Above-Market Lease with Landlord Doctors Costs BioReference $9.85 Million

In this month’s Labs in Court roundup, BioReference pays big to settle kickback allegations, among several other kickback-related cases.

Case: BioReference Health LLC (formerly known as BioReference Laboratories, Inc.) and its parent company, OPKO Health, Inc., agreed to pay $9.85 million to settle charges of leasing office space from physicians at above-market rents to induce lab test referrals. BioReference allegedly overcalculated the amount of rental space for Patient Services Centers where patients could go for blood draws by including a “disproportionate share of common spaces” over which it didn’t have exclusive use, according to the U.S. Department of Justice (DOJ). The former BioReference employee who brought the original whistleblower lawsuit will receive a $1.7 million share.

Significance: In addition to the fact that BioReference is a huge lab, there was another reason that the settlement price tag for this case was so high. After OPKO acquired BioReference, the companies conducted multiple internal audits showing that lease payments to the specified physician-lessors exceeded fair market value. But BioReference didn’t report or return any overpayments to federal health programs in which improperly referred patients participated.

Bribing Beneficiaries Isn’t a “Referral” Under Anti-Kickback Statute, Says Fifth Circuit

Case: The DOJ prosecuted marketing company CMGRX for hiring recruiters to pay TRICARE beneficiaries $250 for each prescription they ordered for experimental compound drugs to treat pain and scars. Among other things, the government claimed that the payments violated the Anti-Kickback Statute (AKS) ban on “knowingly and willfully offer[ing] or pay[ing] any remuneration…to any person to induce such person…to refer an individual to a person” to acquire an item paid for by a federal health care program (emphasis added). CMGRX claimed the payments to beneficiaries weren’t “referrals” and the U.S. Fifth Circuit judge agreed. The “technical meaning” of “refer” means paying a person to direct a third party to order a product, not paying beneficiaries to obtain a product for their own use, the court reasoned.

Significance: What CMGRX did in bribing TRICARE beneficiaries might be a felony, according to the court; it just wasn’t an AKS referral felony. In fact, company principals were convicted of conspiracy to commit healthcare fraud in connection with the TRICARE scheme [United States v. Cooper, 2022 U.S. App. LEXIS 17210, 5^th Cir., June 22, 2022].

Feds Nail 15 More Texas Doctors in Little River Kickback Scheme

Case: The crackdown on physicians who accepted bribes from Little River Healthcare continues, with 15 more Texas doctors agreeing to shell out $2.8 million to settle claims for their role in the scam. It all began when the now-defunct hospital operator came up with a way for physicians who ordered tests that the hospital itself couldn’t perform from out-of-network labs to provide those services in-network via its hospital contract with Blue Cross Blue Shield (BCBS). As part of the plan, they paid volume-based commissions to independent contractor recruiters who then used management services organizations (MSOs) to pay doctors for referrals. MSO payments were disguised as investment returns.

Significance: The latest settlement brings the total of physicians that have settled claims for accepting bribes from Little River to 33. The price tags for the most recent batch of settlements range from $41,000 to $582,522, with nine of the 15 settlement amounts being in six figures. And the action is a long way from over. As part of the settlement, the doctors have agreed to cooperate with the ongoing investigation.

Lab Director Excluded from Medicare Under CLIA Can’t Sue CMS

Case: The Centers for Medicare & Medicaid Services (CMS) imposed sanctions on Missouri lab Gamma Healthcare for failing to correct condition level CLIA deficiencies. Gamma appealed before settling claims by accepting revocation of its CLIA certificate, a two-year exclusion for its lab director, and waiver of appeal rights. But Gamma allegedly didn’t tell the lab director about the appeal or settlement until after the papers were signed. The lab director, a gentleman of significant professional repute, was outraged and refused to sign the attestation. He then sued, asking the federal court to invalidate the exclusion and declare that CMS violated his Fifth Amendment due process rights by not allowing him to appeal. The Missouri federal court dismissed the suit.

Significance: The evidence showed that the director was in the loop and knew there was a possibility of sanctions under CLIA. He also understood that as lab director, he could be held personally accountable for the lab’s CLIA violations. Moreover, the director couldn’t sue CMS or its officials because they were protected by sovereign immunity [Smalley v. Becerra, 2022 U.S. Dist. LEXIS 118085, July 6, 2022].