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January 2024 Labs in Court

by | Jan 2, 2024 | Essential, Lab Industry Advisor, Labs in Court

Recent cases involve Medicare’s 14-Day Rule, improper PHI disclosure to a media outlet, kickbacks, and COVID-19 fraud.

Genomic Health Inc. Agrees to Settle Medicare 14-Day Rule Violations for $32.5 Million

Case: In 2018, the U.S. Department of Justice (DOJ) began investigating Genomic Health for potential violations of Medicare Date of Service billing regulations.1 According to the DOJ, the cancer test producer, which has since been acquired by Exact Sciences Corporation, encouraged hospitals and physicians to cancel and reorder the firm’s Oncotype DX® tests to get around the 14-day non-billing period so that it could receive direct payment for tests that should have been included as part of hospitals’ lump sum reimbursement. Rather than going to trial, Genomic Health recently agreed to settle all claims for $32.5 million.2

Significance: Payment for lab tests provided to a hospital inpatient or outpatient are bundled into the payment the hospital receives for the stay. The 14-Day Rule bans labs from billing Medicare for tests ordered by a physician within 14 days of the patient’s discharge. Under the rules that applied at the time of the alleged violations, tests ordered within 14 days of the patient’s discharge had to be billed to the hospital, which could then bill Medicare. In addition to evading the rule, the DOJ claimed that Genomic Health failed to send timely invoices to hospitals for lab tests falling under the 14-Day Rule and then wrote off the unpaid fees for lab services, in violation of the Anti-Kickback Statute (AKS).

Illegal Disclosure of COVID-19 Patient Health Info Costs New York City Hospital $80,000

Case: The U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) announced in November that Saint Joseph’s Medical Center has paid $80,000 to settle charges of providing the protected health information (PHI) of COVID-19 patients to the Associated Press in violation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy Rule. OCR began investigating the matter after the national media outlet published an article profiling the New York City non-profit academic medical center’s response to the public health emergency that included photographs, diagnoses, treatment plans, vital signs, and other PHI about patients. The agency determined that Saint Joseph’s disclosed the PHI of three COVID-19 patients without first getting the written authorization required by the Privacy Rule. In addition to the $80,000 fine, Saint Joseph’s has agreed to implement a corrective action plan and submit to OCR monitoring for two years.3

Significance: The Saint Joseph’s case underscores the importance of keeping test results and other PHI of COVID-19 and other patients private and confidential. Adopt policies banning disclosure of PHI without proper authorization, except for purposes of medical treatment, payment, healthcare operations, or other permissible disclosures under the HIPAA Privacy Rule. You must also provide patients a Notice of Privacy Practices that explains the PHI your lab collects, uses, and discloses and the purposes of such collections, uses, and disclosures.

Florida Toxicology Lab Settles False Claims and Kickback Charges for Nearly $1.2 Million

Case: Genesis Reference Laboratories agreed to pay $1,195,845 to resolve claims that it engaged in an elaborate kickback scheme to generate illegal referrals for urine drug tests between 2019 and 2021.4 Under the settlement agreement, Genesis admitted to paying a group of three marketing firms (Corum Group LLC, Provisional Medical Consultants LLC, and RMC Medical LLC) in return for encouraging test orders from providers in Missouri and Texas. Those marketing companies then paid the providers kickbacks disguised as investment returns via sham management service organizations (MSOs) in exchange for test orders. In subsequently billing Medicare for test orders solicited in violation of the AKS, Genesis submitted false claims to the government in violation of the False Claims Act (FCA).5

Significance: The settlement is just the tip of this iceberg-sized case. Despite the hefty price tag, Genesis is getting only a limited measure of relief. The settlement agreement includes wide exceptions leaving the US government free to pursue other claims against the lab in relation to the scheme, including but not limited to:

    • income tax and criminal liability,

    • exclusion from federal health programs,

    • liability against the individuals involved, and

  • liability against all corporate entities other than Genesis.

In addition to waiving its Fifth Amendment rights, Genesis agreed to cooperate with the DOJ in pursuing further action against others involved.5

Texas Lab Owner Pleads Guilty to COVID-19 OTC Test Fraud Charge

Case: The owner of JDS Labs in Plano, TX, pleaded guilty to running a scam bilking Medicare for over-the-counter COVID-19 tests. According to the DOJ, 55-year-old Damon Heath Roberts gave providers and healthcare workers information about Medicare beneficiaries, offering and then paying kickbacks for each reimbursement that information generated. He then used passthrough arrangements to conceal the kickbacks. The end result was nearly $4 million in bogus COVID-19 test claims leading to nearly $1.7 million in reimbursement and almost $150,000 in kickback payments. Roberts now faces up to five years in federal prison when he’s sentenced in March.6

Significance: Sharing of Medicare patient beneficiary information for kickbacks disguised as passthrough arrangements is a fairly common pattern of fraudulent activity. What’s novel about the case is its application to consumer lab tests for COVID-19. This is just the latest example of how scammers were able to adapt their usual schemes to coronavirus testing during the pandemic.


    1. https://www.sec.gov/Archives/edgar/data/1131324/000155837019001300/ghdx-20181231x10k.htm

    1. https://www.justice.gov/opa/pr/genomic-health-inc-agrees-pay-325-million-resolve-allegations-relating-submission-false

    1. https://www.hhs.gov/about/news/2023/11/20/hhs-office-civil-rights-settles-hipaa-investigation-st-josephs-medical-center-disclosure-patients-protected-health-information-news-reporter.html

    1. https://www.justice.gov/opa/pr/florida-laboratory-agrees-pay-over-11-million-settle-kickback-allegations

    1. https://www.justice.gov/media/1322941/dl?inline

    1. https://www.justice.gov/usao-ndtx/pr/lab-owner-pleads-guilty-17-million-covid-19-test-fraud-scheme

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