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

Florida Doctor Settles Kickback, False Claims Charges for $911K
Case: A Florida doctor settled charges of taking kickbacks for referring patients to Universal Oral Fluid Laboratories, a now-defunct drug testing lab in Pennsylvania, and then causing claims to be submitted to Medicare for the tests. In addition to shelling out a $911K fine, the doctor had to sign a corporate integrity subjecting his practice’s billing operations to government review for three years.

Significance: This isn’t the first doctor accused of receiving improper payments from Universal. In May, three other physicians pleaded guilty to similar charges for allegedly carrying out a conspiracy involving enabling the lab to generate millions in improper Medicare and Medicaid billings. The settlement amounts, respectively, were $370K, $200K and $130K. Universal’s owner has also been indicted for his role in the scheme.

Kentucky Lab Settles Self-Disclosed SVT False Billing for $88.2K
Case: Commonwealth Pain Associates became the fifth urine drug test provider to settle with the OIG for self-disclosed billing of specimen validity tests (SVT). The price tag: $88,215. Although Medicare covers urine drug testing for managing medical treatment, it deems SVT not medically necessary where its sole purpose is to verify that a specimen is unadulterated.

Significance: In Feb. 2018, the OIG issued a report saying that Medicare made $66.3 million in improper SVT payments to nearly 4,500 labs and physician offices. CMS has ordered Medicare contractors to recover those payments. Meanwhile, labs are proactively coming forward to self-disclose. There have been five settlements since the start of 2019, all involving providers from the Ohio Valley area, generating over $500K in total recoveries:

Self-Disclosed SVT Payment Settlements (January through May 2019)

Date Lab Settlement Amount
Jan. 24 Northern Kentucky Center for Pain Relief $126,799
Feb. 6 Wheelersburg Internal Medicine Group + Mohammad Mouhib Kalo, MD (Ohio) $111,706
March 13 VerraLab JA, LLC (Louisville, KY) $125,983
March 13 Medical Specialist of Kentuckiana, PLLC (Louisville, KY) $69,776
May 30 Commonwealth Pain Associates, PLLC (Louisville, KY) $88,214

Feds Charge Pain Clinic Owner with Running Urine Drug Testing Scam
Case: A South Carolina chiropractor has been indicted for using the pain management clinics and drug testing labs he owned to bilk government and private insurers. According to the complaint, from 2011 to 2018, the chiropractor and his clinics:

  • Paid physicians and other providers kickbacks based directly on the volume of referrals they made to the labs;
  • Entered into “direct bill” agreements under which providers were allowed to pay the labs a set fee for test panels and then bill private insurers directly for the tests, usually at an amount above the set fee;
  • Directed or encouraged providers to use “standing orders” of lab tests for all or most of their patients regardless of their individual needs; and
  • Billed Medicare, Medicaid and TRICARE for medically unnecessary steroid injections and opioid prescriptions.

Significance: The case began as a whistleblower lawsuit brought by former clinic employees claiming that the clinic’s 20 doctors saw about 75 patients per day, most of them on Medicare and Medicaid, generating daily billings in excess of $592K. But according to the whistleblowers, the group’s biggest money maker was opioid prescriptions, which were allegedly dispensed like Tylenol, and accompanied by urine drug testing.

West Virginia Medicaid Recovers $17 Million for $8.5 Million Opioid Scam
Case: A subsidiary of Acadia Healthcare Co. has agreed to pay $17 million to settle charges of falsely billing West Virginia Medicaid for opioid-related tests. The DOJ claims that over a six-year period, Acadia-owned drug addiction centers across the state billed Medicaid directly for moderately to highly complex blood and urine analyses actually performed in a San Diego reference lab, charging Medicaid substantially higher rates than the centers paid the California lab. By the time it was uncovered, the scheme had cost West Virginia $2.8 million and the federal government $6.3 million.

Significance: The double penalty, i.e., $17 million settlement for an $8.5 million loss, is no accident. First, Acadia is a high-profile, publicly traded company with over $760 million in reported 2019 Q1 revenues. The other aggravating factor is that this case took place in West Virginia, a relatively poor state whose relatively high opioid addiction rate has placed a significant burden on the state’s Medicaid program. Acadia subsidiary CRC Health runs outpatient facilities in several towns across West Virginia.

Authors of Genetic Testing Conspiracy Preying on Seniors Sent to Jail
Case: It’s off to jail for the ringleaders of a conspiracy to bill Medicare for $430K worth of genetic tests. The leading defendant, a lab sales rep, posed as a representative of The Good Samaritans of America to get access to senior citizens living in low-income housing communities and used fear tactics to persuade them to submit to genetic testing suggesting that they’d get heart attacks, stroke and cancer if they weren’t tested. The defendant recruited providers on Craigslist and paid them thousands of dollars per month to sign requisition forms ordering tests for patients they never actually saw. He and his co-conspirators in turn received over $100K in commission payments from the labs which they divided among themselves.

Significance: The sentence was stiff: 50 months in prison, three years of supervised release, $434,963 in restitution and forfeiture of another $66,844. Two weeks later, another of the co-conspirators was sentenced to 19 months and a third to 13 months in prison.


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