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

Quest Pays $315K for Self-Disclosed Rent Kickbacks to MDs. Case: Quest Diagnostics agreed to pay $315,093 for allegedly paying kickbacks to a referral source. Quest self-disclosed the conduct which the OIG alleged involved rent payments made by one of its New Jersey labs to a medical practice at above fair market value. Significance: Although there's not much information available about the case, the apparent takeaway is that Quest caught the problem and used the OIG self-disclosure protocol to minimize its resulting liability. The other lesson is the need to ensure that your leases with referral sources provide for fair market value rent.

Pain Management Clinic Owner Settles False Billing Charges for $20 Million. Case: Pain management physician and businessman Dr. Robert Windsor may have to sell off his real estate holdings, two boats and four jet skis to come up with the $20 million he agreed to pay to settle fraud charges. The case, which started as a whistleblower suit, contends that over a four-year period, pain clinics owned by Dr. Windsor in Kentucky and Georgia billed Medicare, Medicaid and other government programs for medically unnecessary balance tests, qualitative drug screens, nerve conduction and electromyography procedures. Significance: The unnecessary diagnostic services are just part of the story. The government also alleges that the clinic falsely billed for online, real time intraoperative monitoring of surgeries that were not monitored by any physician, let alone by Dr. Windsor personally, despite false representations to the contrary.

FISH Testing FCA Claims Yield Another Million Dollar Settlement. Case: A qui tam lawsuit alleged that a lab owned by 21st Century Oncology billed Medicare and Tricare for medically unnecessary fluorescence in situ hybridization (FISH) tests. The government claimed the tests were ordered by four Fort Myers-based urologists who allegedly received bonuses from the integrated cancer center based on the number of tests they ordered. In January 2016, 21st Century paid $19.75 million to settle the civil charges and the whistleblower who initiated the case, a medical assistant of one of the urologists, received $3.2 million of the recovery as a share. Two of the urologists have also already settled for $1.05 million and $250,000 each. Feb. 1, 2017, the Department of Justice announced another settlement with a third urologist for $3.81 million bringing the total recovered in the case so far to more than $24 million. This latest settlement resolves claims by the government that the urologist submitted claims for FISH tests that were not medically necessary. The government further alleged that this urologist ordered over 13,000 FISH tests and was the "number one referring physician in the country with respect to FISH tests," receiving bonuses of approximately $2 million in bonus payments in connection with those referrals. In addition to the settlement, the urologist also agreed to a three-year corporate integrity agreement. Significance: The case and this latest settlement are an excellent illustration of whistleblower suits against labs under current OIG medical necessity guidelines and Department of Justice enforcement policy.

HHS Temporarily Barred from Enforcing Gender Identity Parts of ACA Antidiscrimination Rule. Case: Section 1557 of the Affordable Care Act bans Medicare participants from committing discrimination on the basis of, among other things, gender identity. A group of religious hospital systems and medical groups challenged the law claiming that it forced medical professionals to provide gender transition and abortion services in violation of their medical judgment and religious beliefs. A federal district court in Texas agreed and issued a preliminary injunction to block HHS from enforcing the rule in a case called Franciscan Alliance v. Burwell. Significance: As the name implies, a preliminary injunction is a temporary measure rather than a final disposition of the case. A trial still needs to take place to determine if the gender identity protections of Section 1557 are a violation of doctors' constitutional rights. In fact, some legal experts believe that the court was wrong to conclude that Section 1557 forces providers to furnish gender transition services and abortions and that the ruling will be overturned. But even if that does happen, it will probably take a long time. In the meantime, unless the preliminary injunction is lifted, HHS will be unable to enforce the gender identity nondiscrimination parts of the rule unless and until the court decides that it is enforceable. (For more on Section 1557, see "Complying with ACA's Nondiscrimination Requirements," GCA, Nov. 7, 2016.)

Physician Indicted and Salesman Sentenced in BLS Bribery Case. Case: The list of individuals charged and sentenced in the Biodiagnostic Laboratory Services (BLS) bribery case continues to grow. On Jan. 10, the Justice Department indicted a Passaic County doctor for taking bribes in exchange for test referrals, making him the fifth physician charged in the scheme. According to the indictment, from February 2009 through April 2013, the doctor received $130,000 from BLS employees and associates in the form of sham monthly rental, service agreement and consultation payments in exchange for referring roughly $525,000 worth of Medicare lab business. Additionally, on Jan. 18, a salesman was sentenced to 20 months in prison for allegedly bribing a physician for referrals to the lab. The salesman previously pleaded guilty to one count of conspiring to bribe a physician and one count of money laundering. Significance: The BLS case is a perfect illustration of the ruin that a kickback scheme can inflict on all involved. BLS had to shut down and forfeited all its assets after pleading guilty in June 2016 to kickback charges. The investigation has also generated what is believed to be a record number of prosecutions against medical professionals in a bribery case, yielding 41 guilty pleas, 27 of them from physicians. One physician has been sentenced to 37 months in prison and the other two await trial. (For more on the BLS case, see "Lab Implicated in Long-Running Kickback Case Pleads Guilty, Forfeits Assets," NIR, July 14, 2016.)