March 2023 Labs in Court: Labcorp Wins One, Settles Another
In this month’s roundup of cases involving labs, Labcorp gets one lawsuit tossed and settles another.
Not Disclosing List Prices of Uncovered Lab Tests on ABN Is Not Consumer Fraud
Case: A Labcorp patient was “shocked” to receive a $292 bill for a Vitamin D test listed on their Advance Beneficiary Notice (ABN) form as costing $18.93. The explanation for the discrepancy, of course, is that the ABN price didn’t apply because the patient’s insurer, Highmark Blue Shield, didn’t cover the test. However, that didn’t stop the patient from bringing a class action lawsuit against Labcorp for violating Nevada state consumer fraud law. The North Carolina federal court ruled that the patient didn’t have a valid legal claim and tossed the lawsuit.
Significance: As do many states, Nevada allows consumers to sue companies for making “false or misleading” statements that they know customers will rely on to their detriment. The patient claimed that the ABN was false and misleading because it didn’t include the list price that patients would have to pay for lab tests not covered by their insurance. Labcorp did omit this information from the ABN, the court acknowledged, but so does everyone in the lab industry. The point of the ABN, the court explained, is to disclose to patients what they’ll have to pay out of pocket if the test is covered by insurance. And that’s exactly what the Labcorp ABN did. Moreover, it specifically stated that:
- The listed prices are estimates based on the assumption that “those services are covered by [the patient’s] health insurance plan”
- The estimates reflect “health plan information provided at the time of service”
- The amount the patient may have to pay may be different from the estimated amount
- The patient was “fully responsible” for paying any such differential amounts
[Nolan v. Lab’y Corp. of Am. Holdings, 2023 U.S. Dist. LEXIS 23526]
Labcorp Settles HDL Singulex Whistleblower Kickback Claims for $19 Million
Case: Two whistleblowers sued Labcorp for allegedly conspiring with Health Diagnostics Laboratory (HDL) and Singulex to pay kickbacks disguised as draw fees or process and handling fees to providers in exchange for referrals of expensive and medically unnecessary multi-panel lab tests. The whistleblowers claim that Labcorp participated in the scheme by providing blood draw services for providers receiving kickbacks in exchange for referrals. While denying all claims, Labcorp has decided to shell out $19 million to settle the case and avoid the costs and risks of a trial.1
Significance: It’s been nearly eight years since HDL and Singulex, both of whom are now defunct, settled what is arguably the most notorious lab fraud scandal in history for a combined $48.5 million. However, the scandal continues to generate litigation against the labs and physicians allegedly involved. The latest settlement resolves allegations that Labcorp caused the submission of false claims to Medicare by providing phlebotomy services for patients, knowing that their physicians were taking illegal specimen and processing collection fees from HDL and Singulex. The two whistleblowers who brought the case will receive a $5.6 million share.
California Mobile Phlebotomy Services Owners Plead Guilty to Travel Allowance Mileage Fraud
Case: The sister owners of PhlebXPress pleaded guilty to fraudulently billing Medicare for over $7.5 million in non-reimbursable mobile phlebotomy services and overstating the mileage that company phlebotomists traveled over a five-year period beginning December 1, 2015. The situation went from bad to worse in November 2020 after Medicare imposed a payment suspension against the California mobile phlebotomy services provider in response to “credible allegations of fraud.” The owners allegedly sought to circumvent the payment suspension by falsely representing that services provided by PhlebXpress were performed by another company called Phlebotomy Solutions. In addition to billing Medicare for these non-reimbursable services, PhlebXpress continued to overstate phlebotomist travel mileage, in one case billing for 124.6 miles when the phlebotomist only traveled 1.4 miles. With sentencing set for May 1, 2023, the PhlebXPress owners each face a maximum penalty of 10 years in prison and a $250,000 fine.2
Significance: Medicare pays a specimen collection fee when it’s “medically necessary” for a clinical laboratory technician to draw a specimen for a clinical diagnostic laboratory test. It also provides for payment of a travel allowance when a technician travels to a nursing facility or homebound patients in circumstances where a specimen collection fee is payable. The travel allowance is prorated based on the miles the phlebotomist travels and the number of eligible patients from whom a specimen is collected. The idea is to reimburse labs for the personnel and travel expenses of specimen collection. However, enforcers have targeted labs for taking advantage of the rules and inflating mileage. As telehealth utilization and collection of lab specimens from homebound patients increases, the potential for phlebotomy-related fraud and along with it, regulatory scrutiny, are likely to increase.
11th Circuit Affirms CGx Fraud Convictions Against Patient Recruiter
Case: After a five-day trial, a federal jury convicted a patient recruiter for his role in paying kickbacks for orders of medically unnecessary cancer genetic tests (CGx) performed on patients without cancer and who were not at familial risk of cancer, and then falsely billing Medicare for the tests, knowing that Medicare doesn’t cover tests that merely assess a patient’s risk of cancer. The recruiter, who was sentenced to 120 months, appealed the false claims—but not the kickback—convictions. Among other things, he argued that he committed no fraud because CGx testing must be covered by Medicare to the extent the U.S. Preventive Services Task Force (USPSTF) considers it to be Grade A/B preventive testing. The Eleventh Circuit Court of Appeal rejected the argument and upheld the conviction.
Significance: A provision in the Affordable Care Act of 2010 (ACA) does require that Grade A/B preventive services recommended by the USPSTF be covered by certain “group health plan[s]” and “health insurance issuer[ s].” However, the court continued, Medicare is neither of these things, at least according to the definitions of “group health plan” and “health insurance issuer” under the ACA. Accordingly, the ACA does not mandate Medicare coverage for CGx testing. Even if it did, the USPSTF recommendations for CGx testing apply only after an assessment by the primary care physician of a patient with a personal or family history of certain cancers. No such assessments were made for the CGx tests billed to Medicare in this case. Nor do any other federal statutes or regulations require Medicare to pay for CGx tests or any other Grade A/B preventive screening tests recommended by the USPSTF, the court concluded.
[United States v. Scott, 2023 U.S. App. LEXIS 1495, 29 Fla. L. Weekly Fed. C 2151, __ F.4th __, 2023 WL 328236]
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