Kickbacks: Massachusetts Practice Latest Provider Busted for Taking Kickbacks from Millennium

A northern Massachusetts medical practice became the latest downstream provider to pay the OIG a five-figure fine to settle kickback claims in the form of accepting free point-of-care test cups from now defunct Millennium Health. The settlement amount, $87,650, is the among the highest announced since autumn 2017 when the feds began targeting the physicians on the receiving end of the Millennium scandal. Millennium used the freebies to pay physicians for referrals of custom profile panels and other tests to carry out what the feds claim is the largest ever kickback scandal involving lab services.

Phase 1 of the Millennium Case

While the key charges against Millennium involved use of custom profiles to bill Medicare for medically unnecessary tests, prosecutors also claimed that Millennium provided free POCT cups with embedded testing strips to physicians in exchange for referral of urine specimens in violation of the Antikickback Statute (AKS) and Stark Law. Physicians allegedly agreed not to bill any insurer for the cups and return the specimen samples in each cup to Millennium for additional, often more expensive lab testing. Millennium also charged physicians who did not return the cup for further testing.

The key to the legal case is the finding that free cups to physicians crossed the AKS and Stark Law line on paying "remuneration" for referrals. The Stark Law specifically says that banned "remuneration" does not include "[t]he provision of items, devices or supplies that are used solely to (i) collect, transport, process, or store specimens for the entity providing the item, device, or supply, or (ii) order or communicate the results of tests or procedures for such entity." Although there is no such "carve out" for de minimus remuneration in the AKS, the OIG has made clear in starting with its 1994 Laboratory Fraud Alert that provision of supplies and equipment under those limited circumstances do not implicate the AKS.

But during the trial, the DOJ argued that "the 'cup agreements'. . . create exactly the sort of intertwined financial relationships in the health care system that the Stark Law and AKS are designed to prohibit. . . .The purpose and effect of this arrangement was to give doctors a significant financial incentive to obtain laboratory testing of each sample collected in a POCT cup and to obtain such testing from Millennium rather than a competitor."

In October 2016, Millennium tossed in the towel and agreed to settle all claims for $256 million, a record high settlement involving health care fraud by a lab. Almost inevitably, prosecutors then began to target the downstream providers who accepted the free cups from Millennium.

Phase 2 of the Millennium Case

In the past, federal enforcement efforts have focused on the payer rather than the payee of kickback arrangements for obvious reasons—that's where most of the money is. Going after the one wrongdoer who paid out the money is also far more cost-effective than chasing after the individual payees who accepted the money.

But for sheer scale, Millennium was like no kickback arrangement before it. Given the dollar volume and extent of the scheme, initiating a phase 2 concentrating on the downstream payees made sense. And that's just what the feds have done, spending the past two years going after physicians one practice at a time. The Table below documents the announced settlements these efforts have generated to date.

Takeaway: It's Happening Again with HDL
The DOJ and OIG are following the exact same template in cracking down on the other massive lab kickbacks fraud scheme, the HDL and Singulex case. So far, settlements with at least two different sets of practices have been announced with many more sure to follow.