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

Texas Pathology Lab Settles EHR Consulting Kickback Claims for $63.5 Million
Case: In 2006, HHS implemented an AKS safe harbor and Stark exception letting non-physician providers pay up to 85% of physicians' costs to help them transition from paper records to EHR systems. But Inform Diagnostics (then known as Miraca Life Sciences Inc.) allegedly stretched the rules beyond the breaking point by offering physicians discounts on EHR consulting services in exchange for lab referrals, It even based individual discount amounts on the anticipated return on investment the particular physician's referrals would generate and offered the deal only to physicians it targeted as high-volume referral sources. Three different whistleblowers filed qui tam lawsuits and now Inform has agreed to settle the claims for $63.5 million, to be paid by its former parent, Japanese company Miraca Holdings Inc.

Significance: Under the False Claims Act first-to-file rule, the first whistleblower to file a lawsuit is the only one allowed to bring an FCA case arising out of a particular fraud scheme. But each of the three whistleblowers in this case (including the former Miraca Life Science Sr. Vice President of Commercial Operations, former dermapathologists and a company called LPF LLC) had legally distinct claims based on different factual information. Result: All three cases were allowed to proceed. And when the DOJ decided to intervene in each case, Inform/Miraca saw the writing on the wall and agreed to settle.

Mass. Pain Management MDs Jailed for Elaborate Drug Testing Conspiracy
Case: After pleading guilty to running "one of the most dangerous pain management practices in Massachusetts," a medical resident was sentenced to 75 months in jail, three years of supervised release and a $1,852,000 restitution payment. His physician co-conspirator was also sentenced to eight years in prison for health care fraud and money laundering. The defendants routinely dispensed large quantities of powerful narcotics to addicted patients out of the now-defunct New England Pain Management Associates clinic and billed Medicare and private payors for services not performed.

Significance: The details of the scheme were particularly sordid including falsification of patient encounter notes to make it look like patients received exams of up to 40 minutes and fabrication of urine drug test results with false dates when, in fact, samples weren't tested for up to three months after specimens were collected. The defendants also lied to investigators and provided forged documents in response to subpoenas.

Tennessee Pain Doctor Faces Jail for Opioid Abuses, Medicare Fraud
Case: The doctor is facing 45 charges, including 22 counts of illegal distribution of a controlled substance for routinely prescribing oxycodone and other Schedule II drugs without examining and diagnosing patients, including one Chronic Pain Syndrome patient who died as a result of ingesting "The Holy Trinity" of oxymorphone, Soma and alprazolam. According to the indictment, the doctor required Medicare beneficiaries to visit his office four to six times per month for the same services cash-paying patients only had to come in twice a month to receive. He also allegedly wrote 164 individual prescriptions for over 12,000 Schedule II controlled substance pills the very day the State of Tennessee permanently revoked his Pain Management Certificate.

Significance: As is commonly the pattern in these opioid distribution scams, the doctor allegedly exacerbated his wrongdoings by engaging in Medicare fraud (13 counts) and money laundering (9 counts), including:

• Upcoding claims to indicate a higher level of service than actually provided;
• Billing for services that weren't medically necessary;
• Causing submission of claims for unlawful prescriptions to Medicare; and
• Diverting proceeds of the fraud.

Kentucky Pain Clinic Pays $127K to Settle Specimen Validity Test Billing Claims
Case: The Northern Kentucky Center for Pain Relief agreed to pay the OIG $126,799.90 to settle claims of billing Medicare for specimen validity testing (SVT). Explanation: Under Medicare rules, urine drug testing is deemed medically necessary to detect and quantify the presence of drugs in a patient's body. However, SVT, which analyzes the urine specimen to ensure that it hasn't been tampered with or adulterated, is not deemed medically necessary if its sole purpose is to validate the specimen because the test results aren't being used to manage the beneficiary's treatment.

Significance: Last year, the OIG audited $67+ million in Medicare Part B payments for SVTs billed in combination with urine drug tests, i.e., on the same dates of service, from 2014 through 2016. The findings: $66.3 million of the payments were improper. Those payments were received by 4,480 clinical labs and physician offices. (See, NIR, March 16, 2018, for more details.) The OIG called on CMS to recover those SVT payments from labs, which apparently included the Kentucky clinic involved in this settlement.

Aetna to Pay California $935K for HIV Envelope Privacy Fiasco
Case: The price tag for the privacy snafu that occurred in July 2017 when Aetna mailed 12,000 beneficiaries sensitive information about their HIV medication in envelopes with a transparent window keeps going up. In January 2018, the insurance giant settled a class action lawsuit for $17.2 million. (For the details of the case, see LCA, March 12, 2018). Now, Aetna is settling with the states of the beneficiaries. After agreeing to pay $365.2K to New Jersey, $175K to Washington, D.C. and $100K to Connecticut, Aetna has concluded its most expensive state settlement to date—$935K to California.

Significance: You don't need to be reminded of the seriousness of HIPAA breaches. The real takeaway for lab managers: The measures the settlements require Aetna to take to ensure the privacy of patient mailings containing PHI, including:

• Using envelopes that obscure the contents;
• Ensuring that the return address contains no identifying information other than a P.O. box, city, state and ZIP code; and
• Putting a statement on the envelope front stating: "Confidential Legal Information—To Be Opened Only By the Addressee."