Labs In Court: A roundup of recent cases and enforcement actions involving the diagnostics industry

Lab Accused of Inflating Specimen Travel Mileage Pays $525K to Settle

Case: The feds accused a Missouri lab of submitting false claims to Medicare for travel fees in transporting specimens from April 2011 to December 2014. In addition to a $525K fine, the lab had to sign a five-year corporate integrity agreement to settle the case.

Significance: The lab allegedly committed two violations of Medicare travel allowance billing rules that caused its mileage claims to be deemed false:

  • Logging mileage for specimens transported collectively in a single trip separately rather than prorating the miles among each specimen; and
  • Charging for mileage traveled by a non-medical driver rather than by a lab technician.

Self-Disclosed Sleep Study Billing Violations Cost Hospital $252K+

Case: A North Carolina hospital has agreed to fork over $252,455 for improper billing of Medicare and TRICARE for sleep testing and treatment services committed by its sleep center, an amount that might have been higher had the hospital not self-disclosed the violations.

Significance: The OIG does not provide any details about the case or what the hospital did wrong. However, sleep testing by independent and hospital labs has become a high priority of OIG enforcement in recent months, particularly polysomnography, a sleep study in which patients sleep overnight while connected to sensors measuring brain waves, blood oxygen flow and other parameters. The study is commonly used to diagnose obstructive sleep apnea and evaluate the effectiveness of using positive airway pressure (PAP) devices to manage the condition and PAP titration may also be done when the test indicates that a patient has a sleep disorder. (To find out about the billing pitfalls of polysomnography and how to avoid them, see GCA, Jan. 6, 2017.)

Cancer Genetics Sued by Its Own Shareholders

Case: Personalized cancer treatment firm Cancer Genetics has been struggling with cash flow since acquiring Personal Genetics for $14 million in 2015. Just how tough the situation is became clear on April 3, when Cancer Genetics issued its 2017 fourth quarter financial report. In response, two different groups of shareholders have filed class action lawsuits in federal court charging the New Jersey-based firm with making false and misleading statements and omissions to investors and failing to disclose that it “had ineffective disclosure controls and internal controls over financial reporting.”

Significance: Shareholder lawsuits against labs with disappointing financial results is hardly a new phenomenon. Theranos, Alere and NantHealth are just a few recent examples of firms staving facing securities fraud cases from their own shareholders. (For more on the trend and its role in health care fraud and enforcement, see GCA, Aug. 30, 2017.)

Pain Management Doc Gets Jail + $8.7 Million Fine for Opioid Pill Mill Scam

Case: Another month, another physician busted for opioid prescription abuses. The 62-year-old physician caught up in this case ran his pain clinic as a pill mill to pay for a Florida condo, squash court and other accoutrements of his lavish lifestyle. One of Massachusetts’s leading oxycodone prescribers, the doctor falsely billed Medicare and private insurers for millions of dollars in opioid-related services, including urine drug tests, that were not provided, medically necessary, reliable or even safe over a three-year period. In addition to 27 counts of health care fraud, the doctor pleaded guilty to16 counts of money laundering and one count of mail fraud for good measure. He will have to pay restitution of $8.725 million and spend eight years in a presumably squash court-less prison.

Significance: While not necessarily the central part of the case, the urine drug testing abuses the doctor pleaded guilty to committing are particularly lurid, including causing urine samples to be stored for weeks and up to three months in an unrefrigerated sunlit space in his lab. Beyond the stench, the practice left the samples degraded and worthless. But the doctor still made his staff test the samples—and then billed Medicare for the test results. And questionable sample storage was just the tip of the iceberg. His other testing and Medicare billing violations included:

  • Ordering staff to run every patients’ urine sample on two machines, each of which used the same scientific testing methodology;
  • Causing every sample to be chemically confirmed even when he did not even know the results of the initial screening test;
  • Running tests on chemical analyzers that had not been properly calibrated and validated.

BLS Scandal Takes Down Another Physician

Case: 38 and counting. . . A New Jersey internist is the latest physician convicted in the massive Biodiagnostic Laboratory Service (BLS) bribery scheme. The 57-year-old physician pleaded guilty to accepting over $104K in bribes from BLS employees over a three-year span in return for more than $1.3 million’s worth of illegal test referrals to BLS labs. His sentence: 18 months in prison, one year of supervised release and a relatively modest $7,500 in fines. He will also have to forfeit the $104,611 in bribes he took.

Significance: The most recent BLS “body count”: 53 convictions, including 38 physicians and $13+ million recovered via forfeiture. The latter total gains perspective when you consider that the BLS scandal resulted in over $100 million in illegal payments to Medicare and private insurers.


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