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

BLS Bribery Case Gets Criminal

Case: The massive federal crackdown against doctors who allegedly took bribes from New Jersey-based Biodiagnostic Laboratory Service (BLS) in exchange for Medicare test referrals continues to grow. On June 6, a federal jury indicted a pair of cardiologists with a Patterson, NJ practice for their role in the BLS scheme. One of the doctors allegedly received a $500,000 loan, a free trip to Florida for fishing and visiting strip clubs and other bribes from BLS. His wife was also indicted for setting up the sham company through which the bribes were funneled. The other doctor is accused of taking bribes in exchange for over $900,000 in lab referrals.

Significance: There have been 45 convictions in the BLS case so far, 31 of them physicians. But most of those prosecutions have been civil cases. The new case ups the ante with criminal charges. The Patterson cardiologists are only the fifth and sixth doctors indicted in the scheme.

Fraudster Gets Maximum 10 Years for Lab Billing Ripoff & Obstructing Investigation

Case: Speaking of criminal charges, the mastermind of a false billing conspiracy was sentenced to the maximum 10 years in prison; his accomplice got 37 months. The defendants pleaded guilty to creating testing "clinics" to bill Medicare for tests that were medically unnecessary or not actually performed. The sham bilked the government out of over $7 million in false claims.

Significance: The details are pretty egregious. The plot, which was apparently planned over a long period of time, involved paying marketers $80 to $100 cash to recruit Medicare beneficiaries to the clinics. Marketers used the money to pay the beneficiaries bribes and pocketed the rest. Adding injury to insult, the co-plotters tried to obstruct the investigation.

Pathologists Pay $601K to Settle Stained Specimens False Billing Charges

Case: The case began when an anatomical pathologist filed a qui tam whistleblower lawsuit against his North Carolina practice for allegedly billing Medicare for medically unnecessary tissue tests. The practice denied the charges. But after the government elected to take 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: One of the government's accusations was that the practice applied 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.