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

Urinalysis Lab Caught Up in Tennessee Opiate ‘Pill Mill’ 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.

Lab Charged with Kickbacks Fights to Keep CLIA License & Business Alive

Case: At stake is more than a fine and negative PR. The legal case against Dallas lab Next Health has become a fight for business survival. The feds indicted two company officials for taking $190,000 in bribes for hospital referrals to provide $200 million in overpriced and medically unnecessary drug and genetic tests earlier this year. Then in May, CMS inspectors cited Next Health for CLIA testing violations. Claiming that it’s the victim of a “premeditated” scheme, Next Health is asking a federal court for a restraining order preventing 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 a private lawsuit against the firm in connection with the kickback scheme that it contends generated around $100 million in referrals for testing.

Gift Cards-for-Urine Samples Pitch Leads to Kickback Charges

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.