Millennium Health Settlement and Corporate Integrity Agreement: Focus on Boards of Directors

Millennium Health has agreed to pay $256 million to resolve allegations that it billed Medicare, Medicaid, and other federal health programs for unnecessary drug testing and genetic testing, and that it provided kickbacks to physicians to induce business. This settlement represents two False Claims Act settlements between Millennium and the DOJ and an administrative settlement agreement between Millennium and HHS.

As part of those settlements, Millennium will pay $227 million to resolve the False Claims Act allegations that it systematically billed federal health care programs for excessive and unnecessary drug testing from January 1, 2008 through May 20, 2015. The United States allegations included allegations that Millennium caused physicians to order excessive numbers of urine tests, in part through the promotion of “custom profiles,” which were not customized for individual patients, but actually were standing orders that caused physicians to order a large number of tests without an individualized assessment of each patient’s needs. The supposed “custom profile” use led to the over-billing of federal health care programs which limit payment to services that are reasonable and medically necessary for the diagnosis and treatment of a specific patient’s illness or injury. The United States also alleged that Millennium violated the Stark Law and Anti-Kickback Statute by providing physicians with free drug test cups on the condition that the physicians return the specimen to Millennium for hundreds of dollars’ worth of additional testing.

In addition to the aforementioned payment for resolution of False Claim Act allegations, Millennium agreed to pay $10 million to resolve different allegations that it submitted false claims to federal healthcare programs for medically unnecessary genetic testing that was performed on a routine and preemptive basis, without an individualized assessment of patient need, from January 1, 2012 through May 20, 2015. Typically routine genetic testing does not qualify for Medicare reimbursement because it is not medically reasonable or necessary.

The remaining $19 million was settled in connection with a claim from the Centers for Medicare and Medicaid Services (CMS) to resolve administrative actions regarding Millennium’s claims to Medicare for certain drug test billing codes. Those claims were the subject of claim denials and an overpayment action initiated by CMS and its contractors.

Millennium’s CEO Brock Hardaway said that the agreement will help Millennium reduce its debt and pay the settlement, “[w]hile Millennium may debate some of the merits of the DOJ’s allegations, we respect the government’s role in healthcare oversight and enforcement. At the end of the day, it was time to bring a closeure to an investigation that began nearly four years ago. Millennium Health is currently a very different organization than we were in the past.”

In connection with their False Claim Act settlements, which were originally brought in lawsuits filed by whistleblowers, Millennium has entered into a Corporate Integrity Agreement with the Department of Health and Human Services, Office of Inspector General. Currently, Millennium is owned by private-equity firm TA Associates Management LP and company founder James Slattery; part of the CIA requires Millennium to appoint enough independent directors, rather than executives and family members, to make up a majority of its board. According to Inspector General Daniel R. Levinson, “This company has taken the first step toward demonstrating a commitment to compliance by agreeing to make significant changes to its board of directors. Most of the board will be comprised of new independent members. Under the five-year CIA, OIG will monitor the company’s compliance efforts under this new leadership.”

Their CIA was very direct in requiring the company to appoint a corporate compliance officer and appoint a compliance committee within 90 days of signing the CIA. They also have to appoint a chief clinical officer, apparently something that had been lacking for this clinical diagnostics company.

Millennium Health’s shareholders must guarantee an initial payment of $50 million toward the full settlement, by guaranteeing pieces of the payment based on the proportion of equity in the company they won.

Millennium is in the process of collecting formal votes from their lenders over the next couple weeks to sign off on a mandated restructuring process Millennium expects to be completed by the end of the year. The agreement with the DOJ enables Millennium to finalize their reorganization either out of court or through a Chapter 11 bankruptcy proceeding. Currently, Millennium is debating whether or not to file for bankruptcy protection. They are forced to make a decision and file a petition by November 10, which will allow it to turn over control of the business to its lenders. Creditors would vote to accept what would be a pre-arranged bankruptcy plan by November 8, and a bankruptcy judge would confirm Millennium’s bankruptcy plan by December 21. Millennium has had its earnings and finances shaken up by the probe due to their engagement in this federal investigation for the past four years.