Medicare Compliance & Reimbursement
Federal Enforcers Fixate on Clinical Labs
Ensure your lab claims are medically necessary — or pay the price. Your practice likely orders clinical tests daily because they often lead to more informed diagnoses and enhanced treatment plans. However, recent enforcement suggests the feds are ramping up their scrutiny of clinical labs, and the penalties are steep. Background: The Department of Justice (DOJ) in collaboration with the HHS Office of Inspector General (OIG) has vigilantly pursued clinical lab fraud over the past few years, and it’s only increased during the pandemic. In fact, enforcement activity points to a federal spotlight on COVID-19 testing, experts warn. “While the government certainly has invested significant resources in pursuing pandemic-related issues, the scope of enforcement in the lab space is far broader in regard to COVID-19 issues,” notes Robinson & Cole LLP in the law firm’s Clinical ColLABorative newsletter. But COVID fraud isn’t the only lab issue on the feds’ radar. The OIG and DOJ spotlight continues to shine on the perennial lab fraud favorites of ordering tests that are medically unnecessary, submitting false claims to Medicare and Medicaid, and engaging in kickback schemes with clinicians. Take a gander at these huge July cases. FMV rents: BioReference Health LLC, formerly known as BioReference Laboratories, Inc. and OPKO Health, Inc. got into some hot water for a referral and kickback scheme the firm had with physicians. The New Jersey-based lab allegedly paid physicians’ and physician practices’ “above-market rents” for their office space in exchange for lab referrals, violating the False Claims Act (FCA), the Physician Self-Referral Law (Stark), and the Anti-Kickback Statute (AKS). “BioReference admitted that it rented the office space from the specified physician practices for Patient Service Centers (PSCs), where patients could have their blood samples taken. In calculating payments under certain PSC lease arrangements, BioReference inaccurately measured the amount of space BioReference would use exclusively and included a disproportionate share of common spaces,” a July 14 DOJ release notes. Additionally, the investigation uncovered that despite internal audits showing the rents were above FMV, BioReference neither reported nor returned overpayments it received from federal healthcare programs, the DOJ says. BioReference and OPKO have agreed to fork over $9.85 million to settle the alleged violations. Cardiovascular testing: In a massive nationwide takedown that encompassed 13 federal districts, the DOJ charged 36 defendants with a myriad of crimes, a DOJ report maintains. “The coordinated federal investigations announced today primarily targeted alleged schemes involving the payment of illegal kickbacks and bribes by laboratory owners and operators in exchange for the referral of patients by medical professionals working with fraudulent telemedicine and digital medical technology companies,” a July 20 DOJ release explains. Cardiovascular genetic testing is a “burgeoning scheme” gaining traction in the healthcare fraud realm, and the prosecution of this case highlights the increased interest in this type of lab work, according to the DOJ. The total price tag is more than $1.2 billion in charges for alleged criminal actions. Medical necessity: Irving, Texas-based Inform Diagnostics, Inc., ratcheted up some alleged FCA violations for “routinely and automatically conduct[ing] additional tests on biopsy specimens prior to a pathologist’s review and without an individualized determination” — and then submitting the associated claims to Medicare and other payers, a DOJ release mentions. The lab work was found to be medically unnecessary, and Inform will pay $16 million to rectify the FCA charges. “Laboratories that bill for medically unnecessary tests drain funds from Medicare and other federally funded healthcare programs,” said U.S. Attorney Rachael S. Rollins in a release. OIG Special Agent in Charge Phillip M. Coyne cautioned further, “Clinical laboratories are expected to closely follow Medicare rules and bill properly — nothing more, nothing less ... we are committed to pursuing these types of allegations along with our law enforcement partners as we work to protect the integrity of our federal health care system.” Genetic testing: Two labs, Metric Lab Services LLC and Metric Management Services LLC and Spectrum Diagnostic Labs LLC, and their operators/owners in Mississippi and Texas respectively, Sherman Kennerson and Jeffrey Madison, agreed to resolve false claim violations and a kickback scheme upward of $5.7 million for soliciting unnecessary genetic tests from Medicare beneficiaries via marketers. The labs and owners worked with marketers who “solicited genetic testing samples from Medicare beneficiaries. The marketers arranged to have a physician fraudulently attest that the genetic testing was medically necessary, and Metric and Spectrum would process the tests, receive reimbursement from Medicare and pay a portion of that reimbursement to the marketers,” DOJ explains in a release. Additionally, Metric and Spectrum drew up “sham agreements” to conceal the testing fraud and make it look like the marketers were providing consulting help and other services instead. Kennerson and Madison are awaiting sentencing for conspiracy to defraud the U.S., the DOJ release adds. Reminder: If your documentation doesn’t demonstrate medical necessity for the procedures provided, your lab could be in hot water. The OIG continues to prosecute cases that result in both prison time and million-dollar settlements for medically-unnecessary testing. Remember, Medicare defines medically necessary services as “healthcare services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms and that meet accepted standards of medicine.” And the best way to demonstrate medical necessity is with thorough and accurate documentation.
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