Home 5 Lab Industry Advisor 5 Essential 5 October 2023 Labs in Court

Recent cases involve charges and judgments related to COVID-19 add-on tests, genetic testing fraud, and kickbacks.

DOJ Charges COVID-19 Lab Owner with Respiratory Pathogen Panel Fraud

Case: The U.S. Department of Justice (DOJ) charged the owner of Provista Health LLC and other lab companies of taking advantage of the COVID-19 pandemic to falsely bill Medicare for respiratory tests. According to the complaint, labs owned by Patrick Britton-Harr offered free COVID-19 testing to nursing home residents as a ploy to bill Medicare for more expensive respiratory pathogen panel (RPP) tests that weren’t ordered by physicians, not medically necessary and, in some cases, never performed. These included tests for uncommon organisms like Legionella pneumophila, the bacteria that causes Legionnaires’ disease, as well as Bordetella bronchiseptica, which causes “kennel cough” in dogs and is very rare in humans. The lab allegedly threatened to cut off free COVID-19 testing for any nursing homes that complained. The DOJ says there were also over 300 claims for tests listing the date of sample collection as occurring after the patient had died.1,2

Significance: This might be the first reported DOJ prosecution against a lab for manipulation of COVID-19 testing rules to falsely bill Medicare for higher-reimbursing RPP tests. The OIG had previously red flagged the issue, most recently in a December 6, 2022 report finding that labs might have taken advantage of expanded Medicare Part B coverage rules during the pandemic by billing for “questionably high levels of add-on tests alongside COVID-19 tests.”3,4 The case against Britton-Harr suggests that the federal crackdown has spread beyond the Centers for Medicare & Medicaid Services (CMS) to include the DOJ and that there will be more of these cases to come.

Pittsburgh Lab Owner Gets 18 Months, $86 Million for Telehealth Genetics Kickback Scheme

Case: In January 2020, Ravitej Reddy, the owner of two labs located in the Pittsburgh area, pled guilty to participating in three separate conspiracies to falsely bill Medicare for more than $127 million worth of cancer genomic testing (CGx) and pharmacogenetic testing (PGx). As part of the plea deal, Reddy agreed to pay CMS over $77.3 million in restitution. On August 14, the DOJ announced that Reddy has now been sentenced to 18 months in prison and an additional $9 million in forfeit payments. Although quite expensive, the plea deal apparently resulted in significant prison savings. Reddy had been looking at a maximum sentence of 25 years—five years for each count of conspiracy and 10 years on the kickback charge.5,6

Significance: Although the dollar amounts are relatively high, the scheme in this case follows what has become the typical pattern for genetic testing and telehealth fraud schemes.7 The way it worked: The two labs colluded with business consultants, marketers, and a telehealth entity operator to obtain thousands of cheek swab samples from Medicare beneficiaries across the nation that were collected either at home or during sham “health fairs,” with marketers pocketing a percentage of the resulting Medicare reimbursement as a fee. Physicians received kickbacks for test orders, 95 percent of which didn’t meet Medicare medical necessity criteria because the ordering physician:5

    • didn’t conduct a proper telehealth visit with the beneficiary,

    • wasn’t treating the beneficiary for cancer or cancer symptoms,

    • didn’t use the test results to treat the beneficiary, and

  • wasn’t generally qualified to understand and interpret the test results.

Falsely Billing Routine UTI Assays as PCR Tests Leads to More than $300 Million Judgment

Case: A former employee accused a lab of falsely billing Medicare and Medicaid for standard urinary tract infection tests that should have been coded 87086 or 87088, Current Procedural Terminology (CPT) codes reimbursed at roughly $20. Instead, the tests were allegedly coded with CPT 87798 used for molecular PCR testing priced at $450 to $500. The DOJ intervened in the case and brought False Claims Act (FCA) charges against four labs owned by Rajen Shah, Shah himself, and his management company. The defendants compounded whatever compliance mistakes they made by neither answering the government’s complaint nor showing up for court. As a result, the Florida federal court entered default judgment against all six defendants, amounting to over $300 million in total damages under the FCA [United States ex rel. Cushing v. Rajen Shah, 2023 U.S. Dist. LEXIS 148668].

Significance: The lesson of the Shah case is that ignoring a federal charge is a terrible idea. That’s because under the Federal Rules of Civil Procedure (Rule 55(b)), when one side doesn’t show up for court, the other party can ask the judge to award default judgment for the amount of damages alleged in the complaint.8 The costs are even greater in an FCA case, where the government or whistleblower can seek three times the amount falsely billed. The price tag in Shah:

    • Rajen Shah: $105,634,097 in damages

    • Golden Rule Management, LLC: $105,634,097 in damages

    • Tomoka Medical Lab, Inc.: $6,159,118 in damages

    • Tennessee Valley Regional Laboratories, LLC: $23,996,305 in damages

    • Luminus Diagnostics, LLC: $75,478,674 in damages

  • United Diagnostics Lab, LLC: $54,587,325 in damages

California Whistleblower Gets Chance to Prove Kickback Claims at Trial

Case: A practice administrator filed a qui tam lawsuit against a cardiovascular clinic and its physician owner for paying kickbacks to primary care physicians in the form of quarterly bonuses of $40 per patient referred for diagnostic tests and then falsely billing those tests to Medicare and Medi-Cal. The clinic contended that whatever bonus payments it made fell within the Anti-Kickback Statute (AKS) safe harbor for payments to bona fide employees and asked the California federal court to dismiss the case. The court denied the motion, holding that the administrator had legitimate legal claims and would get the chance to prove them at trial.

Significance: The AKS safe harbor allows for payment “by an employer to an employee who has a bona fide employment relationship with” the employer.9 Because the physicians in this case weren’t directly employed by the clinic, whether the safe harbor applied would depend on the exact relationship between the parties. The problem for the clinic is that this issue will have to be resolved at trial: Courts in California and other parts of the Ninth Circuit aren’t supposed to award summary judgment dismissing AKS and False Claims Act cases on the basis of this or other safe harbors, unless the complaint itself incorporates all of the elements necessary to make out the defense. Thus, for example, summary dismissal might have been merited had the administrator contended that the physicians receiving bonuses were clinic employees. But since the whistleblower didn’t make that claim, the clinic will have to wait and make its safe harbor defense during the trial [United States ex rel. Goldberg v. Sacramento Heart & Vascular Med. Assocs., 2023 U.S. Dist. LEXIS 148293, 2023 WL 5435890].9


    1. https://www.justice.gov/opa/pr/justice-department-files-false-claims-act-complaint-against-laboratory-companies-and-their

    1. https://www.justice.gov/media/1306416/dl?inline

    1. https://www.g2intelligence.com/cms-to-crack-down-on-unnecessary-covid-19-add-on-tests/

    1. https://oig.hhs.gov/oei/reports/OEI-09-20-00510.pdf

    1. https://www.justice.gov/usao-wdpa/pr/pittsburgh-area-lab-owner-pleads-guilty-multiple-kickback-conspiracies-connection

    1. https://www.justice.gov/usao-wdpa/pr/pittsburgh-resident-sentenced-18-months-imprisonment-convictions-agreeing-others-pay

    1. https://www.g2intelligence.com/special-report-the-current-state-of-genetic-testing-fraud-enforcement/

    1. https://www.federalrulesofcivilprocedure.org/frcp/title-vii-judgment/rule-55-default-default-judgment/

    1. https://casetext.com/case/united-states-ex-rel-goldberg-v-sacramento-heart-vascular-med-assocs

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