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

New York Breaks Up Massive $28 Million Medicaid Diagnostics Mill
Case: One of the biggest Medicaid diagnostics fraud schemes in recent memory has resulted in multiple convictions, including two doctors and two corporate presidents. According to New York prosecutors, the key defendants, including the owner of a pair of diagnostic clinics, the head of medical management firm and a complicit physician—used street recruiters to offer patients cash payments of between $20 to $50 to go to the defendant’s clinics for a battery of unnecessary tests. By the time it was done, the massive medical mill had billed $28 million worth of tests to Medicaid and Medicaid MCOs, proceeds the defendants divvied up among themselves under a secret revenue sharing plan.

Significance: This scheme, which required undercover agents and a stream of warrants to discover, wasn’t just sordid but elaborate. In an attempt to give the mill the face of legitimacy, an unlicensed individual was hired to pose as a physician to order tests in the name of physicians involved in the scheme. Even the test technicians were involved as the tests ordered for a particular patient were based on which technician happened to be on duty that day.

Florida Providers Shell Out $733K+ for Self-Disclosed Lab Test Kickbacks
Case: The OIG entered into separate settlement agreements with the three providers involved in a self-disclosed kickback arrangement. Although the details weren’t disclosed, Orlando Foot & Ankle Clinic (OFAC) apparently received some form of remuneration to refer patients to Mid-Florida Pathology, LLC (MFP) and Laboratory Services for Central Florida, LLC (LSCF) for lab testing. The settlement scorecard:

• OFAC: $418,256;
• MFP and LSCF: $314,497.

Significance: The unusual thing about this case is not that it was self-disclosed but that all three parties involved in the transactions participated in the self-disclosure. It’s unclear whether the parties acted in concert or whether somebody was “ratted out.” It’s also unclear whether the strategy paid off. Although the fines do appear to be on the low side, it’s difficult to make a judgment without knowing the volume and dollar value of OFAC referrals it generated.

Pennsylvania M.D. Used Addiction Clinics as Front for Opioid Scheme
Case: A 57-year-old doctor pleaded guilty to running an elaborate opioid distribution and insurance fraud scheme out of the Liberation Way addiction treatment center for which he served as medical director and sole physician. Federal prosecutors claimed the doctor signed blank test order forms, prescribed drugs and created medical treatment plans for patients without actually seeing them. “He never even stepped foot into one of the three treatment centers that billed in his name,” according to the DOJ press release.

Significance: Remember the name Liberation Way because you’ll probably be hearing a lot more of it in the months to come. Last March, criminal charges were filed against nine businesses and 11 individuals in connection with the scheme. All of the elements are there—exploitation of opioid addicts, massive overbillings and kickbacks involving thousands of medically unnecessary urine tests which were sent to Florida-based labs for analysis.

Texas Health System Fined $431K for Falsely Billing Genetic Tests
Case: The feds contend that between 2016 and 2018, Decatur Hospital Authority (d/b/a Wise Health System) sent samples from surgical patients to Tennessee labs for medically unnecessary genetic tests. Rather than risk a trial, Decatur has agreed to settle the claims for $431,182.

Significance: This case is the most recent example of how prosecutors and whistleblowers have begun applying traditional lab fraud laws, e.g., false billing and kickbacks, to newfangled genetic testing. One of the biggest cases was the 2018 $11.4 million settlement with Natera over alleged false billing of the Panorama sequencing-based prenatal screening test. (For more details, see Lab Compliance Advisor (LCA), March 26, 2018.)

WV Hospital & Marketer Accused of Elaborate Kickback Scam
Case: A new DOJ lawsuit accuses a West Virginia non-profit hospital and its business consultant of seeking to dominate the Ohio Valley market by bribing physicians for referrals. The scheme began in 2005, according to the complaint, when Wheeling Hospital hired R&V Associates to turn around its sagging financial fortunes. The plan: Enter into contracts providing beyond market value compensation to the region’s leading OB/GYN, radiology oncologists, cardiologists and pain management physicians for referring patients to the Hospital. As a result of these deliberate Antikickback Statute and Stark Law violations, the Hospital went from $50 million in losses to massive profits.

Significance: The complaint, which arose from a 2017 whistleblower lawsuit, details the contractual arrangements with the physicians who eagerly accepted the millions of dollars’ worth of overpayments even though they knew it was illegal, and how R&V and the Hospital carefully tracked individual physician referral records and adjusted their compensation accordingly. Meanwhile, the Hospital has filed a breach of fiduciary lawsuit against its former executive VP, who’s charged with carrying out the scheme with R&V.

Urgent Care Centers Settle E/M Upcoding Charges for $2 Million
Case: The owners/operators of CareWell urgent care centers in Massachusetts and Rhode Island have agreed to shell out $2 million for improper coding of Evaluation and Management services. CPT code selection for E/M services is based on the number of body systems a provider must evaluate to diagnose a patient and who does the examination, e.g., nurse practitioner or physician. CareWell is accused of falsely inflating the level of E/M services performed and failing to properly identify who provided them. The whistleblower who brought the initial claim will get 17% of the recovery.

Significance: The part of this case that’s relevant to labs are the alleged methods CareWell used to carry out the upcoding scheme, which are analagous to things labs have been charged of doing to inflate coding for testing services, including:

• Requiring medical staff to examine and document at least 13 body systems during medical inquiries and 9 systems during physical exams regardless of patients’ actual complaints;
• Uploading encounter plan templates onto electronic medical records software asking “yes/no” questions about particular body systems that medical personnel had to ask each patient regardless of whether those questions were medically necessary; and
• Programming the template to list “no” as the default answer to any question that wasn’t asked to make it look like the particular body system to which the question related was examined.