Recent Cases and Enforcement Actions Involving the Diagnostics Industry

This month's roundup of cases includes fraud, billing and coding, and HIPAA infractions.

Holmes Can’t Use Out-of-Court Statements by Theranos Co-Founder Balwani as Evidence

Case: Former Theranos founder Elizabeth Holmes and former president Ramesh “Sunny” Balwani are facing federal criminal charges for wire fraud and conspiracy. Balwani’s trial isn’t scheduled to start until Holmes’ trial ends. As a result, Balwani invoked his Fifth Amendment right against self-incrimination to avoid having to testify as a defense witness for Holmes. And since Balwani wasn’t available, Holmes’ lawyers asked the court to admit the statements he made to the US Securities Exchange Commission (SEC) about his role in the Theranos scheme during a deposition in 2017. The California federal court refused the request. Significance: The denial is based on a technical law governing when out-of-court statements made by a witness who’s not available to testify in a federal trial can be used as evidence in the case. The upshot of the ruling is its practical impact on the case. Having been denied the opportunity to cross examine and pin the blame on Balwani, the defense attorneys had to rely on Holmes’ personal testimony to build its case. Having defendants testify on their own behalf in a criminal case is a risky strategy and it remains to be seen whether the gamble will pay off [United States v. Holmes, 2021 U.S. Dist. LEXIS 231156, 2021 WL 5712160].

Pathology Practice Pays $2.4 Million to Settle Whistleblower Suit for Upcoding

Case: A physician brought a whistleblower lawsuit against a New Jersey pathology practice for falsely billing Medicare using CPT code 85390-26, which requires written analysis by a pathologist. The practice’s written records didn’t substantiate use of the higher-paying code and the whistleblower claimed the billed tests actually didn’t require analysis. The government joined the suit, and the provider decided to settle the case. Price tag: $2.4 million, of which the whistleblower will get $456,000; in addition, the practice had to enter into a three-year Corporate Integrity Agreement. Significance: CPT 85390 is a Hematology and Coagulation Procedures code used with the -26 modifier for billing interpretation and reporting of lab tests to evaluate fibrinolysis and coagulation provided by a physician or nonphysician lab professional. This case serves as a reminder of the importance of having an actual written analysis in your records justifying use of the code to avoid being charged with upcoding.

Did Cigna Wait Too Long to Sue Reference Labs for Fraudulent Billing?

Case: Health service company Cigna sued five labs for fraudulent billing of tests that were farmed out to reference labs. The federal court dismissed some of the claims as being barred by the statute of limitations, leaving Cigna with only “equitable” claims that aren’t subject to a statute of limitations. But the labs asserted the defense of “laches,” essentially a statute of limitations for equitable claims, to get the court to toss the remaining three claims. The Connecticut federal court denied the motion. Significance: To make out a laches defense, the labs had to prove: (1) Cigna was guilty of “unreasonable and inexcusable delay,” and; (ii) the delay “resulted in prejudice” to the labs. The second prong turned out to be the labs’ undoing. That’s because unlike the statute of limitations, which prevents a case from going to trial in the first place, laches applies during the trial. And because the labs could still keep the laches defense in their pocket for use at trial, they didn’t suffer prejudice as a result of Cigna’s delay [Conn. Gen. Life Ins. Co. v. BioHealth Labs., Inc., 2021 U.S. Dist. LEXIS 224612, 2021 WL 5447142].

Florida Treatment Center Settles HIPAA Right of Access Enforcement Action for $160,000

Case: On October 1, 2019, the patient of a Florida eating disorder treatment center requested a copy of her medical records. Seven weeks later, she sent a repeat request. Not until May 22, 2020 did the center send the requested records. The Office for Civil Rights charged the center with a HIPAA access violation. The center agreed to shell out $160,000 and implement a burdensome Corrective Action Plan to settle the case [Rainrock Treatment Center, LLC dba Monte Nido Rainrock]. Significance: You better respond promptly when patients request access to their medical records. Twenty-five different providers who denied or delayed access requests have been targeted for enforcement action under the OCR’s HIPAA Right of Access initiative since it launched last year. At $160,000, this is tied for the second highest settlement amount recovered as a result of the initiative. OCR Right of Access Initiative Settlements Scorecard (as of December 16, 2021)

Provider	Settlement Amount*	Allegations
Banner Health ACE	$200,000	OCR cites two occasions in which Phoenix-based not-for-profit health system took about 6 months to provide patients their requested PHI
Rainrock Treatment Center, LLC dba Monte Nido Rainrock	$160,000	Florida eating treatment disorder took more than 8 months to fulfill patient’s request for a copy of her medical records
St. Joseph’s Hospital and Medical Center	$160,000	Phoenix hospital refused to provide PHI to patient’s mother even though she was his legal representative
Dr. Robert Glaser	$100,000	New York cardiovascular disease and internal medicine doctor didn’t cooperate with OCR’s investigation or respond to its data requests after not providing patient a copy of their medical record
NY Spine Medicine	$100,000	Neurology practice refuses patient’s multiple requests for copies of specific diagnostic films
Bayfront Hospital	$85,000	Florida hospital didn’t provide expectant mother timely access to the PHI of her unborn child
Korunda Medical	$85,000	After first refusing to provide it at all, Florida primary care and interventional pain management services provider sent patient’s PHI to third party in the wrong format and charged him excessive fees
Children’s Hospital & Medical Center	$80,000	Nebraska hospital denied mother of minor patient timely access to her daughter’s medical records, despite repeated requests
Renown Health, P.C.	$75,000	Nevada private, not-for-profit health system didn’t timely honor patient’s request to transfer her EHR and billing records to a third party
Sharp Rees-Stealy Medical Centers	$70,000	California hospital and health care network didn’t timely honor request to transfer patient’s EHR to a third party
Beth Israel Lahey Health Behavioral Services	$70,000	Massachusetts provider ignored request of personal representative seeking access to her father’s PHI
Arbour Hospital	$65,000	Massachusetts mental health services provider kept patient waiting 5 months before granting access to his PHI
University of Cincinnati Medical Center, LLC	$65,000	Ohio academic medical center failed to respond to patient’s request to send an electronic copy of her medical records maintained in its electronic health record to her lawyers
Housing Works Inc.	$38,000	New York City non-profit services provider refused patient’s request for a copy of his medical records
Peter Wrobel, M.D., P.C., dba Elite Primary Care	$36,000	Georgia primary care practice failed to provide patient access to his medical records
Advanced Spine & Pain Management*	$32,150	Ohio pain services provider took nearly 4 months to provide patient requested medical records
Denver Retina Center	$30,000	Colorado ophthalmological services provider took 8 months to provide requested medical records and lacked compliant access policies
Village Plastic Surgery	$30,000	New Jersey practice failed to provide patient timely access to his medical records
Riverside Psychiatric Medical Group	$25,000	California medical group didn’t provide patient copy of her medical records despite repeated requests and OCR intervention
Dr. Rajendra Bhayani	$15,000	NY physician didn’t provide patient her medical records even after OCR intervened and closed the complaint
All Inclusive Medical Services, Inc.	$15,000	California multi-specialty family medicine clinic refused patient’s requests to inspect and receive a copy of her records
Wake Health Medical Group	$10,000	North Carolina primary care provider never furnished requested records despite charging patient $25 access fee
Wise Psychiatry, PC	$10,000	Colorado psychiatric firm refused to provide personal representative access to his minor son’s medical record
Diabetes, Endocrinology & Lipidology Center, Inc.	$5,000	West Virginia diabetes clinic made the mother of a minor patient wait nearly 2 years for access to his medical records
King MD	$3,500	Virginia psychiatric practice didn’t provide patient access to her medical records even after OCR intervened, provided technical assistance and closed the complaint

*In addition to the monetary settlement, each accused provider had to agree to implement a corrective action plan and allow the OCR to conduct close monitoring for one to two years

Pain Clinic Operator Gets Permanent Exclusion for Billing Medically Unnecessary Tests

Case: One of the beneficiaries of the pardon spree initiated by President Trump during his final days in office was the former CEO of now defunct Comprehensive Pain Services (CPS) convicted for his role in a scheme to bill Medicare for over $4 million in medically unnecessary tests. But while he won’t have to spend the sentenced 42 months in prison, the CEO still faces civil charges. To settle those charges, he has agreed to a permanent voluntary exclusion from not only federal procurement programs. Significance: The settlement is even harsher when you consider that in addition to exclusion, the 43-year-old CEO also promised not to seek or accept employment in any industry or field in which he could, either directly or indirectly, submit claims seeking reimbursement from Medicare or other federal health care programs. The DOJ has also reached settlements with CPS, its owners and a former manager. At its height, Tennessee-based CPS operated 40 pain clinics in 12 different states.