Lab Owner Indicted for Improper Billings to Medicare of Approximately $117 Million

The U.S. Attorney’s Office, Western District of Louisiana, recently announced that the owner and operator of the Monroe-based Specialty Drug Testing, LLC (“Specialty”) was indicted by a Federal grand jury for violating the Federal Anti-Kickback Statute  (“AKS”), which resulted from improper billings to Medicare of approximately $117 Million. According to the indictment, Specialty and its individual owner conspired with other unnamed co-conspirators and companies in a scheme involving payment of kickbacks and bribes in return for patient DNA specimens and physicians’ orders for cancer genetic tests and pharmacogenetic testing.  If convicted, the owner of the lab faces up to five years in prison for each count of conspiracy to defraud Medicare, and up to 10 years in prison for illegal kickbacks. He also faces up to five years of supervised release, a $250,000 fine, forfeiture, and restitution.  The case is yet another reminder of the perils of engaging in business practices that are designed to reward referrals of services payable under Federal healthcare programs. 

Clinical labs have been the subject of scrutiny for many years, and in recent years, cancer genetic and pharmacogenetic testing have been a target of enforcement action for violations of the Federal Anti-Kickback Statute (“AKS”), the Federal Self-Referral Law (commonly known as the “Stark Law”), and the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).   The AKS imposes criminal penalties against individuals or entities that knowingly and willfully offer, pay, solicit, or receive any remuneration in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program.  Conduct that violates the AKS also implicates another Federal criminal law, the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).  EKRA is broader than the AKS because it applies not only to services payable under Federal health care programs, but also to services that are paid by commercial insurers.  Clinical laboratory services are designated health services (“DHS”), so to the extent that physicians refer to labs in which the physician or a family member of the referring physician has a financial relationship, the Stark Law is also implicated.  In addition to these Federal laws, lab owners and the physicians who refer to labs must also be mindful of state laws and payor-specific rules. 

The United States Department of Justice recently announced an historic nationwide enforcement action alleging $6 billion in false and fraudulent claims, which included, among other things, claims for genetic and other diagnostic testing.  As clinical laboratories continue to be the target of scrutiny, referring physicians should avoid becoming involved in arrangements that induce or reward their referrals, and physicians who are lab owners should seek a regulatory review to determine if the arrangement qualifies for a statutory exception to the Stark Law’s prohibition on self-referral, and/or otherwise complies with state law.

How Frier Levitt Can Help

Physicians and laboratories should retain competent healthcare counsel to review any arrangement between referral sources and providers. For more information, call Frier Levitt to speak with an attorney.

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