Laboratory Test Fraud

Laboratory test services are essential to the proper treatment of some medical conditions. Urine drug tests are commonly ordered by pain clinics that prescribe medication to their patients. These clinics use urine drug tests to ensure their patients are consistently taking the medication they are supposed to be taking, and are not abusing potentially dangerous drugs. Other tests, such as genetic tests, can help a doctor determine whether a drug will be effective for a particular patient, or whether the patient is susceptible to certain cancers. However, these tests can be extremely lucrative—and wherever there’s money, there’s an opportunity for fraud.

Fraudulent testing schemes typically fall into two categories: medically unnecessary tests and kickbacks.

Medically Unnecessary Tests

Government healthcare programs, such as Medicare and Medicaid, pay for covered diagnostic laboratory tests that are furnished by a laboratory, but only if they are medically necessary. This means a test must be ordered by the physician treating the patient for the treatment of a specific illness or injury, the test must be individualized to patient need, and the results of the test must be used to help treat the patient. In addition, each test must be supported by sufficient documentation to demonstrate that it is medically necessary.

• Urine Drug Tests. There are two types of urine drug tests (UDTs). The first type of UDT—called “qualitative,” “presumptive,” “preliminary,” or “screening,”—is used to determine the presence or absence of a drug in the urine. This type of UDT is relatively simple to perform and can generally be completed at a doctor’s office.The second type of UDT—called “quantitative,” “confirmatory,” or “definitive”—is used to determine the exact amount of a particular drug in the urine. This type of UDT is more complicated, and generally must be performed by a laboratory. This type of UDT should be performed only under certain circumstances, depending on whether the presumptive test result is expected, the patient’s history of drug abuse and medication adherence, clinical presentation, and medical history.For example, if a patient is prescribed a certain drug, a positive presumptive test result for that drug would be expected, and a quantitative or confirmatory UDT would probably not be medically necessary. If the test result is negative, however, a definitive UDT to confirm this unexpected negative result may be medically necessary. Likewise, if the preliminary UDT reveals a non-prescribed or illicit drug, a confirmatory UDT may be medically necessary to evaluate the preliminary result.Sometimes, healthcare providers will automatically order both types of UDTs for their patients, regardless of medical necessity. Providers often do this because they can bill the government for both tests and receive additional reimbursement. This is unlawful.

• Genetic tests. Pharmacogenetic/pharmacogenomic (PGx) tests and cancer genetic screening (CGx) tests have become increasingly popular in the past several years. PGx tests are used to identify genetic variations that may predispose a patient to an unusual reaction to a particular medication. PGx tests are sometimes useful when a patient has an unexplained reaction to a medication. CGx tests are used to show whether a patient has a genetic predisposition to certain types of cancer.As with UDTs, government healthcare programs will pay for PGx and CGx tests only if they are medically necessary. These tests are medically necessary only under limited circumstances, where a doctor makes an individualized determination of need based on the patient’s unique diagnosis and medical history. It is generally illegal to routinely perform genetic tests regardless of each patient’s diagnosis, medical history, and unique circumstances.As genetic tests become more ubiquitous, so have fraudulent schemes designed to cheat the government. One of the most common types of fraudulent schemes involves a company reaching out to Medicare or Medicaid beneficiaries—often by phone, but sometimes by mail—offering a free or low-cost genetic test. These tests are then ordered by doctors who have never evaluated or treated the patients, and their results are often never sent to the patient or the patient’s treating physician.The government is extremely concerned by genetic testing fraud and has committed significant resources to stopping it. According a Fraud Alert issued by the U.S. Department of Health & Human Services Office of Inspector General (OIG): “Fraudsters are targeting beneficiaries through telemarketing calls, booths at public events, health fairs, and door-to-door visits. Beneficiaries who agree to genetic testing … may receive a cheek swab, an in-person screening or a testing kit in the mail, even if it is not ordered by a physician or medically necessary.”

Kickbacks

Laboratory tests can be lucrative not only for the provider ordering the tests, but for the laboratory performing them. The Stark Law generally prohibits a doctor from referring tests to his or her own laboratory. Therefore, if the doctor ordering the tests also owns a laboratory that conducts the tests, the doctor may be committing fraud. Likewise, the Anti-Kickback Statute (AKS) prohibits a laboratory from paying anything of value to a doctor in exchange for ordering tests or sending those tests to be conducted at a particular laboratory. This includes not only money, but free medical supplies, services, or anything else of value.

Recent Enforcement Actions

Several recent settlements and enforcement actions show how fraudulent laboratory test schemes work in practice:

• In 2015, Millennium Health paid nearly $256 million to resolve allegations that it provided free items to physicians who agreed to refer expensive laboratory testing business to Millennium.
• For the past several years, the government has engaged in civil and criminal enforcement actions against hundreds of individuals and businesses who allegedly participated in a fraudulent genetic testing scheme worth $2.1 billion. According to the government, these parties ordered and conducted medically unnecessary CGx tests that were not provided to the beneficiaries or were worthless to their actual doctors.  Some of the defendants allegedly controlled a telemarketing network that lured hundreds of thousands of elderly and/or disabled patients into undergoing unnecessary CGx testing. The defendants allegedly violated the AKS by paying doctors to prescribe CGx testing, either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen. This massive enforcement action has led to at least one criminal convictions, with the owner of a telemarketing call center being sentenced to 10 years in prison.
• In April 2020, a group of laboratories, pain clinics, and individuals collectively paid $41 million to resolve allegations pertaining to a UDT fraud scheme. The government alleged that the clinics automatically ordered both presumptive and definitive UDTs for all patients at every visit, regardless of whether those tests were medically necessary for the patients’ treatment. In addition, these tests were all sent to laboratories owned by the clinics, allegedly in violation of the Stark Law. The whistleblowers who filed the case received approximately $7.79 million.
• In July 2020, a laboratory group paid nearly $12 million to resolve allegations that it paid doctors in exchange for referrals of UDTs. The whistleblower who filed the case received nearly $2.4 million. This case also led to several criminal prosecutions.

Identifying Laboratory Test Fraud

Whistleblowers are essential in identifying, reporting, and stopping laboratory test fraud. Whistleblowers are typically employees (or former employees) of a laboratory, healthcare provider, telemedicine company, or telemarketer, with inside information about fraud being committed.

For example, a laboratory employee might have information about her company’s payment of kickbacks to physicians. An employee of a telemedicine company might learn that his employer is ordering genetic tests that aren’t medically necessary. A healthcare provider might be offered a kickback to order a genetic test, or might learn that her colleagues have been offered kickbacks.

Sometimes, successful whistleblowers don’t have this type of inside information, but they still have reliable knowledge that a company or individual is engaging in fraud. In any case, a whistleblower may be entitled to an award of 15%-30% of any amount recovered in a successful enforcement action. If you have evidence that a person or company is committing laboratory test fraud, an experienced whistleblower attorney can help you file an effective complaint and maximize your share of any recovery.

Our Team

With more than 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of laboratory test fraud.

Please call (866) 845-4741 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower.  Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.