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.

Atlanta Medical Group Execs Jailed for $8.5 Million Allergy Testing Scheme
Case: The two owners of now defunct Primera Medical Group pled guilty to criminal charges for their role in billing insurers for allergy blood tests that weren't medically necessary, ordered by a physician or, in many cases, even performed. Details: Primera hired market research firms to pay fees to recruit privately insured patients to undergo allergy testing regardless of whether they had symptoms indicating the tests were medically necessary, generating over 4,500 claims seeking $8.5+ million from private insurers. The owners even fabricated false lab reports for tests that were never completed and sent them to not only insurers but also directly to patients, in one case sending phony results to the family of a 5-year-old girl suffering from an unknown reaction. Both owners were fined over $1.5 million and sentenced to 81 months and 93 months in jail, respectively, followed by three years of supervised release.

Significance: In addition to health fraud, the owners committed aggravated identity theft by billing insurers for the tests and allergy immunotherapy injections administered to nearly every patient using National Provider Identifiers of other doctors without their knowledge.

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. (See Lab Compliance Advisor (LCA), December 2018, for more complete analysis of managing kickback risks associated with specimen processing fees.) 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.

Device Company Pays Nearly $20 Million to Settle MD Bribe Claims
Case: Former sales managers of Covidien LP filed a whistleblower suit accusing the firm of providing free or discounted marketing and practice development services to California and Florida physicians to get them to buy Covidien's ClosureFASTradiofrequency ablation catheters. In addition to kickback violations, Covidien violated the False Claims Act by billing Medicare and Medicaid for the devices, the claim alleges. Covidien denies the charges. But once the DOJ decided to pick up the case, it decided that discretion was the better part of valor and agreed to settle for $17,477,947, of which $3,146,030 will go to the whistleblowers. In addition, Covidien will have to pony up $1,474,892 to California and $1,047,160 to Florida to settle the related Medicaid claims.

Significance: Although Covidien is a medical device company, this case is also extremely relevant for labs. The Antikickback Statute ban on offering referring physicians free or cut-rate practice and marketing services, e.g., accounting, technology, EHR, consulting and other forms of support, also applies to labs.

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.