Labs In Court: A roundup of recent cases and enforcement actions involving the diagnostics industry

Lab Tech and Account Rep Face Jail for Test Fee and Commissions Scheme.
Case: A pair of Texans face criminal charges for allegedly conspiring to cheat Medicare of nearly $837,000 over a 6-month period in 2015. The feds contend that the lab technician at a medical clinic misappropriated patient urine samples and secretly sent them to a toxicology testing company at which his co-conspirator was the account representative to pocket commissions and testing fees. The two allegedly forged physician signatures and medical records to carry out the scheme.

Significance: The defendants have been charged with 8 counts of healthcare fraud each of which carries a maximum penalty of 10 years in prison and a $250,000 fine. They also face 9 counts of aggravated identity theft, at up to 2 years of prison a pop. And those latter years would have to be served consecutively to any jail time for healthcare fraud.

System Pays $6.5 Million to Settle Urine Test Upcoding Charges.
Case: A lab director filed a whistleblower suit claiming that Carolinas Healthcare System upcoded what should have been "moderate complexity" urine screens to "high complexity" tests, resulting in overpayments of $80 per test. Carolinas denied the claims but when the government took over the case decided to settle for $6.5 million, $1.365 million of which will go to the whistleblower.

Significance: The damages could have been much higher but for the fact that Carolinas cooperated in the investigation. Another mitigating factor was that Carolinas had enlisted a pair of separate outside consultants to review its coding process, each of which gave the thumbs up. Accordingly, most of the $6.5 million was for restitution of the overcharges rather than penalties.

Anthem Settles Data Breach Lawsuit for Record $115 Million.
Case: Anthem, the nation's second largest health insurer, has agreed to shell out $115 million to settle a class action lawsuit over a massive 2015 cyberattack in which hackers stole the names, addresses, birthdates, Social Security numbers and other personal information of roughly 78.8 million plan members and employees. Under the deal, the biggest settlement ever for a data breach, Anthem will furnish 2 additional years of credit protection monitoring to the individuals affected and set aside a $15 million fund to cover victims' out of pocket costs.

Significance: The settlement isn't just about money. It also requires Anthem to make specific improvements to its data security systems over a 3-year period, including:

• Strict access requirements;
• Data retention periods;
• Mandatory information security training for associates; and
• Annual IT security risk assessments.

BLS Bribery Case Gets Criminal.
Case: The massive federal crackdown against doctors who allegedly took bribes from New Jersey-based Biodiagnostic Laboratory Service (BLS) in exchange for Medicare test referrals continues to grow. On June 6, a federal jury indicted a pair of cardiologists with a Patterson, NJ practice for their role in the BLS scheme. One of the doctors allegedly received a $500,000 loan, a free trip to Florida for fishing and visiting strip clubs and other bribes from BLS. His wife was also indicted for setting up the sham company through which the bribes were funneled. The other doctor is accused of taking bribes in exchange for over $900,000 in lab referrals.

Significance: There have been 45 convictions in the BLS case so far, 31 of them physicians. But most of those prosecutions have been civil cases. The new case ups the ante with criminal charges. The Patterson cardiologists are only the fifth and sixth doctors indicted in the scheme.

Fraudster Gets Maximum 10 Years for Lab Billing Ripoff & Obstructing Investigation.
Case: Speaking of criminal charges, the mastermind of a false billing conspiracy was sentenced to the maximum 10 years in prison; his accomplice got 37 months. The defendants pleaded guilty to creating testing "clinics" to bill Medicare for tests that were medically unnecessary or not actually performed. The sham bilked the government out of over $7 million in false claims.

Significance: The details are pretty egregious. The plot, which was apparently planned over a long period of time, involved paying marketers $80 to $100 cash to recruit Medicare beneficiaries to the clinics. Marketers used the money to pay the beneficiaries bribes and pocketed the rest. Adding injury to insult, the co-plotters tried to obstruct the investigation.

MD Practice Manager Fined, Jailed for Testing Ripoff.
Case: The manager of an Oregon ophthalmology practice was fined $2.519 million and sentenced to a year and a day in prison for his role in a six-year scam targeting Medicare, private health insurers and even the IRS. The ophthalmologist, since deceased, who also happened to be the manager's father, performed medically unnecessary diagnostic tests and the manager sent out the invoices, often billing for tests that cost more than were actually performed and double billing insurers for the same test. As icing on the cake, the two concocted a scheme involving a straw company to conceal nearly $8 million in business revenue from the IRS and finance personal expenses including the construction of a posh home.

Significance: The manager was actually hit with a pair of fines—$1.702 million in restitution to Medicare, Care Oregon and several private health insurers and $817,378 to the IRS. And once he gets out of jail, he'll be subject to three years of supervised release.