Of the enforcement actions announced last week involving laboratories and the health care industry, the majority of cases involved urine drug testing. More specifically, three cases relating to urine drug testing involved an illegal kickback scheme as well as billing for medically unnecessary tests.
March 30: The Oregon co-owner of a now-defunct medical testing lab was convicted of five federal felonies relating to an illegal kickback scheme involving urine drug testing paid for via government insurance programs. The co-owner of Northwest Physicians Laboratory (NWPL) was charged with four counts of receipt of kickbacks and one count of conspiracy to solicit and receive kickbacks involving health care programs. He faces five years in prison for each count.
According to the U.S. Department of Justice (DOJ), the kickback scheme involved two non-physician-owned labs that paid NWPL in exchange for referring TRICARE and Medicare program business to the lab. However, because NWPL was physician-owned, it was barred from testing patient samples covered by these programs under the Anti-Kickback Statute. The labs referring the business to NWPL disguised their payments as marketing fees, despite receiving no marketing services from NWPL. Three other defendants have pleaded guilty in connection to the scheme and await sentencing.
March 31: A California corporation headquartered in Reno and its co-founders agreed to pay up to $16 million to settle allegations of medically unnecessary urine drug testing, according to the Nevada Attorney General’s Office. MD Spine Solutions LLC, d/b/a MD Labs Inc., which operates a clinical lab that specializes in urine drug testing, along with its two principal owners, will pay a minimum of $11.6 million. However, depending on the company’s financial circumstances, that amount could rise as high as $16 million. According to the Nevada Attorney General’s Office, the company and its owners are alleged to have improperly billed, or caused to be billed, federal health care programs for unnecessary urine drug testing.
March 31: Radeas LLC, a clinical lab based in North Carolina, agreed to pay $11.6 million to settle allegations that it fraudulently billed Medicare for medically unnecessary urine drug testing. According to the DOJ, the lab performed relatively inexpensive presumptive testing and more expensive confirmatory testing at around the same time and then billed for both types of tests at the same time. It is these confirmatory tests that are alleged to be medically unnecessary, thus billing for them violated the False Claims Act, the DOJ states.
April 4: The DOJ filed a False Claims Act complaint against a number of individuals involved in the health care industry, alleging they violated the Stark Law and Anti-Kickback Statute due to patient referrals. Two laboratory CEOs, a hospital CEO, and several others from Pennsylvania, New York, and Texas are said to have been involved in the scheme. According to the DOJ, Boston Heart Diagnostics Corporation (BHD) and True Health Diagnostics LLC (THD) employees allegedly worked with small Texas hospitals to pay doctors to refer patients to those hospitals for testing, which BHD and THD then performed. The hospitals allegedly paid part of their profits to recruiters, who then paid the doctors making the referrals, disguising those payments as investment returns. Among other shady practices alleged to have been carried out by the defendants, the resulting lab tests were billed to federal health care programs and are said to have been not medically necessary. In total, the complaint names 18 defendants alleged to have been involved in the scheme.