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

IBM Shells Out $14.8 Million to Settle Claims of Overselling ACA Software

Case: The DOJ contends that IBM and Cúram Software, the company it acquired in 2011, misrepresented the capabilities of its products to win a subcontract to develop an Affordable Care Act health insurance exchange website and information technology platform for the Maryland Health Benefit Exchange in February 2012. The alleged claims were made during a product presentation one month earlier demonstrating the software’s capability to calculate tax credits and integrate with another subcontractor’s health plan shopping software. The claims proved unfounded and, after a series of mishaps with the product, the Maryland Health Benefit Exchange terminated the contract in October 2013.

Significance: The Maryland health insurance exchange rollout proved a disaster and IBM, as the provider of the technology, is being blamed for the problems. Of course, several other states experienced significant health insurance exchange website failures, but the Maryland case was particularly high profile due in part to the parties involved including not only IBM but also then Governor Martin O’Malley and Lt. Governor Anthony Brown, who were running for President and Governor, respectively. Each man would go on to lose his election bid due in part to the negative publicity from the exchange fiasco.

CMS Finds Lab Safety Violations at Texas Hospital

Case: CMS has found the University of Texas MD Anderson Cancer Center out of compliance with Medicare conditions of participation with regard to lab services. The inquiry began in December 2018 after MD Anderson reported an adverse event related to a blood transfusion to the FDA, which then referred the case to CMS for a separate investigation. Although the details haven’t yet been made public, CMS has apparently required the lab to submit a plan for remedying the problems by June 18.

Significance: Although the lab deficiencies were the only ones requiring a corrective action plan, CMS reportedly uncovered other conditions of participation violations involving MD Anderson’s governing body, quality assessment and performance improvement program and patient rights. CMS hasn’t threatened to revoke its Medicare status but MD Anderson will be subject to Texas health department investigation to ensure it complies with the conditions.

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 February 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 (Jan. thru 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.


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