Labs In Court

A roundup of recent cases and enforcement actions involving the diagnostics industry


Lab’s ‘False Positive’ Drug Test Report ≠ Defamation of Employee

 Case: An Arkansas nurse got fired and reported to the State Nursing Board after failing a urine drug test. It turned out to be a false positive. After getting cleared by the Board, the nurse sued the testing lab, Quest Diagnostics, for defamation. But the federal court found the claim legally invalid. Quest had a qualified privilege to do the tests and report the results to the nurse’s employer. After all, that was its job and the employer had a legitimate need to know the information [Skorcz v. Quest Diagnostics Clinical Labs., Inc., 2019 U.S. Dist. LEXIS 180861].

Significance: Reporting an employee’s false positive drug test to an employer isn’t an act of defamation as long as the lab doesn’t deliberately or recklessly falsify the test results or act maliciously. However, the employee may be able to sue the lab for negligence.

SNF Labs Can Separately Bill Medicaid for Blood Glucose Tests

Case: The State of Ohio sued a skilled nursing facility (SNF) for falsely billing glucose lab tests that were already bundled into its per diem Medicaid SNF patient rate as “ancillary and support costs.” The labs that performed the tests, although owned by the SNF, were independent labs and thus entitled to bill for the tests, the SNF contended. The Ohio high court agreed and dismissed the false billing charges.

Significance: The key factor in this ruling was that Ohio Medicaid granted the labs approval to operate as independent labs. And the approval was valid under the State Medicaid statute in effect at the time, which required that a lab be independent from: (1) the offices of the attending or consulting physicians, (2) clinics, (3) ambulatory surgery centers and (4) hospitals. The court noted that SNFs weren’t on this list and that the prosecution couldn’t point to any other laws banning the approval of SNF labs as independent [State v. Amherst Alliance, LLC, 2019-Ohio-4640, 2019 Ohio App. LEXIS 4680, 2019 WL 5887277].

Kentucky Hospital Shells Out $10+ Million to Settle Whistleblower Suit

 Case: Ending a case that began as a qui tam whistleblower lawsuit, Jewish Hospital & St. Mary’s Healthcare Inc., d/b/a Pharmacy Plus and Pharmacy Plus Specialty, has agreed to pay $10.1 million to settle claims of falsely billing for prescription drugs that weren’t medically necessary. In addition to serious documentation issues—orders unsigned by a physician and absence of records showing that medications were actually delivered, the hospital allegedly paid kickbacks to patients in the form of free blood glucose testing supplies and waiver of co-payments and deductibles for insulin.

Significance: As is often the case with qui tam suits, the case might have been prevented had hospital officials taken the whistleblower, a pharmacist, who stepped forward to report concerns about improper billing of prescription drugs. But when the issues went unaddressed, the pharmacist resorted to litigation, which the federal government eventually joined. For his efforts, he will get $1.85 million of the settlement award.

Feds Target Principals of Pacific Northwest Urine Test Billing Scam

 Case: A physician-owned testing lab and three individuals were indicted for an alleged kickback scam that generated more than $2 million in falsely billed urine tests. According to federal prosecutors, Molecular Testing Lab (MTL) agreed to pay Northwest Physicians Lab (NWPL) as much as $100K per month for referrals of urine tests billed to Medicare. The payments were disguised as marketing fees even though Washington-based didn’t perform any actual marketing services for the Vancouver lab.

Significance: One of MTL’s co-founders pled guilty and will pay up to $461,752 in restitution. And in December 2018, MTL agreed to pay $1.777 million to settle allegations for its role in the scam.




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