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

Quest Pays $88.7K to Settle Specimen Collection Fee Kickback Charges Against Its Subsidiary

Case: After self-disclosing, Quest has settled kickback claims against its wholly-owned subsidiary, Quest Diagnostics TB LLC, for $88,780. The OIG alleges that from June 2011 to December 2016, the lab that was then known as Oxford Immunotec, Inc. (OI) made improper payments to physicians and physician groups in the form of blood sample collection, processing and handling fees. Quest acquired OI in December 2018.

Significance: The OIG has repeatedly reminded labs that sample collection and processing fees raise bright red flags under the Anti-kickback Statute. See Lab Compliance Advisor (LCA) Dec. 10, 2018. Considering the penalties imposed on other labs for paying collection fees, most notably HDL, and the fact that the alleged scheme in this case lasted over five years, $88.7K is a fairly light penalty and testimony to the wisdom Quest displayed in self-disclosing the conduct.

Alabama Doctors, Cardio Practice, Settle Genetic Testing Kickback Claims for $1.1 Million 

Case: Three doctors and a cardiology practice, all based in Alabama, have agreed to shell out $1.1 million for allegedly taking bribes from a now-bankrupt genetic testing company in the Seattle area. The DOJ claims that Natural Molecular Testing Corporation (NMT) paid doctors as much as $10,000 per month in consulting fees in exchange for referrals of high-complexity tests that were then billed to Medicare.

Significance: In 2015, after entering Chapter 11, NMT settled claims related to its part in the scheme for $71.1 million. In addition to paying kickbacks, the genetic test lab was accused of a litany of billing violations, including billing for tests that weren’t medically necessary, failure to document completion of the testing, submitting multiple billing claims for the same date of service and billing genetic tests used for screening purposes (which Medicare doesn’t cover).

New Jersey Lab Hit with $144.6K Settlement Tab for Improper Billing of Nerve Conduction Studies

Case: OIG investigators concluded that MDR Diagnostics, LLC, of New Brunswick, NJ, billed for nerve conduction studies that are considered screening exams not covered by Medicare. Rather than duke it out in court, MDR has decided to pay $144,621 to settle the charges.

Significance: Nerve conduction studies (NCS), which measure action potentials resulting from peripheral nerve stimulation that are recordable over the nerve or from an innervated muscle, are covered for use in diagnosing peripheral nervous system disorders in symptomatic patients but not for use as part of a routine physical screening exam used on all patients.

Kentucky Lab Settles Self-Disclosed SVT False Billing for $88.2K

Case: After self-disclosing, Kentucky lab Ethos Laboratory has agreed to pay $1,345,959 to settle charges for improper billing of specimen validity tests (SVT), a quality control process designed to catch drug test cheaters by verifying that a urine drug screen sample is consistent with normal human urine and hasn’t been adulterated, diluted or substituted. While urine drug testing for medical treatment purposes meet Medicare medically necessary criteria, SVT is a non-covered service.

Significance: This is by far the largest settlement over SVT billings. The crackdown began in Feb. 2018, when the OIG cited Medicare for making $66.3 million in improper SVT payments to nearly 4,500 labs and physician offices. In response, CMS ordered Medicare contractors to take measures to get that money back. In 2019, eight different urine drug testing labs have come forward to self-disclose improper SVT billing, most of them providers from the Ohio Valley, generating over $2.6 million in total recoveries:

Urine Drug Testing Lab SVT Billing Settlements (Jan. thru Aug. 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
June 28 Ethos Laboratory (Newport, KY) $1,345,959
Aug. 7 Discover Diagnostic Laboratory, LLC (Oak Ridge, TN) $95,882
Aug. 22 American Clinical Solutions, LLC (Boca Raton, FL) $61,546

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