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

Federal Court Dismisses Whistleblowers' Urine Drug Test False Billing Claim
Case: Whistleblowers accused a national lab company of falsely billing Medicare and Medicaid for high complexity quantitative urine drug tests under CPT code G0431 at up to $476 per test. According to the complaint, the lab falsely marketed the capabilities of its UDT machines, knowing they were capable only of basic qualitative testing, billed at $20 per test. The lab denied the charges and asked the California federal court to toss the case without a trial. And that's just what it did.

Significance: The court didn't determine that the whistleblowers' claims were invalid, only that they weren't specific enough. How did the lab market the machines and why was this fraudulent? How many false claims did the lab submit and how much did the government overpay as a result. So, the court gave the whistleblowers permission to revise their complaint and try again [United States v. Carolina Liquid Chemistries, Corp.]

Lab Fails in Bid to Get Medicare Payment Suspension Set Aside
Case: In 2017, CMS suspended 100% of Medicare payments to True Health Diagnostics (THD) based on what it called "credible allegations of fraud." Two years later, while the suspension was still in place (although it had been reduced to 35%), CMS imposed a second suspension on the basis of "credible" fraud allegations. THD denied any wrongdoing and asked the Texas federal court to issue a temporary restraining order barring CMS from enforcing the suspensions until the underlying fraud allegations were resolved. But the court refused saying it had no jurisdiction, i.e., legal authority to adjudicate a Medicare appeal at this stage.

Significance: Federal courts generally do have jurisdiction to rule on claims "arising under" U.S. laws like the Medicare Act. But that jurisdiction kicks in only after the federal government agency, in this case HHS via CMS, renders a final decision. That wasn't the case in this situation because THD hadn't "exhausted its administrative remedies," i.e., gone through the CMS process for contesting suspensions due to overpayments [True Health Diagnostics, LLC v. Azar].

Lab Fires Sales Rep Due to Performance, Not Age
Case: A lab sales rep claimed she was fired due to age discrimination. Her evidence: A remark allegedly made by her manager: "Sometimes people feel that this job is better suited for younger people." The lab claimed she was fired for performance problems. Lab's evidence: Customer complaints, negative performance reviews and placement into and failure to meet the goals of a performance improvement plan. Ruling: The sales rep didn't have enough evidence to make out a prima facie case of discrimination.

Significance: "Stray remarks alone do not give rise to the inference of discrimination," explained the Arkansas federal court. And the evidence clearly showed that she wasn't meeting the lab's reasonable performance expectations [Taylor v. Abbott Labs., Inc.].

Drug Abuse Treatment Owner Guilty of $57 Million Drug Test Pass-Through Billing Conspiracy
Case: The owner of a northern Florida substance abuse treatment center pleaded guilty for his role in a $57 million pass-through lab testing billing and money laundering scheme. The way it worked: The treatment center owner cut a deal with a lab owner to send patient urine samples to the lab for urine drug testing in exchange for a 40% share of the insurance reimbursements. The lab owner did his part by arranging with managers of two rural hospitals to bill private insurers to secure the highest possible rates for the tests.

Significance: Making the scheme even more egregious is that the same treatment center owner also brokered parallel urine drug testing deals between the rural hospitals and other substance abuse facilities, pocketing 30% of reimbursements as his commission. In addition to forfeiting $10.2 million in ill-gotten gains, he's looking at a high fine and time behind bars when sentencing is handed down.

Massachusetts Practice Busted for Taking Free POCT Cups from Millennium
Case: A northern Massachusetts medical practice and Detroit pain clinic became the latest downstream providers to pay the OIG a five-figure fine to settle kickback claims in the form of accepting free point of care test cups from now defunct Millennium Laboratories. The settlement amounts: $87,650 and $44,900, respectively, are consistent with the range of what other providers have paid since autumn 2017 when the feds began targeting the physicians on the receiving end of the Millennium scandal.

Significance: Millennium used the freebies to pay physicians for referrals of custom profile panels and other tests to carry out what the feds claim is the largest ever kickback scandal involving lab services. (For more on the physician crackdown, see, Lab Compliance Advisor, (LCA), June 18, 2018).

Lab Uses Billing Info of Another Lab to Get Around Payment Restrictions
Case: In 2015, Kentucky Medicaid and private payors began having doubts about the legitimacy of urine drug test claims submitted by CAL Laboratory Services and restricted payments to the toxicology lab. Undeterred, the owner of CAL arranged with his counterpart at Tristate Medical Laboratories to have tests referred to and performed by CAL billed to health insurance programs using Tristate's billing information to make it look like Tristate performed the tests. In exchange, he paid Tristate's owner 40% of the $1.3 million in fraudulent reimbursements received on the tests.

Significance: Four principals of CAL and Tristate pleaded guilty to their role in the conspiracy. Two of the defendants died after being convicted; the other two are awaiting sentencing. In addition to fines and possible prison, the owner of Tristate is likely to get a 10-year Medicare and Medicaid exclusion.