Case of the Month: Judge Who Said Labs Must Independently Verify Medical Necessity Takes It Back
"That CAN’T Be Right: Court Says Labs Must Independently Verify Medical Necessity of M.D. Ordered Tests" That was the headline we used in reporting a highly disturbing federal court ruling allowing a whistleblower to sue Boston Heart Diagnostics for falsely billing lab tests. The real stunner wasn’t the judge’s ruling but the theory on which […]
"That CAN'T Be Right: Court Says Labs Must Independently Verify Medical Necessity of M.D. Ordered Tests"
That was the headline we used in reporting a highly disturbing federal court ruling allowing a whistleblower to sue Boston Heart Diagnostics for falsely billing lab tests. The real stunner wasn't the judge's ruling but the theory on which he based it. According to D.C. District Court Judge Reggie Walton, labs have a duty to independently verify that tests physicians order are actually medically necessary.
Of course, Judge Walton's theory goes directly against decades of consensus, not to mention express OIG guidance, on the role of labs in verifying medical necessity of ordered tests. So it just had to be wrong and inevitably would be reversed. That wasn't just our opinion; it was held by almost every legal and industry expert in the country, including the influential American Clinical Laboratory Association which took the trouble to file an amicus curiae (friend of the court) brief asking the Judge to reconsider the decision after re-reading the OIG Guidance.
And, thankfully, that is exactly what has happened. Here is a quick summary of the Groat case saga, including the latest chapter.
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 those tests were necessary.
But Judge 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 for the diagnostic codes cited, he reasoned. And because it didn't do this, it had to stand trial for false billing. 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-to-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…)
On Dec.11, Judge Walton took back what he said—at least in part. I "overstated" that whole independent medical necessity duty of labs business, he 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 dismissing 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, Judge Walton's reversal on medical necessity is a huge relief for the lab industry as a whole.
This content is exclusive to Lab Compliance Advisor subscribers
Start a Free Trial for immediate access to this article and our entire archive of over 20 years of LCA reports.