The Year in Lab Compliance: The Biggest Stories of 2021

The ongoing COVID-19 public health emergency (PHE) has clearly had an impact on compliance. Enforcement funds have been sequestered, federal fraud recoveries are down and temporary waivers of kickback, coverage and other rules remain in effect. But even in this environment, 2021 was a very busy year with developments directly affecting lab compliance occurring across all fronts. Here’s our breakdown of the year’s biggest stories in rough chronological order.

January: A New Administration Takes Command

The most important development of the compliance year occurred on Jan. 20 when Joseph Biden replaced Donald Trump. The changes began on that very day when the new president issued an executive order freezing new HHS regulations slated to take effect, such as prior authorization rules for Medicare Advantage Plans and automatic Medicare of new breakthrough devices, and unveiled a broad COVID-19 response plan calling for aggressive promotion of testing. 

February: Former HDL CEO Socked with $114 Million Verdict

While Health Diagnostics Laboratory, Inc. (HDL) has been gone for years, the fallout from the most massive lab kickback scandal in history continues. On Feb. 22, the US Court of Appeals for the Fourth Circuit upheld a $114.1 million jury verdict against a former HDL CEO and two sales consultants for their role in conspiring with BlueWave Health Consultants, Singulex and one other lab (the now defunct Berkeley Heart Lab) to generate blood testing referrals, including medically unnecessary large multi-assay panels, by paying physicians sham specimen processing and handling fees of between $10 to $17 per referral and routinely waiving copayments and deductibles. The defendants appealed their May 2018 conviction by a federal jury in a whistleblower case but the Fourth Circuit wouldn’t budge, affirming both on liability and the extent of the damages award.

March: Federal Court Nixes PAMA Challenge but the Fight Continues

The lab industry’s long-running battle against CMS’ warped implementation of the Protecting Access to Medicare Act of 2014 (PAMA) market-based Medicare Part B pricing scheme continued throughout 2021. CMS drew first blood on Mar. 30 when the federal DC district court once more tossed the case brought by the American Clinical Laboratory Association (ACLA) challenging the legality of the CMS PAMA system. But ACLA kept up the pressure by appealing the ruling in May, while maintaining focus on the real battlefield. While a court victory would be nice, PAMA relief would likely have to come from CMS in the form of revised regulations or Congress via legislation. ACLA and its allies continued their efforts on both fronts and, for the third year in a row, were able to get Congress to pass legislation delaying the next round of draconian price cuts and reporting requirements slated to take effect in 2022 for one year.

April: Lab Dodges HIPAA Class Action Bullet

Ambry Genetics was the target of a class action lawsuit stemming from a Jan. 2020 hacking incident that compromised the personal data of up to 230,000 individuals. Twenty-four victims from 15 states accused the California genetic testing lab of negligently failing to implement “adequate and reasonable” cybersecurity systems in violation of its HIPAA duties. On Apr. 7, the US District Court for the Central District of California dismissed the case, finding that the victims “failed to plausibly allege that their injuries were caused by” Ambry’s actions. “The problem,” the judge continued, is that the alleged harm “is not fairly traceable—at least not plausibly so—to the conduct they complain of.” Of course, this reasoning pertains to most HIPAA class actions and is one reason those cases are so hard for privacy breach victims to win.

June: OSHA Unveils a New COVID-19 Standard

Mobilizing the Occupational Safety and Health Administration (OSHA) to do more to protect frontline health care workers from COVID-19 exposure was one of the items included in the executive order issued by the new president on his first day in office. On June 21, OSHA responded by issuing a new Emergency Temporary Standard (ETS) requiring labs, hospitals and other providers to implement a laundry list of infection control measures covering everything from PPE to pre-entry screening and contact tracing. But the really controversial part of the ETS are its requirements that employers give workers paid vaccination leave and other benefits, provisions you’d normally expect to find in labor standards rather than OSHA laws. The question of whether OSHA has the legal authority to regulate these matters remains at the center of extensive litigation.

July: DOJ Makes Not Following Guidance Evidence of False Claims Act Violations

Unlike the regulations they purport to clarify, guidance materials issued by federal agencies don’t carry the weight of law. Accordingly, the longstanding efforts of the US Department of Justice (DOJ) to prosecute labs and other providers for failing to adhere to guidance has been highly controversial and politically infused. During the Trump administration, the DOJ issued internal memoranda instructing US attorneys to adhere to certain limits in seeking to use a defendant’s non-compliance with guidance materials as evidence that a lab or other defendant “knowingly” submitted a false claim in violation of the False Claims Act (FCA). On July 1, Attorney General Merrick Garland issued a memorandum countermanding those orders. Two weeks later, the DOJ issued an interim final rule implementing the Garland memo and allowing prosecutors to once more use failure to follow government guidance as evidence of an FCA violation.

September: The Telemedicine Takedown 

Increasing utilization of telehealth made possible by the temporary waivers added momentum to federal enforcement efforts against telehealth scams, many of which involved lab services. On Sep. 17, the DOJ announced the results of its third telehealth takedown since 2019, a massive operation involving 31 federal districts resulting in criminal charges against 138 defendants for billing ripoffs that cost the government $1.4 billion. Lab testing figured prominently in the telemedicine schemes. The general pattern: Telemedicine executives paid doctors and nurse practitioners to order unnecessary genetic and other diagnostic testing (as well as durable medical equipment and pain medications), either with only a brief phone call with patients they had never previously met or seen, or in some cases, no interaction with patients at all. Genetic testing labs then purchased those orders in exchange for bribes and illegal kickbacks. In some instances, medical professionals billed Medicare for sham telemedicine consultations that didn’t take place as described. 

October: FDA Expands Recall of COVID-19 Rapid Tests

The earliest COVID-19 tests to receive emergency use authorization (EUA) from the FDA were molecular PCR assays designed for diagnosis. In October 2020, the agency also began clearing tests designed for screening on a rapid and scalable basis at the point of care, eventually including at-home versions of rapid test kits. Rapid and at-home tests also featured prominently in the new response plan rolled out by the Biden administration in September 2021. But that same month, FDA began a series of Class 1 recalls of some of those tests amid concerns of false positives. The recalls would expand to include some of the biggest products on the market, including Abbott’s Alinity high throughput tests and home test kits from Ellume.

November: HHS Restores FDA Premarket Review of LDTs

Delays in getting desperately needed new COVID-19 tests exposed flaws in the FDA’s premarket regulation of laboratory developed tests (LDTs). Last August, the Trump administration ordered FDA not to require 510(k) premarket review for LDTs as part of a broader effort to cut regulation. On Nov. 15, the pendulum swung back when HHS announced that it was revoking the Trump order and restoring FDA premarket review of LDTs. The new directive also imposes limits on which kinds of LDTs will have access to the EUA pathway. Meanwhile, the lab industry looks on with horror and continues to press for a long-term legislative solution to the LDT regulation mess that will provide stability and predictability and end these unpredictable regulatory swings in policy. Two candidates have emerged as leading contenders:

• VALID, i.e., the Verifying Accurate, Leading-edge IVCT Development Act, which would leave FDA in control of LDTs but replace the current improvisational-based rules with a formal, legitimate risk-based framework in which LDTs would no longer be treated as an offshoot of new medical devices regulation but instead be in their own separate test product category; and
• VITAL, i.e., the Verified Innovative Testing in American Laboratories Act, which would shift LDTs regulation away from FDA and to HHS as an extension of its regulatory authority over lab operations and products under CLIA.

December: Biden Orders Private Payors to Pay for Rapid COVID-19 Tests

On Dec. 2, a few days after the World Health Organization officially named Omicron a variant of concern, the Biden administration took steps to promote wider use of at-home COVID testing, including ordering private health insurers to cover 100 percent of the cost of at-home tests purchased by plan members. Reimbursement of rapid tests has been a bone of contention ever since Congress enacted the 2020 CARES Act and FFCRA requiring insurers to cover the full cost of “medically appropriate” COVID-19 tests. But insurers have relied on CMS guidance to avoid paying for tests performed on the asymptomatic.