ENFORCEMENT

Enforcement Trends: New Takedown Is Evidence that Genetic Testing Has Become an Enforcement Priority

It’s a pretty good sign that fraudulent billing of genetic lab testing has become a priority for federal fraud enforcers when it gets its very own “takedown.” Known as Operation Double Helix, the initiative was a joint HHS, DOJ and FBI crackdown carried out in five federal districts against 35 defendants associated with genetic testing labs (CGx) and telemedicine companies, including doctors, CFOs and CEOs that allegedly “capitalized on the fears of elderly Americans to induce them to sign up for unnecessary or non-existent cancer screening tests,” according to one of the U.S. Attorneys involved. Here’s a rundown of what lab managers need to know.

The Next Generation of Lab Kickbacks

The alleged kickback scheme follows a familiar pattern of paying doctors for referrals of Medicare patients for lab tests. But it also feels like a more modern version of abuse to the extent it brings together things that largely didn’t exist in the 20th century, including:

  • DNA cancer screening;
  • Telemedicine; and
  • Identity theft.

How the Scam Worked

In the first phase of the scam, “recruiters” contacted Medicare beneficiaries either online, on the phone or face-to-face at health fairs, senior centers, low-income housing areas or religious institutions like churches and synagogues and made the following pitch: We’ll provide you free genetic testing to determine your cancer risks and how well you’d respond to certain drugs; all we need from you is a swab from your cheek, your Medicare information and a copy of your driver’s license.

A decade ago, this pitch would have drawn a blank stare. But in this era of consumer awareness of the benefits of genetic testing, it was not only familiar but also highly appealing. “It never crossed my mind that there was anything wrong with this,” noted one of the beneficiaries who took the bait. Recruiters also used scare tactics to get beneficiaries to enlist. “You don’t want to end up suffering from some horrible disease, do you,” they threatened.

The next phase of the scam: Get the beneficiaries’ doctor to order the tests in return for a cut of the Medicare payment. If the doctor refused, the recruiters would go to plan B: having one of their assembled cadre of doctors write a prescription for the tests, even those doctors didn’t know or examine the beneficiary.

In stage three, CGx labs in on the scam performed the prescribed tests and billed them to Medicare to the tune of $1.7 billion in total. When Medicare paid the bill, typically in the $10,000 to $18,000 range, the testing lab, ordering doctor and telemarketing firm that recruited the beneficiary split the money.

In most of the cases, the test results were useless to the beneficiary’s doctor; in many cases, those results weren’t provided at all. But what beneficiaries did get was a big fat charge to their Medicare account that ate into their deductible and reduced their financial coverage for genetic tests that they may actually need in the future. The other harm, of course, was in turning over their sensitive personal information to scammers.

Takeaway

 Operation Double Helix is the latest and most obvious indication that genetic testing fraud has become a central focus of federal enforcement. On June 3, 2019, the OIG issued a genetic testing fraud alert  warning beneficiaries of exactly the kinds of scams perpetrated in Double Helix. See National Intelligence Report (NIR), July 15, 2019. There has also been a series of individual and non-coordinated enforcement actions against labs for genetic testing fraud. (To find out more about the crackdown and how to protect your lab, see G2 Blog.)

SCORECARD: Lab Defendants Charged in Operation Double Helix Genetic Testing Takedown

Defendant Role Alleged Violations
Khalid Satary Owner of CGx labs in GA, OK, LA Paid telemarketers and doctors kickbacks for ordering $547+ million in medically unnecessary genetic tests from his labs
Kevin Hanley CFO, Acadian Diagnostic Laboratories (LA) Paid telemarketers and doctors kickbacks for ordering $240+ million in medically unnecessary genetic tests from Acadian and other CGx labs
Mark Allen Owner of telemarketing firms Paid telemarketers and doctors kickbacks for ordering $240+ million in medically unnecessary genetic tests from Acadian and other CGx labs
Edward B. Kostishion, Kacey C. Plaisance, Jeremy Richey Operators of Ark Laboratory Network LLC (Ark) Took bribes from labs in exchange for delivering DNA samples and orders for genetic tests and used sham hourly invoices to conceal arrangement
Kyle D. Mclean Operator of Privy Health, Inc. Partnered with and another company to acquire DNA samples and Medicare information from hundreds of patients, including via offering $75 gift cards to patients, all without the involvement of a treating health care professional
Matthew S. Ellis, MD Physician Served as Ark and Privy Health’s ordering physician who authorized $4.6 million in genetic testing for hundreds of patients he never saw, examined or treated
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