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

$80K Is the Price for Accepting Free Testing Cups

Case: Those turned out to be some pretty expensive cups! A group of addiction centers (aka, AMC) probably did not think twice about accepting free point of care testing cups from Millennium Labs. But what looked trivial to AMC was valuable enough in the eyes of the OIG to constitute remuneration creating an improper financial relationship between the parties. Result: Subsequent AMC referrals to Millennium constituted illegal kickbacks. AMC doubtlessly disagreed with the OIG's theory but decided that discretion was the better part of valor and paid $79,880.50 to settle the case.

Significance: Those darned free Millennium Labs test cups! The exact same forbidden fruit was the damnation of Parallax Center, a New York City drug addiction treatment center earlier this fall. The settlement bill: $64,203. Neither case is all that big a surprise when you consider that over the years, the OIG has gone out of its way to remind labs (and other providers) that compensation need not be elaborate to establish an illegal relationship between the lab and referral source. And if the referrals are tainted, billing for the resulting claims amounts to submitting a false claim under the False Claims Act.

Processing & Handling Fees Cross Kickback Line

Case: Speaking of kickbacks, a North Carolina medical clinic and its physician order have agreed to pay $60K to settle charges of accepting illegal remuneration from labs to which it referred patients in the form of "process and handling fees."

Significance: Unfortunately, it is almost impossible to figure out what the physician did wrong since the OIG did not release the details of the case. But in general, paying fees to referring physicians for processing, handling and other services is an anti-kickback violation unless it qualifies for the so called "bona fide employee" exception:

• The services covered by the fee are clearly identified;

• The fee reflects fair market value for the provided services; and

• Volume or value of federal program referrals by the physician are not a factor in determining the fee amount.

Methadone Clinic & CEO Settle Improper Urine Testing Charges for $884K

Case: Improper billing for urine drug testing, 2017's biggest story in FCA lab enforcement, has struck again. On Dec. 8, a substance abuse clinic and its CEO settled claims of incorporating on-site testing of patients into the bundled weekly rate it charged the Connecticut Medicaid Program for all services rendered. The problem is that it was referring those tests to an independent lab in Massachusetts, meaning Medicaid was paying twice for those tests. The settlement bill: $883,859.

Significance: If you have been following these urine test cases throughout the year, you may notice that the settlement amount seems a bit high. And there's a good reason for that. The Connecticut Dept. of Services detected the "bundling" issue during an audit two years earlier. Continued non-compliance with the weekly rate payment rule would result in penalties later, the audit report warned. But the clinic apparently ignored the warning and ended up having to settle at above the usual going rate for these cases.