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

West Virginia Medicaid Recovers $17 Million for $8.5 Million Opioid Scam

Case: A subsidiary of Acadia Healthcare Co. has agreed to pay $17 million to settle charges of falsely billing West Virginia Medicaid for opioid-related tests. The DOJ claims that over a six-year period, Acadia-owned drug addiction centers across the state billed Medicaid directly for moderately to highly complex blood and urine analyses actually performed in a San Diego reference lab, charging Medicaid substantially higher rates than the centers paid the California lab. By the time it was uncovered, the scheme had cost West Virginia $2.8 million and the federal government $6.3 million.

Significance: The double penalty, i.e., $17 million settlement for an $8.5 million loss, is no accident. First, Acadia is a high-profile, publicly traded company with over $760 million in reported 2019 Q1 revenues. The other aggravating factor is that this case took place in West Virginia, a relatively poor state whose relatively high opioid addiction rate has placed a significant burden on the state's Medicaid program. Acadia subsidiary CRC Health runs outpatient facilities in several towns across West Virginia.

Authors of Genetic Testing Conspiracy Preying on Seniors Sent to Jail

Case: It's off to jail for the ringleaders of a conspiracy to bill Medicare for $430K worth of genetic tests. The leading defendant, a lab sales rep, posed as a representative of The Good Samaritans of America to get access to senior citizens living in low-income housing communities and used fear tactics to persuade them to submit to genetic testing suggesting that they'd get heart attacks, stroke and cancer if they weren't tested. The defendant recruited providers on Craigslist and paid them thousands of dollars per month to sign requisition forms ordering tests for patients they never actually saw. He and his co-conspirators in turn received over $100K in commission payments from the labs which they divided among themselves.

Significance: The sentence was stiff: 50 months in prison, three years of supervised release, $434,963 in restitution and forfeiture of another $66,844. Two weeks later, another of the co-conspirators was sentenced to 19 months and a third to 13 months in prison.

New York Breaks Up $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 whom 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. So, stay tuned…

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.)