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

$1.99 Million Settlement for False Billing of Genetic Tests

Case: In a case that began as a whistleblower suit filed by two ex-employees, GenomeDx Biosciences has agreed to shell out $1.99 million to settle charges of improperly billing Medicare for its Decipher Biopsy which predicts the probability of prostate cancer metastasizing after surgery and classifies the tumor's aggressiveness. The feds claim that over a nearly two-year period, beginning in September 2015, the San Diego-based genetic testing company made claims for Decipher tests performed on patients who didn't have risk factors making the tests medically necessary. The whistleblowers will get $350K of the settlement.

Significance: Decipher, which is based on the level of expression for 22 RNA biomarkers involved in prostate cancer pathways, has gained favor with a growing number of payors, including Cigna. In 2015, Medicare approved coverage but only for a limited subset of patients, i.e., those with: i. pathological stage T2 disease with a positive surgical margin; ii. pathological stage T3 disease; or iii. rising prostate-specific antigen levels after an initial PSA nadir. The patients GenomeDx billed for allegedly lacked the risk factors spelled out in the coverage policy.

Lab Settles Specimen Collection Fee Kickback Charges for $2.275 Million

Case: Cleveland HeartLab (CHL) has agreed to pay $2,275,094 after self-disclosing to the OIG that it paid remuneration in the form of payments to physicians and physician groups for collecting, processing and handling blood specimens. The offenses occurred during a four-year period between 2010 and 2014, three years before CHL was acquired by current owner Quest Diagnostics.

Significance: OIG Advisory Opinions and court cases, including the notorious Health Diagnostics Laboratory (HDL) case involving the payment of a $10 to $17 per test processing fee to physicians have made it abundantly clear that processing fee arrangements raise bright red flags under the Anti-Kickback Statute and Stark Law. More legally sound alternatives to help physicians manage the costs of specimen collection and processing include:

• Establishing a collection station near the offices of your physician clients; and/or
• Placing a phlebotomist or staff member compensated by your lab at fair market value within their facilities.

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 million 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.

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."

PacBio Settles Lawsuits with Shareholders over Illumina Acquisition

Case: In November 2018, Illumina agreed to acquire Pacific Biosciences for $1.2 billion. Disappointed with the $8 per share acquisition price, PacBio shareholders filed five different class action lawsuits against the financially troubled long-read, high-resolution sequencing firm claiming that the board of directors deliberately concealed important financial information to secure shareholder support for the deal. On Feb. 1, 2019, PacBio announced that it had settled all five of the cases.

Significance: Although the terms of the settlement weren't disclosed, as part of the deal, PacBio has agreed to pay $300K worth of attorneys' fees.