Case of Month: Judge Takes Back Ruling that Labs Must Independently Verify Medical Necessity
From - National Intelligence Report Thanks for clearing that up. As if the lab industry doesn't already have enough legal agita to deal with, last June a federal D.C. District Court upheld a… . . . read more
Thanks for clearing that up. As if the lab industry doesn’t already have enough legal agita to deal with, last June a federal D.C. District Court upheld a whistleblower’s right to sue Boston Heart Diagnostics for false billing because it failed to independently verify that tests physicians ordered for certain diagnostics codes were actually medically necessary. The only good thing about the ruling was that it was so wrong that it just had to be invalid. At least that’s what the legal experts said. And it turns out they were right.
The Groat Case: Part I
A former United Healthcare medical director filed a whistleblower suit claiming that Boston Heart routinely billed Medicare for tests that were medically unnecessary for certain diagnostic codes. Boston Heart asked the court to dismiss, noting that all of the tests were properly ordered and that it was up to the physicians to determine whether the tests were necessary.
But D.C. District Court Judge Reggie Walton allowed the claim to go to trial. Having billed Medicare for the tests, Boston Heart had a duty to independently verify their medical necessity, Judge Walton reasoned. The ruling cites a California case (called Garcia v. Sibelius) stating that Medicare regulations “place the burden of establishing the medical necessity of diagnostic tests on the entity submitting the claim.” But, as attorneys noted at the time, it was an apples and oranges comparison because unlike in Groat where the lab billed for the tests, the ordering physician was the billing entity in the Garcia case [U.S. ex rel. Groat v. Boston Heart Diagnostics Corp.].
The Groat Case: Part II (What I really meant was…)
On Dec. 11, Judge Walton took back what he said back in June—at least in part. I “overstated” that whole independent medical necessity duty of labs business, the Judge wrote. “The Court is now convinced that a laboratory cannot and is not required to determine that tests billed to Medicare are medically necessary,” he said. “The OIG Guidance makes clear that ‘laboratories do not and cannot treat patients or make medical necessity determinations,’ but ‘should be able to produce or obtain from the treating physician. . . the documentation to support the medical necessity of the service the laboratory has provided,” he added.
However, Judge Walton stopped short of tossing the case. While breach of independent duty to verify was no longer in play, the whistleblower could still prove her false claims allegations by showing that Boston Heart’s preprinted order forms encouraged physicians to order screening tests that were not medically necessary [U.S. ex rel. Groat v. Boston Heart Diagnostics Corp.].
Takeaway: While Boston Heart is no doubt bummed that it still has to go to trial, the greater significance of Judge Walton’s mea culpa and clarified ruling on medical necessity is its welcome—albeit not unexpected— relief to the lab industry, including the American Clinical Laboratory Association which actually filed an amicus curiae (friend of the court) brief asking the Judge to do what he ultimately did—reconsider the decision after re-reading the OIG Guidance.
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