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

BLS Bribery Scheme Claims another Physician. Case: A New York internist became the third physician indicted in the Biodiagnostic Laboratory Services (BLS) bribery scheme. The Justice Department claims that the internist received tens of thousands of dollars' worth of bribes from BLS employees over a two-year period in return for referring patient blood samples to the now-defunct New Jersey lab and at one point, even demanded and got an increase to his monthly payment for luring a third physician into the scheme. Significance: The BLS case is a perfect illustration of the ruin that a kickback scheme can inflict upon all involved. In June, BLS had to shut down and forfeit all its assets after pleading guilty to kickback charges. The investigation has also generated what is believed to be a record number of prosecutions against medical professionals in a bribery case, yielding 41 guilty pleas, 27 of them from physicians. One physician has been sentenced to 37 months in prison and the other two await trial. (For more on the BLS sentencing, see GCA, July, 2016).

Texas Lab Fined $3.75 Million for Inflating Mileage Claims. Case: In July 2014, a former employee filed a qui tam lawsuit against the owners of Elite Lab Services. Among other things, she claimed that over a four-year period the Texas lab charged Medicare for tens of thousands of miles that its personnel never actually drove. On Dec. 13, the owners agreed to settle the case by paying $3.75 million, 21% (or $787,500) of which will go to the whistleblower, and admitting they submitted false claims to Medicare. Significance: As with so many whistleblower cases, this lawsuit was one the lab might have been able to prevent. The employee approached the owners to voice her concerns over its mileage billing practices. But for whatever reason, the owners squandered the opportunity to correct the problem. The employee resigned and took up the litigation option. (For guidance on avoiding the same mistakes and turning a potential whistleblower lawsuit into a positive and constructive compliance initiative, see "Whistleblowers Can Be Your Best Friend," GCA).

Civil False Claims Charges against Lab Owner Jailed for Evading Medicare Pre-Payment Review. Case: Troubles continue for the New Jersey owner of a diagnostic testing company jailed for evading Medicare pre-payment review. Now, the government is suing him to recover false claims. The story begins in 2009 when the Medicare contractor placed a cardiologist affiliated with the testing company on pre-payment review to ensure he was properly documenting Medicare claims. The lab owner was charged with deliberately evading pre-payment review by submitting claims through his company and a company owned by his brother—making it look like the services were performed by the companies rather than the cardiologist—and then siphoning off Medicare payments received to himself and the cardiologist. In June 2015, the owner pleaded guilty and was sentenced to a prison sentence of 12 months. Significance: The owner's ordeal is a reminder that False Claims Act violations carry the risk of both criminal and civil liability. In other words, there is no "double jeopardy" bar against the government's bringing a civil lawsuit for money damages against the owner for the same violations that led to his criminal conviction a year earlier—although it is unclear why the government in this case did not follow its usual course and pursue the criminal and civil case in a single proceeding. (For more on the case, see "Physicians Sentenced for Diagnostic Testing Schemes," National Intelligence Report, June 4, 2015.)