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

Wisconsin Health System Settles Stark Claims for $12 Million
Case: In a case that began as a whistleblower suit, a company affiliated with Advocate Aurora Health, Inc. has agreed to pay $12 million to settle claims of violating the Stark Law. The US and State of Wisconsin cited the company for improper relationships with a pair of physicians between 2008 and 2012, including providing compensation:

• At above fair market levels;
• That took into account the volume of anticipated referrals; and
• That covered unidentifiable services.

Significance: The case is a good illustration of how whistleblower lawsuits become a lingering pain in the side that may be hard to settle. Although the relator who brought the original suit will get a share of the $12 million recovery, the government intervention covered only some of the original claims. As a result, the settlement doesn't end the litigation and the whistleblower suit will continue as a separate case covering the residual claims. The good news for Aurora is that:

• The government won't be involved in the subsequent case; and
• The settlement will have no bearing on its liability in that case.

HIPAA ePHI Violation Costs Colorado Hospital $111,400
Case: This case began when the Office of Civil Rights (OCR) received a complaint contending that an ex-employee of Pagosa Springs Medical Center (PSMC) still had remote access to the critical access hospital's web-based scheduling calendar containing electronic PHI of 557 patients. OCR investigators confirmed the allegation and found that the ex-employee had accessed the calendar on at least 2 occasions since leaving PSMC. To make matters worse, PSMC got the calendar from Google without having it sign a business associate agreement (BAA) (at the time, Google Calendar wasn't a HIPAA compliant" service the way it is today). In addition to the $111,400 fine, the settlement requires PSMC to sign an onerous 2-year Corrective Action Plan with OCR agreeing to overhaul its information security management, BAA and employee training systems.

Significance: The moral of this case is to ensure that your lab:

• Immediately terminates employees' access to ePHI when they leave your company or remain but no longer require access to do their jobs; and
• Enters into a BAA with vendors before disclosing your ePHI to them.

Despite Vigorous Denial, Molecular Lab Pays $1.8 Million to Settle Fraud Charges
Case: The feds claim that Molecular Testing Labs, a toxicology and genetics lab in Washington State, paid local labs in exchange for Medicare and Tricare referrals; it then turned what had been an Anti-Kickback Statute offense into a False Claims Act violation by billing for the tests it provided as a result of those ill-gotten referrals. While unshakably adamant about its innocence, the lab recognized that discretion is the better part of valor and agreed to pay out up to $1.8 million to settle.

Significance: While credible, Molecular's vigorous denial of wrongdoing is a potent reminder of the Hobson's choice providers face when charged with fraud violations: invest a fortune in time, effort and legal fees to resist or pay a substantial settlement amount to make the situation go away. Citing the hundreds of thousands it had already racked up, a written statement from Molecular's chief compliance officer said that, like many healthcare providers do, it entered into the settlement so it could "stop spending our valuable resources on the case.

Chicago Doctor Indicted for Approving Medically Unnecessary In-Home Tests
Case: Working out of a Chicago-based clinic, a doctor allegedly prescribed and authorized ultrasounds, percutaneous allergen and nerve transmission for Medicare patients even though he knew the in-home tests weren't medically necessary. During the course of the four-year scheme, he approved the tests after they had been completed, the indictment contends. He now faces six fraud charges, each of which carries a maximum prison sentence of 10 years.

Significance: The details of the alleged scheme particularly smarmy—albeit not necessarily true. According to the indictment, the doctor attempted to cover his tracks by submitting fraudulent bills from multiple entities. Then, once the entities received payment from Medicare, they sent him a check representing a percentage of the proceeds as his share for the business.