January 2023 Labs in Court: Two Usual Cases, Two Unusual Ones

Georgia Lab Owner Convicted for Role in $463 Million Genetic Testing Kickback Scheme

Case: A Florida federal jury convicted the owner of LabSolutions LLC on five counts of conspiracy and fraud in connection with a massive genetic testing kickback scheme. Minal Patel, 44, conspired with patient brokers, telehealth firms, and call centers to bill Medicare for $463 million worth of high-cost cancer genetic (CGx) tests that were not only medically unnecessary, but also ordered by physicians in exchange for kickbacks. Patel, whom the DOJ claims personally pocketed over $21 million from the scam, faces a maximum penalty of 20 years in prison on the first conspiracy count, 10 years on each healthcare fraud count, five years on the second conspiracy count, 10 years on each kickback count, and 20 years on the third conspiracy count. He’s scheduled for sentencing in March.

Significance: CGx testing fraud carried out via telehealth has become perhaps the fastest-growing segment of federal enforcement. The Patel case was part of the DOJ’s massive Operation Double Helix enforcement action that has snagged dozens of telehealth marketers, physicians, and CGx test labs. The Patel scam followed what has become a familiar pattern: It began with telemarketers calling Medicare beneficiaries, preying on their health concerns to urge them to receive supposedly free CGx tests. Patel and his patient broker cronies then paid bribes to recruit telehealth physicians to order the tests without actually seeing the beneficiaries. To cover his tracks, Patel required patient brokers to sign contracts falsely stating that they were performing legitimate advertising services for LabSolutions.¹

Pathology Lab Successfully Sues Co-Founder for Violating Non-Compete Clause

Case: After being terminated from Bako Pathology LP, the highly successful dermatopathology laboratory he co-founded 17 years earlier, Dr. Bradley Bakotic launched a new human anatomic pathology laboratory called the Rhett Foundation. One of Bako’s key doctors left to join Bakotic at the Foundation. The duo then lured away other Bako employees. As it became clear that the Rhett Foundation’s business and marketing practices mirrored its own, Bako sued the Foundation doctors for violating the non-compete and non-solicitation clauses in their employment, partnership, and other agreements with the lab. The Delaware lower court sided with Bako and the doctors appealed. But it proved to be of no avail.

Significance: While the restrictive covenants didn’t precisely define the kind of business the doctors could engage in after leaving Bako, they did say they could “not perform the same or similar duties that [they] performed for” Bako. And that’s just what the doctors were doing. “There is no doubt that Dr. Bakotic intended to duplicate [his] success at the Rhett entities using the same marketing strategy and to replace Bako as the leader in this industry,” the Delaware Supreme Court concluded.² However, while agreeing that the doctors had to pay Bako damages for lost profits, the court did question the formula the lower court used to calculate the $8.273 million total and ordered that court to do a recalculation and clarify its methodology [Bako Pathology LP v. Bakotic, 2022 Del. LEXIS 362, 2022 WL 17243705]. 

False Billing of Allergy Tests, E&M Services, Costs Connecticut MD $4.26 Million

Case: Dr. Jasdeep Sidana, the owner of a group of Connecticut physician practices operating under the name Docs Medical has agreed to pay $4,267,950 to settle charges of falsely billing Medicare and Connecticut Medicaid for immunotherapy services. The charges include:

• Billing for medically unnecessary allergy testing and annual re-testing;
• Submitting claims for medical services performed or supervised by Sidana on dates of service when he was traveling outside the US
• Billing visits in which patients received COVID-19 tests for moderately complex E&M services when those services weren’t performed.

Significance: Docs is a big operation with over 20 facilities across the state. That partly explains why the settlement price tag was so high and why the government also insisted that Sidana and Docs enter into a three-year Integrity Agreement with the U.S. Department of Health and Human Services (HHS). Under Medicare coverage rules, allergy tests and the preparation of allergy immunotherapy services must be directly supervised by a physician, meaning that the physician must be present in the same office suite, and immediately available to assist if needed.³     

Posting HIPAA-Protected Patient Information on Yelp Costs California Dental Practice $23,000

Case: In November 2017, the HHS Office for Civil Rights (OCR) received a complaint contending that Brandon Au, DDS, of New Vision Dental (NVD) was using protected health information (PHI) in responding to patient reviews on the California dental practice’s Yelp page. According to the complaint,⁴ NVD habitually provided the full names of patients who posted their reviews anonymously using a Yelp moniker. In some cases, the NVD response included detailed information about patient visits and their insurance not included in the original patient review. In addition to $23,000, NVD has agreed to implement a corrective action plan (CAP) and undergo OCR monitoring of its information practices and policies for two years.

Significance: It should go without saying that the HIPAA Privacy Rule applies to social media and online activity. “Providers cannot disclose PHI of their patients when responding to negative online reviews,” noted OCR director Melanie Fontes Rainer in the press release announcing the settlement. “This is a clear NO.”⁵ 

References:

1. https://www.justice.gov/opa/pr/lab-owner-convicted-463-million-genetic-testing-scheme-defraud-medicare
2. https://courts.delaware.gov/Opinions/Download.aspx?id=340780
3. https://www.justice.gov/usao-ct/pr/connecticut-physician-and-urgent-care-practice-pay-over-42-million-settle-false-claims
4. https://www.hhs.gov/hipaa/for-professionals/compliance-enforcement/agreements/new-vision-ra-cap/index.html
5. https://www.hhs.gov/about/news/2022/12/14/hhs-civil-rights-office-enters-settlement-with-dental-practice-over-disclosures-of-patients-protected-health-information.html