Lab to Pay Up to $43 Million After Disregarding Employee’s False Billing Concerns

One of the costliest False Claims Act settlements in recent years is still one more cautionary tale of how dismissing the reports of lab employees who come forward to express internal compliance concerns can fester into a devastating whistleblower lawsuit.

The Whistle Blows

The concerned-employee-turned-whistleblower in this case was the board-certified physician hired by North Carolina-based Genova Diagnostics as Chief Medical Order tasked with responsibility to develop medical necessity evidence for IgG allergen, NutrEval and GI Effects, three of the firm’s unconventional test profiles. Over time, he realized that there was no such evidence and advised the lab not to bill Medicare, TRICARE and private insurers for the tests.

The Lab Plugs Its Ears

He claims that Genova dismissed his concerns as “overly conservative,” and then cut his department’s budget, before excluding him from management meetings and eventually firing him over what he contended were trumped up employment misconduct charges. So, the whistleblower took his case to federal court [United States ex rel. Darryl Landis, M.D. v. Genova Diagnostics, Inc., et al., No. 1:17-cv-341 (W.D.N.C.)].

The Feds Get Involved

The DOJ entered the scene, charging Genova with falsely billing for IgG allergen, NutrEval and GI Effects tests, citing the lack of published, peer-reviewed or high-quality clinical studies demonstrating the effectiveness of the tests. And since the tests weren’t scientifically proven effective at diagnosing any medical conditions, they weren’t deemed medically necessary under Medicare coverage rules. The DOJ also accused Genova of falsely coding the tests and paying compensation to phlebotomy vendors in violation of the Stark Law.

The Price of Settlement

After doing its own internal assessment, Genova concluded that it had done nothing wrong. But facing the risk of litigation and prosecution, it decided that discretion was the better part of valor and settled the case. The price tag could run as high as $43 million, including:

• Over $17 million in Medicare and TRICARE payments forfeited; and
• Additional penalties of13% of any net annual revenue above $100 million and 20% of any asset sales over $1 million over the next five years, subject to a $26 million cap.

The whistleblower stands to collect up to $6.5 million of this award.