A roundup of recent cases and enforcement actions involving the diagnostics industry

Self-Disclosing Saves Kentucky Lab Over $1 Million in False Claims Settlement

Case: A Kentucky-based lab that made heroic efforts to step up its COVID-19 testing early in the pandemic has agreed to shell $1.25 million for falsely billing Medicare, Medicaid, TRICARE and CHAMPVA for urine drug tests between 2016 and 2018. The U.S. Attorney claimed that Bluewater Toxicology:

• Submitted claims for definitive urine drug tests of 22 or more drug classes even though it tested for a lower number of classes to secure higher reimbursement;
• Submitted certain claims without sufficient documentation showing the treating physician’s intent to order the test; and
• Billed for specimen validity testing (SVT), a procedure to verify that a urine sample for drug testing hasn’t been diluted which isn’t covered by Medicare and other federal health programs.

Significance: Even though $1.25 million is a lot of money, the settlement price tag could have been twice as high had the lab not come forward to self-disclose and thereby secure a 1.5 monetary loss rate rather than the triple damages provided for by the False Claims Act.

Blue Cross and Blue Shield Sues Lab for COVID-19 Test Price Gouging

Case: Blue Cross and Blue Shield of Kansas City is suing GS Labs for COVID-19 test price gouging, contending that the national testing facility inflated its cash prices and performed medically unnecessary tests on out-of-network members. The $9.2 million federal lawsuit accuses GS Labs of “engaging in an abusive scheme to exploit the COVID-19 pandemic by duping health insurers into paying thousands of COVID-19 diagnostic testing claims at grossly inflated rates.” BCBS claims that GS Labs charged it $380 for a COVID-19 antigen test, roughly 10 times what Medicare reimburses for the test and up to $979 for a PCR test.

Significance: Insurers and labs have been waging PR war against each other almost from the moment the federal government mandated that payors cover COVID-19 tests without charging copays, deductibles or other out-of-pocket expenses. Labs have claimed that payors aren’t obeying the mandate; insurers have accused labs of price gouging. But this is the first time the conflict has festered into actual litigation. However, this is not the first time that GS Labs’ test prices have come under question. Last December, the Kansas Insurance Department began investigating a local facility owned by GS Labs for charging $1,000 for tests. GS Labs has yet to comment on these allegations.

Georgia Lab Owner Must Stand Criminal Trial for CGx Kickback and Billing Scam

Case: In 2019, the feds indicted the owner of a Georgia lab for allegedly paying kickbacks to patient recruiters to engage in telemarketing campaigns and health fairs in an effort to drum up referrals of Medicare patients for medically unnecessary cancer genomic (CGx) BRCA tests and then billing Medicare for the tests. The owner asked the Florida federal district court to toss the indictment, claiming that:

• The payments to recruiters weren’t kickbacks but legitimate payments to “patient navigators” under the Affordable Care Act;
• The US Preventive Services Task Force recommends BRCA CGx testing for certain cases and Medicare is legally required to cover any screening tests the Task Force recommends; and
• Labs don’t have an independent duty to verify that ordered tests are medically necessary.

Not surprisingly, the court upheld the indictment.

Significance: Although the court suggested that the lab owner’s legal theories were way off base, especially the medically necessary argument, the refusal to dismiss the indictment was also based on procedural grounds to the extent that the arguments raised questions of fact that would have to be determined at trial [United States v. Patel, 2021 U.S. Dist. LEXIS 115925, 2021 WL 2550477

West Virginia Clinic Becomes Most Recent Provider Fined for HIPAA Right of Access Violation

Case: Instead of the required 60 days, it took a West Virginia diabetes clinic two years to provide access to a minor child patient’s mother access to his medical records. In addition to $5,000 to settle a potential HIPAA Privacy Rule violation, the clinic had to agree to implement a corrective action plan providing for two years of Office for Civil Rights (OCR) monitoring.

Significance: This is the 19th fine the OCR has handed out since it launched its HIPAA Right of Access Initiative in April 2019 targeting providers for not granting individuals’ access to their own protected health information. Although the initiative remains ongoing, the pace of fines has slowed considerably under the Biden administration. The West Virigina settlement represents the second lowest fine. The highest fine was $200,000. Here’s a Scorecard of all the fines issued so far.

OCR Right of Access Initiative Settlements Scorecard (as of July 26, 2021)