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

Psychiatrist Pays $805K to Settle Urine Drug Test Billing Fraud Claims
Case: The DOJ charged the owner of a Connecticut psychiatric practice of false billing of urine drug screening tests. The practice allegedly tested urine samples collected from patients with substance use disorders for different classes of drugs and billed each class tested for as if it were a separate patient encounter. Under Medicare and Medicaid rules, urine tests screening for multiple classes of drugs are considered one test since they are conducted on a single urine sample. The alleged abuses, which involved Medicare and Connecticut Medicaid, continued over a nearly three-year period.

Significance: The case, the latest in a string of urine drug test abuse actions against physicians, was originally brought by a whistleblower, a former employee of the practice, who will get $99,113 of the settlement..

Connecticut Hospital Settles Self-Disclosed Stark Violations for $423K
Case: There was more action in Connecticut this month. Another major settlement in the Nutmeg State was authored by Hartford Hospital after it made the mistake of leasing office space to a physician practice (and Medicare referral source) at below fair market value rents. Facing the prospect of trial for violating the Stark law as well as the Civil Monetary Penalties Law for subsequently billing services provided to Medicare beneficiaries as a result of those poison referrals, the hospital has agreed to fork over $423,017 to settle.

Significance: Unfortunately, we do not know any of the details of the arrangement because the hospital self-disclosed the violation to the OIG. Along with a lower fine, shielding potentially embarrassing details is one of the advantages of self-disclosure and something you need to consider if your lab ever unearths a violation before the OIG does.

Health Care CEO Charged with Paying Kickbacks to Pill Mill Doctor
Case: The former owner and CEO of Alabama chronic care management provider MyPractice24, Inc. has been indicted for an alleged kickback scam involving what has become Public Enemy Number One: abuses involving opioid drugs. The feds claim the CEO offered not only cash bribes but also free chronic care management and medical billing services to a Montgomery physician and his staff for referring patients to MyPractice24. The CEO also allegedly waived Medicare co-pays to recruit patients to enroll in its chronic care management program.

Significance: The physician who allegedly took this bundle of freebies from MyPractice24 has since pleaded guilty to illegal drug distribution, health care fraud and money laundering. And once one domino falls, others typically follow. Thus, it seems highly likely that once they are done with the CEO, the prosecutors will focus on lower level staff managers within both MyPractice24 and the Montgomery practice.

Ohio Hospital System Settles Kickback Claims for $14.25 Million
Case: Mercy Health has agreed to pay $14.25 million to settle charges of having improper financial relationships with six referring staff physicians. The feds accused the Cincinnati-based nonprofit system of providing above fair market value employment compensation to five internists and one oncologist in violation of the False Claims Act.

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.