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

LabCorp Must Go to Trial to Defend against Deceptive Trade Practices Charges

Case: Fourteen patients sued LabCorp for allegedly overcharging them for lab tests. In March 2018, a North Carolina federal court tossed their class action ruling that the patients didn’t have a valid legal claim for unfair and deceptive trade practices. Undaunted, the patients tried again with a slightly new theory: LabCorp violated the consumer protection laws not in the way it billed the tests but because of the excessive prices it charged. LabCorp once more asked for dismissal but the court refused, saying the new claim was legally valid and that the patients could take it to trial.

Significance: Surviving a motion to dismiss just means the patients will get the chance to prove their claims in court. And that won’t be easy. To constitute an unfair or deceptive trade practice, a business practice must be “egregious or aggravating.” The patients will have the “considerable burden” of showing that LabCorp’s prices were so excessive and its billing practices so coercive  as to reach that level.

Federal Court Dismisses Urine Drug Test False Billing Claim

Case: Whistleblowers accused a national lab company of falsely billing Medicare and Medicaid for high complexity quantitative urine drug tests under CPT code G0431 at up to $476 per test. According to the complaint, the lab falsely marketed the capabilities of its UDT machines knowing they were capable only of basic qualitative testing, billed at $20 per test. The lab denied the charges and asked the California federal court to toss the case without a trial. And that’s just what it did. 

Significance: The court didn’t determine that the whistleblowers’ claims were invalid, only that they weren’t specific enough. How did the lab market the machines and why was this fraudulent? How many false claims did the lab submit and how much did the government overpay as a result. So, the court gave the whistleblowers permission to revise their complaint and try again [United States v. Carolina Liquid Chemistries, Corp.].

Lab Fails in Bid to Get Medicare Payment Suspension Set Aside

Case: In 2017, CMS suspended 100% of Medicare payments to True Health Diagnostics (THD) based on what it called “credible allegations of fraud.” Two years later, while the suspension was still in place (although it had been reduced to 35%), CMS imposed a second suspension on the basis of “credible” fraud allegations. THD denied any wrongdoing and asked the Texas federal court to issue a temporary restraining order barring CMS from enforcing the suspensions until the underlying fraud allegations were resolved. But the court refused saying it had no jurisdiction, i.e., legal authority to adjudicate a Medicare appeal at this stage.

Significance: Federal courts generally do have jurisdiction to rule on claims “arising under” U.S. laws like the Medicare Act. But that jurisdiction kicks in only after the federal government agency in this case, HHS via CMS renders a final decision. That wasn’t the case in this situation because THD hadn’t “exhausted its administrative remedies,” i.e., gone through the CMS process for contesting suspensions due to overpayments [True Health Diagnostics, LLC v. Azar].     

Lab Fires Sales Rep Due to Performance, Not Age

Case: A lab sales rep claimed she was fired due to age discrimination. Her evidence: A remark allegedly made by her manager: “Sometimes people feel that this job is better suited for younger people.” The lab claimed she was fired for performance problems. Lab’s evidence: Customer complaints, negative performance reviews and placement into and failure to meet the goals of a performance improvement plan. Ruling: The sales rep didn’t have enough evidence to make out a prima facie case of discrimination.

Significance: “Stray remarks alone do not give rise to the inference of discrimination,” explained the Arkansas federal court. And the evidence clearly showed that she wasn’t meeting the lab’s reasonable performance expectations [Taylor v. Abbott Labs., Inc.].


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