Labs in Court: Lab Settles Kickback Allegations for $5.9M

Texas Lab Settles Marketing Commissions Kickback Charges for $5.9 Million

Case: Genotox Laboratories Ltd. agreed to shell out at least $5.9 million to settle charges of paying volume-based commissions to outside marketers in violation of the Anti-Kickback Statute (AKS). Furthermore, by billing the tests generated via these allegedly illegal referrals to Medicare, TRICARE, and other federal health programs, False Claims Act (FCA) charges were added to Genotox’s rap sheet. As part of the settlement, Genotox admitted to paying independent contractor “1099” marketing representatives a percentage of the reimbursement that the lab received for the tests ordered. Genotox was also accused of getting physicians to submit blanket orders and standing orders to perform drug tests on all practice patients regardless of medical necessity. The settlement required the Austin-Texas-based lab to enter into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).¹

Significance: Paying commissions to third-party marketers based on the volume or value of drug test orders they generate violates not only the AKS but also the Eliminating Kickbacks in Recovery Act of 2018 (EKRA). What makes EKRA so scary is that it covers arrangements that meet AKS safe harbors. However, EKRA charges weren’t part of the case against Genotox. The most likely explanation for this is that the U.S. Attorney concluded that it didn’t need to rely on EKRA since Genotox’s commissions arrangements didn’t qualify for any AKS safe harbors.²

California Court Nixes Qui Tam Case Because It’s Based on Public Information

Case: A certified registered nurse anesthetist (CRNA) filed a qui tam lawsuit against Envision Healthcare Corporation and its subsidiaries for submitting claims to Medicare for anesthesia services ordered by physicians in exchange for kickbacks. According to the complaint, Envision cut illegal deals with physician-owned anesthesia management companies offering exclusive referrals from Envision’s ambulatory service centers in exchange for accepting a reduced per diem payment rate and sending Envision a cut of the profits. After the US decided not to intervene in the case, Envision moved to have the claims dismissed contending that the CRNA’s entire case was based on public information. The California federal court agreed and granted the motion [United States ex rel. Waters v. Envision Healthcare Corp., 2023 U.S. Dist. LEXIS 50550, 2023 WL 2636461].³

Significance: The so called “public disclosure bar” of the FCA (31 U.S.C. § 3730(e)(4)(A)) requires courts to dismiss a qui tam lawsuit where “substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed” in other sources. The point of the bar is to protect defendants against parasitic, copycat lawsuits. But it’s also subject to strict limitations. The court ruled that the bar did apply in this situation because the CRNA’s case was based on information that had been publicly disclosed before the suit was filed, citing:

• A nearly identical qui tam lawsuit filed in 2016 called U.S. ex rel. Vanasco v. Amsurg Corp. et al, No. 8-16-cv-00288 (M.D. Fla. 2016)
• Securities Exchange Commission (SEC) filings made by Envision’s predecessor disclosing revenues from the arrangements with the anesthesia companies and suggesting that they may not fall into any AKS safe harbors
• Various news media publications

Note: The case may still not be over because the court gave the CRNA a lifeline: 30 days to submit an amended complaint.

Distribution Firm Pays $195K to Settle Diabetes Blood Test False Claims

Case: The FCA makes it illegal not only to submit but also to cause somebody to submit false claims. With this in mind, the feds accused distribution company GlycoMark, Inc., a joint-venture subsidiary of Toyota Tsusho Corp., Toyota Tsusho America, Inc., and Nippon Kayaku Co., Ltd., of violating the FCA by encouraging customers to bill Medicare and Medicaid for a diabetes test that it knew the programs no longer covered. Rather than risk a trial, GlycoMark agreed to settle the claims for $195,000. The whistleblower who brought the original case to court will get a share of this amount.

Significance: The GlycoMark test for assessing blood sugars to identify patients that may need more stringent diabetes management used to be reimbursable under Current Procedural Terminology (CPT) code 84378. But on October 17, 2016, a local coverage determination (LCD) took effect banning reimbursement for the test, contending that it wasn’t reasonable or necessary for diabetes management. Despite being aware of the new LCD, GlycoMark allegedly encouraged customers to keep billing for the test using the CPT 84378 code while also circulating marketing materials describing the test as “reimbursed by Medicare” for nearly three more years.⁴

Employer Not Liable for Harassment Committed by Employee’s Coworkers

Case: After getting a pink slip, a medical lab research technician at Northwestern University sued the school for sexual harassment and other alleged violations. Among other things, she claimed that her coworkers mocked and ridiculed her, sabotaged her work by deliberately giving her an outdated protocol for cell analysis, and engaged in other behavior that created a hostile work environment. The university argued that, if such harassment did occur, it wasn’t responsible for it. The Illinois federal district court agreed and dismissed the case. The technician appealed, but the Seventh Circuit upheld the lower court’s ruling of no liability [Trahanas v. Northwestern Univ., 2023 U.S. App. LEXIS 8329, __ F.4th __, 2023 WL 2821795].

Significance: The general rule is that an employer isn’t liable for harassment by one employee against another of which it has no knowledge, unless it negligently fails to take reasonable steps to discover, prevent, or remedy the harassment. In this case, the university had no knowledge of the coworker harassment that the technician was allegedly enduring. And the court said the school took reasonable steps to discover employee acts of harassment by implementing an anti-harassment policy and establishing complaint mechanisms, noting that the technician admitted that she didn’t report her coworkers’ comments or conduct to the university. “Without knowledge of what [the technician’s] coworkers were doing, Northwestern cannot be held liable for failing to rectify the problem,” the Seventh Circuit concluded.⁵

References:

1. https://www.justice.gov/opa/pr/texas-laboratory-agrees-pay-59-million-settle-allegations-kickbacks-third-party-marketers-and
2. https://www.g2intelligence.com/how-to-explain-the-current-state-of-ekra-to-your-lab-executives/
3. https://casetext.com/case/united-states-ex-rel-waters-v-envision-health-care-corp
4. https://www.justice.gov/usao-edpa/pr/diabetes-blood-test-distributor-glycomark-agrees-pay-195000-settle-false-claims-act
5. https://media.ca7.uscourts.gov/cgi-bin/OpinionsWeb/processWebInputExternal.pl?Submit=Display&Path=Y2023/D04-07/C:21-3278:J:Brennan:aut:T:fnOp:N:3027854:S:0