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

Lab Charged in Kickback Scheme Fights to Keep Its CLIA License

Case: Next Health is in a legal fight for its life. Earlier this year, the feds indicted two officials of the Dallas lab company for accepting $190,000 in bribes in exchange for allegedly generating $200 million in hospital referrals for overpriced and medically unnecessary drug and genetic tests. In May, CMS inspectors cited Next Health for CLIA testing violations. Claiming that it’s the victim of a “premeditated” scheme, Next Health has now asked a federal court for a restraining order to prevent CMS and state agencies from revoking or suspending its CLIA accreditation. Loss of the CLIA license would put Next Health out of business, the suit contends.

Significance: Next Health’s legal adversaries aren’t limited to the public sector. In February, UnitedHealthcare brought its own lawsuit against the firm in connection with the kickback scheme contending that it ran into the range of $100 million. (See the related article on page X for more on private sector suits against labs.)

Marketer Accused of Offering Gift Cards for Urine Samples

Case: Speaking of Next Health, one of the lab’s former marketers is dealing with kickback troubles of its own. In an unrelated case, an Austin marketer has been charged with giving soldiers $50 Walmart gift cards for urine and saliva samples. Next Health and other client labs allegedly performed tests on the samples under the guise of a “wellness study” and billed Tricare for reimbursement. The marketer has pleaded not guilty to the charges.

Significance: The case is a reminder that kickbacks and bribes may implicate not only the referral source and testing lab but the sales and marketing personnel involved in making the allegedly illegal business arrangements.

Urinalysis Lab at Center of Opiate ‘Pill Mills’ Scam

Case: A urinalysis lab with a shady past figures prominently in an equally shady scheme involving TennCare, Tennessee’s Medicaid program. According to federal prosecutors, Confirmatrix Labs paid kickbacks to pill mill operators that dispensed medically unnecessary opiates for referring patients to the lab for urine testing patients had to undergo to take the meds. And TennCare was billed for the whole shebang via a series of Confirmatrix shell companies.

Significance: Neither Confirmatrix nor its officials have been charged in the scheme. However, that may be just a matter of time. Confirmatrix’s founder has a track record having served three years in federal prison for running a massive music counterfeiting operation. Another red flag is Confirmatrix’s abnormally high per-patient costs. One private study named the lab “the biggest outlier” among reviewed firms for Part B payments, noting its $2,406 per-patient billing rate as opposed to the national per-patient average of $751.

Spine Clinic Charged with False Billing of Urine Tests

Case: The feds indicted the co-owner and billing manager of a Louisiana spine and pain management clinic for falsely billing Medicare and private insurers for $4.4 million worth of medically unnecessary services, including $3.9 million in quantitative urinalysis tests. The clinic was planning to open a urinary testing lab and began storing specimens for unnecessary testing once the lab went on line, the indictment claims.

Significance: The Louisiana indictees are not alone. More than 400 defendants have been charged with health care fraud as part of the 2017 National Health Care Fraud Takedown spanning 41 federal enforcement districts and 30 State Medicaid Fraud Control Units. (For more on the Takedown, see GCA, July 2017, page 3.)

Genetic Testing Company Linked to Indiana False Billing Prosecution

Case: Now we know why the FBI raided the HQ of Proove Biosciences in Southern California. The genetic testing company is apparently caught up in a Takedown case targeting illegal dispensing of oxycodone and opioids by Physicians Primary Care (PPC) in Indiana. The indictment claims that three individuals affiliated with PPC, including an MD and two nurse practitioners, caused Proove to fraudulently bill for genetic tests administered to PPC patients that were medically unnecessary and never interpreted.

Significance: It’s important to note that Proove hasn’t been formally charged with any offenses. And in a recent statement, the company’s founder and CEO emphasized three key points, including the fact that Proove:

• Received written and signed medical necessity determinations for the tests in question;
• Cut ties with the indicted PPC physician immediately upon learning of the investigation in 2014; and
• Has cooperated with the FBI and U.S. Attorney’s office.