Whistleblower Can Sue Lab for Alleged Specimen Fee Kickback Collection Ripoff

Case: A whistleblower filed a False Claims Act suit charging a California lab of entering into “sham phlebotomy contracts” paying kickbacks to physicians’ family members and staff in the form of process, handling and collection fees at above market rates. The lab argued that the $15 per blood sample draw fees, as compared to the Medicare rate of $3, were legitimate because: (1) they covered a “panoply” of services that including apportioning the blood in vials, spinning the vials in a centrifuge, packaging and labeling the vials and arranging for shipment; (2) the $15 payment is made to a staff or family member and not to the physician. But the federal court denied the lab’s motion to dismiss the case.

Significance: The ruling just means the case can go to trial and isn’t a decision on the merits. In determining that the whistleblower had a legally valid FCA claim, the court cited the 2014 OIG Special Fraud Alert warning that the potential for paying kickbacks in the form of excessive collection fees extends not just to blood collections but other specimen processing and arrangements, in essence nixing the lab’s “panoply” argument. As for whether $15 was a legitimate rate for the fees, the question at the dismissal stage isn’t whether the charges are true but whether the complaint states a valid legal claim, assuming the charges are true. So, the lab would have to keep its price defense in its back pocket and use it at trial [United States ex rel. STF, LLC v. Vibrant Am., LLC, 2020 U.S. Dist. LEXIS 150345].