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

Ohio Hospital System Settles Kickback Claims for $14.25 Million

Case: Rather than risk a trial, Mercy Health will pay $14.25 million to settle charges of entering into improper financial relationships with six referring staff physicians. The Cincinnati-based nonprofit system allegedly violated the False Claims Act by providing above fair market value employment compensation to five internists and one oncologist.

Significance: The size of the settlement is somewhat surprising given the mitigating circumstances. Mercy Health self-disclosed the violations after discovering "errors in the administration of a small number of physician arrangements" during an internal audit and fully cooperated with the investigation, according to a company statement. By the same token, this is not the first time Mercy Health has been in hot water with the feds for false billing. Recently, Mercy hospitals in Missouri and Maine have faced—and ultimately settled—charges of paying oncologists and other physicians for referrals.

Shareholders Sue Myriad Genetics Over Alleged myRisk Billing Improprieties

Case: Last March, Myriad Genetics disclosed that it had received an OIG subpoena related to an investigation into possible false claims stemming from the firm's billing of Medicare and Medicaid for its myRisk genetic cancer test over a four-year period. At issue, specifically, is Myriad's use of CPT codes 81211 and 81213—full sequencing analysis of BRCA 1/2 and duplication and detection analysis of the genes—to bill for myRisk. Now, two different groups of shareholders have filed class action lawsuits charging Myriad with failing to disclose its improper billing practices to investors and making misleading financial claims about the company to the extent those representations were based on false information about myRisk revenues.

Significance: Keep in mind that Myriad has not been charged, let alone convicted of any fraud offense. But the moral of this case is how in the current litigious environment, the mere suspicion of fraud and improper billing may be enough to create ancillary legal problems for labs. This is especially true for publicly traded labs that face the specific risk of being sued by their own shareholders for securities fraud.

Breast Cancer Recurrence Test Billing Case Ends in $2 Million Settlement

Case: BioTheranostics has agreed to shell out $2 million to settle claims of falsely billing Medicare for its molecular Breast Cancer Index (BCI) test. BCI, which determines the risk of breast cancer recurrence beyond five years, is used to guide treatment decisions regarding the value of extended endocrine therapy. But the DOJ claimed that BioTheranostics promoted and performed BCI on breast cancer patients who had not been in remission for five years and who had not been taking tamoxifen. In so doing, the San Diego-based company flew in the face of not only Medicare coverage rules but published practice guidelines and clinical trial data finding BCI medically unnecessary for such patients.

Significance: So far, FCA cases targeting billing of medically unnecessary gene expression tests have been relatively rare. Of course, that is bound to change as Medicare broadens its coverage rules for such tests. The BCI case may thus prove to be a harbinger of things to come.

Pennsylvania Drug Testing Lab at Center of Alleged Stark Scam

Case: What do Dr. Robert Fetchero of Jeannette, Pennsylvania, Dr. Sridhar Pinnamaneni of Windermere, Florida, and Dr. Thelma Green-Mack of Zionsville, Indiana, have in common—other than being physicians? Answer: All three settled charges of accepting payments for Medicare referrals to Universal Oral Fluid Laboratories (UFOL), a Pennsylvania drug testing lab with which they had an improper financial relationship in violation of the Stark and anti-kickback laws. The price of settlement:

• Dr. Fetchero: $200K;
• Dr. Pinnamaneni: $370K; and
• Dr. Green-Mack:

UFOL's medical director also pled guilty to charges for his role in the scheme which unfolded over a roughly three-year period.

Significance: While drug testing has been the hottest trend in lab enforcement, this case is an old-fashioned kickback scheme rather than the opioid-related abuses that have become so common over the past 18 months.

BLS Scandal Convicted Physicians Count Reaches 38

Case: The latest doctor swallowed up in the Biodiagnostic Laboratory Service (BLS) bribery scheme is a 56-year-old physician from Monmouth County, NJ, who was sentenced to 24 months in prison after pleading guilty to accepting $3,000 per month in bribes for referring at least $828K worth of blood testing business to BLS labs. The judge also added two years of supervised release and a $4,000 fine.

Significance: The BLS scandal has become a Bermuda Triangle for physicians, with 38 convicted so far—which may be a record not just for lab but any kind of health care services bribery case. And as we approach the June 2016 anniversary of BLS's guilty plea and subsequent asset forfeiture and shutdown, the crackdown against the individual physicians involved in the scheme is still a long way from over.