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

Allergy Firm Sues Quest for Antitrust Violations

Case: Texas-based United Allergy Services (UAS) is suing Quest Diagnostics for conspiring with Thermo Fisher Scientific’s Phadia business and other market players to squeeze it out of the market in a deliberate bid to eliminate lower-priced competition. The suit claims that Quest and its co-conspirators persuaded insurers and other potential customers that doing business with UAS would create “medical, legal and other risks.” UAS, which provides testing and allergen immunotherapy for hay fever and other allergies, claims it lost $200 million in profits as a result of the plot.

Significance: There’s a mysterious subtext. The case actually began in 2014, when UAS sued Quest’s co-conspirators but not Quest. Why UAS decided to bring a separate subsequent action against the lab giant rather than naming it in the original suit is unclear. In any event, that original suit has now been dismissed. Meanwhile the plot thickens, as UAS deals with a whistleblower lawsuit by a former marketing representative accusing it of overbilling Medicare for allergy testing. It adds up to a fascinating drama and we’ll keep you apprised as it unfolds.

Standing Orders Don’t Prove Validity Testing Is Medically Necessary

Case: Over a five-year period, a Vermont lab routinely billed Medicare and Medicaid for urine specimen validity testing even when referring physicians did not specifically order it. Rather than slug it out in court, the lab agreed to pay $815K to settle the false claims charges.

Significance: Lab Compliance, 101: Performing and billing for tests without a physician’s order is a cardinal sin. The Vermont lab almost certainly knew this but relied on standing orders executed by physicians to perform specimen validity tests automatically even without an express order. Other labs have made the same mistake. The moral: Seemingly standard ordering protocols like standing orders and reflex testing raise medical necessity red flags. While they’re not per se illegal, these ordering protocols can’t be used as a blank check or satisfy the requirement that medical necessity be established for each individual test performed.

Drug Test Billing Abuses Land Retired Indiana M.D.s in Hot Water

Case: A husband-and-wife physician team has been charged with falsely billing the Indiana Medicaid program for over $1.1 million in urine drug tests. The government contends that from 2011 to 2013, the now retired physicians routinely required patients seeking opioid prescriptions to furnish a urine specimen to be tested for nine different classes of drugs using a multiplex screening kit costing no more than $5 per day. They then billed and were paid $171.22 per patient, getting around the $20.83 per patient limit allowed under Indiana Medicaid billing rules by falsely certifying that they had collected and tested nine separate samples.

Significance: As the opioid crackdown continues, physicians need to be extra scrupulous in documenting the medical necessity of the drug tests they order for patients who are prescribed legal opioid and painkillers.

Self-Disclosure Pays Off for Clinic Accused of Taking Illegal Consulting Fees

Case: A cardiovascular clinic in Philadelphia has agreed to pay $50,000 to settle charges of taking kickbacks from a lab company in the form of:

• Blood collection processing, handling and collection fees; and

• Consulting fees.

Significance: The clinic self-disclosed the violations in this case. It appears to have been a very wise decision. The normal price tag for violations involving questionable consulting and processing fee arrangements run into the six- and seven-figure ranges. While other factors may have been at work, voluntary self-disclosure probably played a key role in the relatively small size of the settlement.

Owners of NYC Testing Clinics Charged in $44 Million Fraud Scheme

Case: Kickbacks were just the tip of the iceberg. According to the indictment, the three co-owners of diagnostics clinics in Brooklyn not only solicited and received roughly $19 million in bribes for test referrals but compounded their sins by misrepresenting which clinic actually did the tests and using shell companies to conceal payments in violation of money laundering and tax laws.

Significance: Less than a month after the federal indictment came down, New York State brought parallel Medicaid fraud criminal charges against two of the co-owners for their role in the scheme. And just for good measure, the State Attorney General filed a $24 million civil lawsuit under the New York version of the False Claims Act. The moral: Fraud scams can lead to criminal AND civil charges; and when Medicare and Medicaid are targeted, parallel criminal and civil charges can be brought but under BOTH federal and state law.