prohibit health insurers and employers from using genetic information when making insurance eligibility and employment decisions.

The genetic testing industry received a further boost with the enactment of the Affordable Care Act (ACA). With the passage of the ACA, insurance payors were barred from denying coverage to patients with most preexisting illnesses and conditions. This effectively opened the door for patients to readily participate in genetic testing without the fear of losing their insurance due to the presence of a preexisting illness or disease.[5]

V. MEDICARE COVERAGE OF SPECIFIC GENETIC TESTING PROCEDURES:

While the direct-to-consumer market has been in place for almost 20 years, most insurance payors have yet to issue comprehensive coverage guidance on genetic testing for diagnostic and screening purposes. In order to qualify for coverage and payment under Medicare, a specific genetic test must meet the predicate requirements set out under 42 C.F.R. § 410.32. While the Centers for Medicare and Medicaid Services (CMS) has been fairly progressive in approving the coverage of certain genetic tests for diagnostic purposes, it has been slow to authorize the coverage of genetic screening tests. For example, CMS did not finalize coverage of Next Generation Sequencing tests (diagnostic laboratory tests administered to patients with advanced cancer), until March, 2018.[6] Additionally, Medicare still does not pay for genetic testing in many cases.[7] Even the common genetic tests for the BRCA1 and BRCA2 gene mutation linked to breast cancer are only covered by Medicare under certain circumstances such as a family history of breast cancer.[8]

VI. PRIMARY CIVIL AND CRIMINAL STATUTES IMPLICATED IN GENETIC TESTING FRAUD SCHEMES:

Depending on the specific improper genetic testing conduct alleged, a variety of civil and / or criminal statutes may be implicated. In this section, we briefly examine the various conduct that may result in prosecution by Federal law enforcement authorities. Examples of problematic conduct includes:

• 42 U.S. Code § 1320a–7a(a)(5). Beneficiary Inducement Provisions. Under the beneficiary inducement statute, it is a violation of law to offer or provide anything of value to a beneficiary in order to influence the beneficiary to order or receive any item or service that is reimbursed by Medicare or Medicaid. Violations of these provisions may result in the assessment of significant civil money penalties. Examples of improper beneficiary inducements include: (1) Gift cards.Giving $100 gift cards to senior citizens covered by Medicare if they sign up to have a “free” DNA swab taken and submitted for genetic testing; (2) Other items of value. Providing a “free” health screening if a senior citizen signs-up for genetic testing and provides their Medicare information.
• 18 U.S.C. § 1347. Health Care Fraud. Under this statutory provision, it is a criminal violation to defraud any health care program (both governmental and private payor programs) OR to obtain payment by means of false or fraudulent pretenses, representations or promises. As the language reflects, this health care fraud statute is extraordinarily broad and may encompass a broad range of improper actions and conduct. Examples of cases brought under this statutory provision include: (1) Misrepresentation of a non-covered service. In some respects, this improper practice is nothing more than another form of “billing for services not rendered.” Simply put, in the cases we have seen where this has occurred, a genetic testing laboratory was alleged to have purposely billed a non-covered genetic test under the CPT code of a covered laboratory genetic test; (2) Misrepresentation of the ordering physician. This type of billing fraud is fairly common in laboratory testing fraud cases. We have seen cases where the putative ordering physician had never heard of the patient and did not know that his provider number was being improperly used to bill Medicare for genetic tests; (3) Medically unnecessary services. We have seen multiple cases where the prerequisite requirements to qualify for a Medicare beneficiary to have a certain genetic test performed have not been met. Moreover, representatives of the laboratory billing for the genetic testing services were aware that these requirements had not been met.
• 42 U.S.C. § 1320a-7b(b). Anti-Kickback Statute.It is against the law to provide something of value in an effort to induce a referral that is covered by a Federal health care benefit program. Under the Anti-Kickback Statute, transactions aimed at inducing referrals for items or services billed to federal healthcare programs are strictly prohibited. This criminal statute is, in part, aimed at preventing the overutilization of services and the providing of unnecessary services. When it comes to genetic testing, ordering physicians, marketing representatives and others who receive kickbacks for referring genetics testing work to a laboratory for processing and billing may be criminally prosecuted. As a final point, it is important to keep in mind that as a result of the Affordable Care Act, violations of the Anti-Kickback Statute may also be pursued as a violation of the civil False Claims Act.As the statute provides:

“(1) Whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—

(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program, shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.

(2) Whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person—

(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program, or

(B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program,

shall be guilty of a felony and upon conviction thereof, shall be fined not more than $100,000 or imprisoned for not more than 10 years, or both.[9]“

• 18 U.S.C. § 220(a).Illegal Remunerations for Referrals to Recovery Homes, Clinical Treatment Facilities, and Laboratories.These statutory provisions were enacted in October 2018 as part of the “Eliminating Kickbacks in Recovery Act (EKRA).” EKRA was intended to address patient brokering and other kickback schemes by expanding liability and raising the maximum penalties for kickbacks. Under this statute, the maximum penalties for illegal remunerations paid by recovery homes, clinical treatment facilities, and laboratories in an effort to induce referrals can result in penalties of $200,000 and 20 years of imprisonment per occurrence. To date, none of the publicized prosecutions of genetic testing related kickbacks have been brought under EKRA. Nevertheless, we anticipate that private payor kickback cases involving genetic testing claims and laboratories will become public as investigations mature and referrals are made to Federal prosecutors around the country.An offense under this provision is described as:

Offense — Except as provided in subsection (b), whoever, with respect to services covered by a health care benefit program, in or affecting interstate or foreign commerce, knowingly and willfully—

(1) solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory; or

(2) pays or offers any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—

(A) to induce a referral of an individual to a recovery home, clinical treatment facility, or laboratory; or

(B) in exchange for an individual using the services of that recovery home, clinical treatment facility, or laboratory…”

• 31 U.S.C. § 3729 (a)(1)(A).Civil False Claims. Under this statutory provision, anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” is liable to the U.S. Government for civil penalties.[10] Medicare does not cover “medically unreasonable and unnecessary services” so knowingly billing Medicare for medically unnecessary genetic tests could constitute a violation of the False Claims Act. is legislation under this section.[11] Several of the cases discussed below were brought by former employees (whistleblowers) with knowledge of the fraud.
• 42 U.S.C. 1395nn.Ethics in Patient Referrals Act of 1989 (Stark). Both the initial legislation and subsequent refinements to the law and corresponding regulations are all focused on prohibiting improper physician self-referrals for certain “Designated Health Services“ (DHS) for which Medicare would otherwise pay, to an entity with which the physician or an immediate family member has a financial relationship, unless one of the statutory or regulatory exceptions applies. Importantly, “Clinical Laboratory Services” are listed as DHS. Under Stark, if a physician (or an immediate family member of such physician) has a financial relationship with clinical laboratory, the physician may not make a referral to the laboratory for the furnishing of services for which payment may be made under the Federal health care programs. To date, the government has not cited violations of Stark as the basis for prosecuting one or more of the genetic testing fraud cases that have been widely publicized. Nevertheless, the prohibitions presented under Stark should be considered since laboratory services are a recognized DHS.

VII. RECENT GENETIC TESTING FRAUD PROSECUTIONS:

In recent years, the U.S. Department of Justice (DOJ) has focused increasing resources on the investigation and prosecution of genetic testing related fraud and abuse. These efforts have resulted in a genetic testing fraud prosecutions. Some of the recent case pursued by DOJ prosecutors have included:

• March 2018. Misrepresenting the Nature of a Genetic Test in Order to Get it Covered. In this case, a California genetic testing company improperly billed TRICARE, FEHBP and Medicaid for services that did not qualify for coverage and payment. To get the claims paid, the company allegedly used an improper code which misrepresented the nature of the services. To resolve violations of the civil False Claims Act, the genetic testing company agreed to pay $10,635,615.90 to TRICARE and FEHBP. The company also paid $756,183.00 to the state Medicaid program to resolve similar allegations.
• December 2018. Genetic Testing Kickback Case.A Vancouver, Washington toxicology and genetic testing lab was sued under the civil False Claims Act and agreed to pay $1,777,738 to settle allegation that it violated the FCA by paying kickbacks to obtain the referral Medicare and TRICARE covered tests from other local laboratories. As the U.S. Attorney’s Office noted, “Paying remuneration to medical providers or provider-owned laboratories in exchange referrals encourages providers to order medically unnecessary services.”
• February 2019. Medically Unnecessary Genetic Testing Case. In this case, a San Diego genetic testing company agreed to pay $1.99 million to resolve allegations that the company violated the civil False Claims Act, 31 U.S.C. §§ 3729 et seq. The government alleged that the genetic testing company submitted claims for genetic tests that were not medically reasonable and necessary because the prostate cancer patients at issue did not have any of the specific risk factors that qualified for the testing. Notably, this case was brought by two former employees of the testing company who filed suit under the whistleblower provisions of the False Claims Act.
• May 2019. Medically Unnecessary Genetic Testing Case. A health system in Decatur, Texas agreed to pay $431,182.96 to resolve allegations that it violated the civil False Claims Act. According to the government, the health system submitted false claims to Medicare for payment in connection with the ordering of genetic testing panels for surgical patients that were not medically reasonable or necessary. Notably, the samples taken from surgical patients to be subjected to genetic testing were sent to a lab in Tennessee for processing. The U.S. Attorney’s Office for the Western District of Tennessee prosecuted the case against the Texas health system.
• May 2019. Medically Unnecessary Genetic Testing Case. In this case, a New Jersey laboratory sales representative pleaded guilty to one count of “Conspiracy to Commit Health Care Fraud.”The defendant obtained access to hundreds of senior citizens through his work with a non-profit organization, The Good Samaritans. He was able to persuade these senior citizens to submit to genetic testing, despite the fact that no health care professional was involved. Notably, the defendant reportedly used “fear-based tactics during the presentations, including suggesting the senior citizens would be vulnerable to heart attacks, stroke, cancer and suicide if they did not have the genetic testing.” To get the genetic tests authorized, the defendant recruited health care providers off of Craigslist and paid them thousands of dollars each month to “sign their names to requisition forms authorizing testing for patients,” despite the fact that the health care providers had never examined or interacted with any of the patients. The defendant, along with two co-conspirators were reported paid more than $100,000 in commission payments by two laboratories for whom they worked. The defendant was sentenced to 50 months in prison and ordered to pay restitution of $434,963 and forfeiture of $66,844.
• June 2019. Genetic Testing Kickback Case. In this case, a Las Vegas cardiology practice agreed to settle violations of the Anti-Kickback Statute and the civil False Claims Act by agreeing to pay $2.5 million to the government. The government alleged that the cardiology practice referred patients for genetic testing in exchange for kickbacks from the testing laboratories.
• June 2019. Genetic Testing Kickback Case. The owner of a Tampa medical marketing company was recently prosecuted and found guilty of conspiracy to pay kickbacks and bribes. In this case, the defendant was alleged to have paid kickbacks to medical clinics in exchange for the referral of DNA swabs that have been obtained from Medicare beneficiaries. The government further alleged that the medical clinics were directed to collect the DNA of all of their patients, regardless of medical necessity. The defendant marketing company sent the DNA swabs to a clinical laboratory for genetic testing. Over the course of the conspiracy, the clinical laboratory billed over $2.2 million to Medicare for genetic testing claims. The defendant marketing company owner
• July 2019. Improper Marketing Practices / Ordering Genetic Tests for Patients that Were Never Seen or Treated. In this case, the Chief Medical Officer physician in Gainesville, Florida, along with two other individuals (non-physicians), have been charged with one count of “Conspiracy to Commit Health Care Fraud.” The three individuals worked for a company that operated a network of laboratories that performed genetic testing procedures. According to the government, the two non-physicians are alleged to have contacted a clinical laboratory in New Jersey and proposed sending ten DNA swabs for genetic tests in return for 50% of the Medicare payments received by the laboratory. The DNA genetic tests reportedly listed the Chief Medical Officer as the “Ordering Physician.” Moreover, the Chief Medical Officer certified that the tests were medically reasonable and necessary. Upon investigation, the government has supposedly learned that all 10 of the patients for whom genetic testing was ordered live outside of Florida. In order to qualify for coverage and payment, the genetic test ordered for one of the patients (who lived in Oklahoma) required that the patient have a personal history of breast cancer. When interviewed, the patient reported that she had not had cancer and had not advised anyone to the contrary. When asked how she learned about the genetic testing opportunity, the patient reported that she submitted the DNA swab “after seeing an advertisement on Facebook that offered a $100 gift card for people interested in genetic testing.” She further stated that the DNA swab was not taken at a medical office. Instead, the swab was reportedly taken in a “plain old office building” by “some random guy.” The Oklahoma patient has further alleged that she never saw or spoke with a treating physician or with the Chief Medical Officer (who was listed as the Ordering Physician) about the genetic testing. If convicted, the defendants in this case may be sentenced to a maximum penalty of 10 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.

VIII. GENETIC TESTING — STAYING WITHIN THE FOUR CORNERS OF THE LAW:

As Medicare, Medicaid and private payors have expanded their genetic testing coverage policies, the number of laboratories, physicians and marketing companies involved in the procurement and provision of these tests has exploded. Regrettably, many individuals and companies have moved into the genetic testing space without fully understanding the rules and regulations that must be met before these tests can be ordered, interpreted, billed and paid by Medicare and other payors. If your business model involves the marketing of genetic testing services, the ordering of genetic tests or the performance of genetic tests, it is essential that you conduct a comprehensive assessment of your business (and, if applicable clinical) practices to ensure that your conduct does not violate the Federal Anti-Kickback Statute, EKRA, Stark, the False Claims Act or a host of other statutory and regulatory requirements that apply to these laboratory testing claims.

If you or your company are involved in the genetic testing industry, the following questions should be considered:

• Is your marketing company involved with the promotion of genetic testing services?
• Are you performing marketing services as an employee or as an independent contractor of a clinical laboratory?
• Are you a physician, nurse practitioner or physician assistant who has been approached and asked to serve as the “ordering physician” of genetic testing services?
• Are you a physician who has been approached by a marketing company, laboratory or other third party who has offered to pay you to conduct an evaluation (for the purpose of ordering genetic testing) via telemedicine?
• Has your medical practice been offered a fee (by a clinical laboratory or another third party) for each genetic test (DNA swab) that is taken from the patients seen in your practice?
• Has a clinical laboratory offered to give a percentage of Medicare, Medicare or private payor revenues generated by genetic testing claims referred to the laboratory by you or your medical practice?

Each of these questions raise a number of complex regulatory questions that must be fully vetted by an experienced health lawyer before you engage is such conduct.

[1] The Nobel Prize in Physiology or Medicine 1962. NobelPrize.org. Nobel Media AB 2019. Sun. 11 Aug 2019.
[2] https://web.ornl.gov/sci/techresources/Human_Genome/project/index.shtml.
[3] An examination of the remaining gaps in sequencing has been compiled by the Genome Reference Consortium. The Genome Reference Consortium is a coalition of international research institutes that have worked together to map and sequence the human genome.
[4] Direct-to-Consumer Genetic Tests – Misleading Test Results are Further Complicated by Deceptive Marketing and other Questionable Practices. GAO-10-847T. Released July 22, 2010.
[5] https://khn.org/news/safe-under-the-aca-patients-with-preexisting-conditions-now-fear-bias/
[6] https://www.cms.gov/newsroom/press-releases/cms-finalizes-coverage-next-generation-sequencing-tests-ensuring-enhanced-access-cancer-patients
[7] https://www.asco.org/practice-guidelines/cancer-care-initiatives/genetics-toolkit/genetic-testing-coverage-reimbursement
[8] Ibid.
[9] https://www.law.cornell.edu/uscode/text/42/1320a-7b
[10] The penalties for violations of the False Claims Act are currently:
Treble damages, plus $11,463 and $22,927 per false claim or statement. (These 2019 estimated amounts reflect the anticipated increase that has not yet been announced by DOJ).
[11] https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/Downloads/Items-and-Services-Not-Covered-Under-Medicare-Booklet-ICN906765.pdf