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

Quest Fined for Self-Disclosed Violations for Second Time in 2017. Case: Quest Diagnostics, Inc., New Jersey agreed to pay over $1.151 million for three Civil Monetary Penalties Law involving:

• Performance of services outside the scope of employment by Quest phlebotomists in Texas, Maryland, Ohio and New Jersey;

• Failure to meet documentation requirements in connection with Quest's donations of electronic health records software and information technology to clinical laboratory referral sources; and

• Failure to collect timely second-year payments from physician clients as required in electronic health record donation agreements.

Significance: One of the key things to note about the case is that the allegations were self-disclosed. This is the second reported case of 2017 in which the OIG fined Quest for violations it voluntarily self-disclosed. In February, Quest agreed to pay $315,093 for allegedly paying kickbacks to a referral source in a case involving rent payments at above fair market value to a medical practice made by a Quest lab in New Jersey.

Pathology Practice Settles Claims for False Billing of Specially Stained Specimens. Case: The case began when a pathologist filed a qui tam whistleblower claim against his North Carolina practice for allegedly billing Medicare for medically unnecessary tissue tests. The practice denied the charges. But after the government took over the case, it decided that discretion was the better part of valor and agreed to settle for $601K— $120,200 of which will go to the pathologist. Significance: Among other things, the complaint accused the practice of applying special stains to test specimens without first giving pathologists a chance to review specimens stained with more routine (and less expensive) hematoxylin and eosin (H&E) stains. And under Medicare rules, the pathologist must first review the routine H&E stained specimen for the special stains to be deemed medically necessary.

Pathology Labs Pays $897K to Settle Off-Label Marketing of Cell Stain Tests. Case: Memphis providers conducted a multi-year campaign promoting their immunohistochemical mast cell tryptase stain test for its ability to definitively diagnose a condition known as "mast cell enterocolitis." The claims went beyond the test's FDA approval and unsupported by evidence, according to the government. Rather than slug it out in court, the defendants agreed to fork over $897,640 to settle the case. Significance: The case is a useful illustration of the interplay among FDA approval, medically necessary and false claims act requirements. Because the promoted use was off-label, the tests were deemed not medically unnecessary under Medicare. And billing Medicare for medically unnecessary tests would have made the providers guilty of submitting false claims.

Not Documenting M.D. Response to Urine Drug Tests Leads to Medicare Exclusion. Case: A Michigan physician and pain management specialist agreed to a three-year Medicare and Medicaid exclusion for failing to meet medical necessity documentation standards. According to the OIG, the physician didn't adequately document his response to results of urine drug screenings and discussions with patients who:

• Tested positive for illicit drugs and/or controlled substances;

• Tested positive for noncontrolled substances he didn't prescribe; and/or

• Tested negative for controlled substances he did prescribe.

Significance: This case serves as a reminder of two important morals on physician documentation of medical necessity of lab tests:

• Proper documentation isn't just a favor to help the lab get paid for ordered tests—it's a core standard of health care quality that physicians must meet to participate in Medicare; and

• To document medical necessity properly, physician must show not simply why they ordered the tests but how they actually used the test results to treat the patient.