Home 5 Lab Compliance Advisor 5 Labs in Court: Three Lawsuits Tossed

Labs in Court: Three Lawsuits Tossed

by | Mar 24, 2023

In this month’s roundup, three cases—including two whistleblower lawsuits and one workplace discrimination case—get dismissed.

Urine Drug Test Maker Defeats Whistleblower Upcoding Lawsuit—for the Third Time

Case: A pair of whistleblowers filed a qui tam lawsuit accusing urine drug testing manufacturer Carolina Liquid Chemistries (CLC) of overbilling Medicare and Medicaid. According to the complaint, North Carolina-based CLC represented its urine drug test machines as being capable of performing high-complexity quantitative drug testing, which is reimbursed at higher amounts, even though the machines could only perform qualitative testing. They also contended that CLC misrepresented the machines as being approved by the FDA. Initially brought in 2013, the case seeking treble damages had been dismissed twice before. Undeterred, the relators reworked the complaint and tried again. But the third attempt proved no more successful than the previous two, with the California court dismissing all claims against CLC.

Significance: A key factor in the dismissal was that the relators worked for companies in direct competition with CLC and thus lacked any inside knowledge of the firm’s marketing and billing practices. In addition to the lack of direct evidence of any wrongdoing, the judge noted that the FDA had in fact properly cleared CLC’s tests and reagents, meaning that the claims noting such weren’t false.1

Lack of Billing Specifics Dooms PA’s Whistleblower Lawsuit Against Millennium Physician Group

Case: A whistleblower brought a qui tam lawsuit against Florida primary care practice Millennium Physician Group for upcoding, unlawful referrals, and unlicensed practice of medicine. Unlike in the CLC case, the relator in this case was an insider, a physician assistant (PA) with direct, first-hand knowledge of medical operations. However, inside knowledge as a PA wasn’t enough to prevent the Florida federal court from dismissing his False Claims Act (FCA) case without a trial due to failure to cite specifics about the particular false claims that Millennium allegedly submitted to the government.

Significance: Federal Rule of Civil Procedure 9(b), which requires plaintiffs in fraud cases to state their claims “with particularity,” has become a major legal defense in FCA whistleblower lawsuits. Many federal courts apply the rule created by the Eleventh Circuit in a case called United States ex rel. Clausen v. Laboratory Corporation of America, Inc., interpreting Section 9(b) as requiring relators to provide specifics on actual billing amounts, dates, policies, and practices. The Eleventh Circuit also recognizes an exception (which comes from United States ex rel. Mastej v. Health Management Associates, Inc.) for relators who have actual inside knowledge of a provider’s billing practices. However, the Florida court ruled that the Mastej exception to the Clausen rule didn’t apply in this case because the PA’s inside knowledge didn’t relate to billing and coding. “The closest thing he has to information gained from a reliable source is the off-hand comment (‘this is just how it’s done’) from a doctor without billing or claim submission knowledge,” the court reasoned [United States v. Millennium Physician Grp., LLC, 2023 U.S. Dist. LEXIS 25889, 2023 WL 2022232].

Feds Indict Texas Lab Owners for $107 Million Medicare Genetic Testing Scam

Case: Three lab owners and operators, two from Texas and one from Louisiana, were indicted for their role in a kickback scheme resulting in the submission of at least $107 million in false claims for genetic tests to Medicare and Medicare Advantage plans. The Texas lab, Trinity Clinical Laboratories, allegedly paid bribes and kickbacks to acquire patient DNA samples and requisitions for medically unnecessary genetic tests not covered by Medicare, utilizing sham marketing contracts to disguise the payments. As a result, they pocketed approximately $44 million worth of fraudulent reimbursements from Medicare.2

Significance: The Trinity Clinical Laboratories indictments are the latest prosecutions under the original 2019 Operation Double Helix federal takedown that kicked off the current wave of enforcement actions against genetic testing labs.3 If convicted, the defendants face 10 years in prison on each of two counts of paying and receiving healthcare kickbacks and another five years for conspiracy.

OK to Terminate Lab Manager for Repeated Use of Work Email to Express Personal Political Views

Case: A little over a year after being reprimanded and counseled for using his work email to express political views, a lab manager, who happened to be white, emailed a message to a colleague’s effort to sell T-shirts to support Black Lives Matter (BLM). The “reply all” message, which was sent to 70 lab employees, criticized BLM as a “Marxist” movement dedicated to “get[ting] rid of nuclear families.” The manager defended the message as a “golden opportunity for a teachable moment” about BLM, but the lab and legal department didn’t see it as such and fired him for violating the organization’s code of conduct and email policy the next day. The manager sued for reverse race discrimination but the Michigan federal court dismissed the lawsuit without a trial.

Significance: The fact that the lab replaced him with another white person took some of the wind out of the manager’s reverse race discrimination claim. Nor did his failure to produce any statistical or other evidence that the lab discriminated against white people help his case. True, the other non-white employees involved in the BLM incident didn’t lose their jobs. However, the crucial difference was that they were all first-time offenders who, unlike the manager, didn’t have a history of being disciplined for misusing work email to express personal political views [Golash v. Trinity Health Corp., 2023 U.S. Dist. LEXIS 25719, 2023 WL 2024462].


  1. https://www.carolinachemistries.com/carolina-liquid-chemistries-wins-summary-judgment-defeating-false-claim-act-allegation/
  2. https://www.justice.gov/opa/pr/laboratory-owners-and-executives-charged-health-care-kickback-scheme
  3. https://www.g2intelligence.com/enforcement-trends-new-takedown-is-evidence-that-genetic-testing-has-become-an-enforcement-priority/

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