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

Ex-Hospital Exec Pays $1 Million for Role in Kickback Scheme. Case: Last fall, Tuomey Healthcare shelled out $72.4 million to settle claims of paying part-time specialists for referrals of hospital patients and falsely billing Medicare $39 million. Now the South Carolina system's former CEO Ralph "Jay" Cox III has agreed to pay $1 million of his own money and accept a four-year ban for his personal involvement in the scheme. Brushing aside warnings from attorneys, Cox allegedly caused Tuomey to enter into sweetheart deals with the physicians to keep them from referring outpatients to a new freestanding surgery center. Significance: The Cox settlement is the latest example of the Justice Department's policy of holding health care executives personally accountable for Medicare fraud committed by their organizations. A week earlier, the board chairman and Senior Vice President of North America Health Care paid $1 million and $500,000, respectively, to settle claims for their role in the skilled nursing company's billing of medically unnecessary rehabilitation services provided to residents. (For more on executive accountability, see "Yates Memo Creates Additional Compliance Risk for Labs and Their Executives," GCA, Dec. 2015).

Doctor Jailed for Taking Cash Bribes from Marketers. Case: A New Jersey osteopath pleaded guilty to accepting thousands of dollars in commissions from the sales reps of a marketing firm in exchange for referring patients to two different blood and DNA testing labs that were clients of the firm. The osteopath was sentenced to a year in prison, two years of supervised release and fined $26,000. Significance: While kickbacks tend to be enmeshed in complex business arrangements, this scheme was as subtle as a punch in the face. In addition to his monthly commissions check, the osteopath received cash payments calculated on the basis of the actual number of patient referrals he made to the client labs during the month. Similar to the Biodiagnostic Laboratory Services LLC case, this case highlights the government's intention to pursue individuals including physicians involved in improper referral arrangements.

Lab Fined $152K for Exposing Workers to Chemical Dangers. Case: Employees of a Connecticut lab complained to the Occupational Safety and Health Administration (OSHA) about suffering sore throats, headaches and other ailments on the job. OSHA inspected and cited the facility for 17 violations, including failure to implement an effective chemical hygiene plan carrying $152,435 worth of proposed fines [Quest Diagnostics Corp., OSHA Region 1, Sept. 1, 2016]. Significance: Although labs are subject to OSHA regulations, they are relatively low on the agency's list of priorities. Construction sites, manufacturing facilities and other high risk operations get most of OSHA's attention. But labs become an inspection target in certain situations such as when:

• Employees complain, which is what happened in this case;

• A health or safety incident occurs; and/or

• OSHA carries out a specific enforcement initiative targeting labs or lab operations.

(See "How (& When) to Comply with New OSHA Chemical Safety Requirements," GCA, Nov. 2015, for more on managing OSHA risk.)