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

Drug Abuse Treatment Owner Guilty of $57 Million Drug Test Pass-Thru Billing Conspiracy

Case: The owner of a northern Florida substance abuse treatment center pleaded guilty for his role in a $57 million pass-through lab testing billing and money laundering scheme. The way it worked: The treatment center owner cut a deal with a lab owner to send patient urine samples to the lab for urine drug testing in exchange for a 40% share of the insurance reimbursements. The lab owner did his part by arranging with managers of two rural hospitals to bill private insurers to secure the highest possible rates for the tests.

Significance: Making the scheme even more egregious is that the same treatment center owner also brokered parallel urine drug testing deals between the rural hospitals and other substance abuse facilities, pocketing 30% of reimbursements as his commission. In addition to forfeiting $10.2 million in ill-gotten gains, he's looking at a high fine and time behind bars when sentencing is handed down.

Florida Medical Center Fined $102.2K for Accepting Processing Fees from HDL

Case: Southern Florida-based Midland Medical, Inc. and its subsidiary are the latest providers to settle claims of accepting kickbacks in the form of blood collection "process and handling" payment from Health Diagnostic Laboratory, Inc. and Singulex, Inc. The settlement amount of $102,204 is the highest announced so far.

Significance: The HDL case began as a qui tam whistleblower lawsuit alleging payments of kickbacks disguised as processing fees of $10 to $17 per test to physicians in exchange for orders of medically unnecessary blood tests that were subsequently billed to Medicare and TRICARE. In April 2015, the case settled with HDL agreeing to pay $47 million and Singulex $1.5 million and enter into Corporate Integrity Agreements. Now, as happened with the Millennium Labs case the feds are targeting the downstream physicians to accept kickbacks from a major lab. On May 20, 2019, a pair of physicians and their Missouri practice entered into a $96,880 settlement agreement for accepting process and handling payments related from HDL.

Lab Uses Billing Info of Another Lab to Get Around Payment Restrictions

Case: In 2015, Kentucky Medicaid and private payors began having doubts about the legitimacy of urine drug test claims submitted by CAL Laboratory Services and restricted payments to the toxicology lab. Undeterred, the owner of CAL arranged with his counterpart at Tristate Medical Laboratories to have tests referred to and performed by CAL billed to health insurance programs using Tristate's billing information to make it look like Tristate performed the tests. In exchange, he paid Tristate's owner 40% of the $1.3 million in fraudulent reimbursements received on the tests.

Significance: Four principals of CAL and Tristate pleaded guilty to their role in the conspiracy. Two of the defendants died after being convicted; the other two are awaiting sentencing. In addition to fines and possible prison, the owner of Tristate is likely to get a 10-year Medicare and Medicaid exclusion.

Nevada Clinic Pays $2.5 Million to Settle Genetic Testing Kickback Charges

Case: The feds accused Nevada Heart & Vascular Center (NHVC) of taking kickbacks from a pair of now defunct genetic testing companies Natural Molecular Testing Corp. and Iverson Genetic Diagnostics, Inc., in exchange for referrals of Medicare patients over a roughly two-year period starting in September 2012. Rather than risk trial, NHVC shelled out $2.5 million to settle the case.

Significance: The $2.5 million recovered from NHVC is chump change compared to the $90 million in fraudulent payments ($71 million to Natural Molecular and $19 million to Iverson) allegedly made to the labs that declared bankruptcy before CMS could get any of that money back. Genetic test labs going bankrupt after being busted for Medicare fraud has become a pattern with other notable examples including Texas-based Companion Dx and Pharmacogenetics Diagnostic Laboratory LLC in Louisville.

Florida Marketer Convicted of Genetic Testing Kickbacks

Case: Speaking of genetic testing fraud, a federal jury found the owner of a Tampa medical marketing firm guilty of taking part in a $2.2 million scam involving payment of cash bribes to medical clinics in exchange for referral of DNA swabs collected from Medicare patients. The owner allegedly instructed the clinics to collect DNA from all patients regardless of medical necessity.

Significance: In addition to the fact that it went to trial, the other notable thing about this case is the financial dimension. What began as a series of direct cash payments evolved in the course of one year to a sophisticated arrangement involving shell companies. During the trial, the prosecution contended that the defendant went from ATM to ATM across south Florida to make separate withdrawals of thousands of dollars in an effort to conceal the scam and stay under the $10,000 deposit threshold for filing federal currency transaction reports to the US Treasury Dept.

Kickback Scheme Gets Missouri Lab Owner 30 Months & $3 Million

Case: The 62-year-old Illinois man paid "marketers" $150 to $200 (50% of the profits) per urine and saliva sample for referrals of Medicare and Medicaid patients to his labs operating in Missouri and other states under the name of AMS Medical Laboratory Inc. Some test orders listed doctors who never saw the patient and had no idea their names were being used for the scam.

Significance: In April, a federal jury in St. Louis convicted three of the marketers who were on the receiving end of the 50% profit payments. Altogether, 10 defendants have been charged in the case, including a doctor found guilty of conspiracy and four counts of health care fraud at trial last October.