False Claims

The Liability Risks of Failing to Report Tests of Dubious Medical Necessity

What should your lab do if providers order tests that clearly don’t meet coverage criteria for medically necessary coverage criteria? A recent settlement involving Cordant Health Solutions charges of falsely billing Medicare for medically unnecessary urine drug tests offers perspective on this question.

The Case

The allegations stem from events that happened in New England far from Cordant’s Denver, Colo., base of operations. The central players in the scheme were Massachusetts lab and Cordant subsidiary Secon Laboratories and Secon client Crossroads, Inc., a behavioral health treatment center located in New Haven, Conn.

The problems began in 2015, when Crossroads implemented a new policy requiring residents, many of whom were enrolled in the Connecticut Medicaid program, to submit to regular urine drug testing for purposes of monitoring rather than medical treatment. Crossroads ordered Secon to perform presumptive (screening) drug tests and definitive (confirmatory) drug tests for all residents every week. In many cases, Crossroads ordered residents to undergo duplicative tests three, four and even five times per week.

The Justice Department press release doesn’t suggest that Cordant and Secon actively plotted the scheme with Crossroads. But the DOJ claimed that they “knew or should have known” that the tests were medically unnecessary. Instead of smelling a rat, they went ahead and performed the tests and then sent the bill to Medicaid, starting in October 2015 and ending in February 2017. In so doing, they violated the False Claims Act. While denying the charges, Cordant and Secon decided that discretion is the better part of valor and settled the case for $845,108 rather than risk a trial.

Medically unnecessary urine drug testing has been a millstone around Cordant’s neck in recent months. On July 20, 2020, the firm agreed to pay $11.9 million to settle a case that began as a whistleblower suit claiming that its Denver and Tacoma labs paid kickbacks to physicians and marketing companies to generate referrals of urine-drug tests that were subsequently billed to Medicare and TRICARE.

Inactions Speak Louder than Words

For lab compliance managers, the takeaway from the Cordant case is how your lab can get into trouble not just for action but inaction. Specifically, while labs are neither qualified nor expected to second guess referral source determinations, they are expected to raise a red flag when ordered tests raise clear issues of medical necessity. In other words, if you know or should know that tests don’t meet medically necessary criteria and bill for them anyway, you’re partaking in a false billing that may result in liability under the FCA.

And that’s not all. The litany of violations for labs that bury their head in the sand when confronted with suspicious ordering behavior may include failing to report and return overpayments. In fact, this is what happened to Cordant and Secon.


The best way to sum it all up is by paraphrasing the words of John Durham, the U.S. Attorney in the Cordant case. Labs have a responsibility to ensure that the claims they submit to government health care programs are for medically necessary testing services. If a lab discovers that it’s performed and billed for tests that weren’t medically necessary, it must report and return any overpayments, and modify its practices.



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