Lab Owner Convicted for $463 Million Genetic Testing Fraud

Case is a recent example of the trend toward Medicare schemes involving telehealth, cancer genetic testing, and kickbacks.

Over the years, healthcare fraudsters have repeatedly demonstrated their ability to evolve and adapt their business model to new technology and societal changes. The rise of the Medicare telehealth, cancer genetic testing (CGx) kickback scam is an excellent illustration of this. It’s a fraud that brings together many of the most modern technological and social trends:

• The aging population;
• The increasing utilization of telehealth; and
• The emergence of new diagnostics capable of using genetic material to assess an individual’s risk of developing (or redeveloping) cancer.

The Anatomy of the Telehealth CGx Testing Scam

Telehealth CGx scamming has become arguably the fastest growing segment of the lab fraud business. And while details vary from case to case, the modus operandi is generally the same. It starts when telemarketers seek out elderly Medicare beneficiaries, seeking to prey on their health concerns. Often, it’s a phone call; sometimes it’s an actual face-to-face encounter at a health fair or other community event. Regardless of medium, it’s the same basic pitch. “At your age, you should really receive genetic tests for cancer,” the marketer coos, “especially since the tests are totally free under Medicare. Just give us your Medicare information and perhaps a sample, and we’ll arrange it for you.”

Getting tested for cancer risk without having to pay or do anything sounds like a great deal. Of course, the tests aren’t free. The CGx tests that the marketers are pushing are often extremely expensive. But to cash in on the lucrative reimbursements, somebody has to actually order them from Medicare. So, the telehealth marketers engage in the second part of the scam by recruiting physicians who are willing to order the tests without actually examining or, in many cases, even talking to the beneficiary. There also needs to be a lab willing to perform and bill Medicare for the tests. And because crooked providers don’t work for free, the marketers must offer some kind of bribe in exchange, like a percentage of the reimbursement received.

The Telehealth CGx Fraud Crackdown & LabSolutions Case

Not surprisingly, these schemes have become a growing priority for federal enforcement agencies. Even before the COVID-19 pandemic began, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued fraud alerts warning consumers not to fall for free CGx testing pitches. Meanwhile, the U.S. Department of Justice (DOJ) was coordinating with other federal and state agencies to organize a massive “takedown,” known as Operation Double Helix and was carried out in five federal districts, that would end up bringing charges against 35 defendants associated with CGx labs. The takedowns have continued and gotten larger each year.¹

One of the biggest cases, which arose from the Double Helix takedown, reached a climax last month when a Florida federal jury convicted the owner of LabSolutions LLC on five counts of conspiracy and fraud in connection with a massive genetic testing kickback scheme. According to the DOJ announcement, Minal Patel, 44, conspired with patient brokers, telehealth firms, and call centers to bill Medicare for $463 million worth of high-cost CGx tests that were not only medically unnecessary, but also ordered by physicians in exchange for kickbacks. To cover his tracks, Patel required patient brokers to sign contracts falsely stating that they were performing legitimate advertising services for LabSolutions.

Patel, whom the DOJ claims personally pocketed over $21 million from the scam, faces a maximum penalty of 20 years in prison on the first conspiracy count, 10 years on each healthcare fraud count, five years on the second conspiracy count, 10 years on each kickback count, and 20 years on the third conspiracy count. He’s scheduled to be sentenced in March 2023.²

Practical Impact: How to Protect Your Own Lab

If your lab provides CGx or any other kinds of testing for telehealth patients, you need to be aware of and take steps to guard against the potential for liability under the False Claims Act, Anti-Kickback Statute, and other federal laws. The starting point is to vet your arrangements for what a July 20, 2022 Special OIG Fraud Alert warns are “suspect characteristics” constituting red flags for potential fraud:³

• What the OIG calls “purported patients” are identified or recruited by a telehealth company, telemarketer, sales agent, recruiter, call center, health fair, and/or through internet, television, or social media advertising for free or low out-of-pocket cost items or services;
• The provider doesn’t have sufficient contact with or information from the purported patient to make a meaningful assessment of whether the ordered tests are medically necessary;
• The telehealth company provides compensation based on the volume of lab tests ordered or medical records reviewed;
• The telehealth company serves only patients in federal programs and doesn’t accept insurance from any other payor;
• The telehealth company says it only furnishes items and services to individuals who aren’t federal healthcare program beneficiaries, but may in fact bill federal healthcare programs; and/or
• The telehealth company only furnishes one product or class of products, e.g., genetic testing, potentially restricting the provider’s treating options to predetermined courses of treatment.

While no single one of these factors is determinative, the more suspect characteristics you spot, the more problematic you should consider your lab arrangement to be.

References:

1. https://www.justice.gov/opa/pr/federal-law-enforcement-action-involving-fraudulent-genetic-testing-results-charges-against
2. https://www.justice.gov/opa/pr/lab-owner-convicted-463-million-genetic-testing-scheme-defraud-medicare
3. https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf