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

56 Months' Jail for Lab Technician Caught in Texas Toxicology Scam 

Case: A former toxicology testing company account rep pled guilty to conspiring with a medical clinic lab technician to steal patient identities and urine specimens from the clinic and send them to the testing company without a physician order or patient consent so they could pocket commissions and collection fees. Along the way, they forged patient consent signatures, falsified medical records and created registration forms and other fictitious documents to make it look like the unapproved toxicology screens were properly ordered. As a result of the scheme, Medicare was billed $836,788 between May and December 2015.

Significance: The account rep was sentenced to 56 months followed by three years of supervised release; in exchange prosecutors dropped the remaining 17 charges against him and the lab technician, who'll be sentenced on April 17. Each defendant will also pay $166,866 in restitution.

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.

Texas Scammer Gets 20 Years for Role in $50 Million Lab Test Ripoff

Case: The plot unfolded 10 years ago when a then 26-year-old woman and three co-conspirators set up 24 phony diagnostic testing centers in Houston. Offices were rented in 28 locations even though none of them actually saw any patients. To complete the charade, the offices were staffed with "seat warmers," i.e., young women whose only job was to answer the phones and keep out auditors, and who actually sat around and watched streamed movies all day. Meanwhile, fake diagnostic testing technicians, nurses and doctors were employed to act as a "rubber stamp" so that $50 million in tests could be billed to Medicare, Medicaid and private insurers. Fake technicians even visited supposedly homebound patients to carry out sham tests billed to home health care programs.

Significance: Three of the four co-conspirators (charges were dropped against the third after he was found mentally incompetent to stand trial) were convicted on not only health fraud but also money laundering charges in connection with efforts to hide the true owners of the test clinics. The ringleader was sentenced to 20 years in jail and three years of supervised release and ordered to repay almost $15.3 million as restitution. The other two defendants are awaiting sentence.

Maryland Hospital Fined $457.2K for Free Support Services Kickbacks 

Case: Union Hospital of Cecil County, Inc. has agreed to pay $457,213 for a pair of self-disclosed kickback violations, namely, paying remuneration to:

• Physicians in the form of free support services provided by a trio of physician assistants; and
• Cardiologists via free support services provided by a nurse practitioner.

Significance: The OIG didn't disclose any of the details of the arrangements, other than to say that the hospital self-disclosed them, which presumably resulted in a lighter penalty. Free or discounted support services from referral sources to physicians are, of course, a common form of illegal remuneration banned by the anti-kickback and Stark laws.

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 ClosureFAST radiofrequency 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.