Last week, the Justice Department announced that Quest Diagnostics Inc. and Quest Diagnostics Clinical Laboratories Inc. agreed to pay the United States $1.79 million to settle claims that it violated the False Claims Act. Quest operates medical labs where people go for blood tests and other procedures, including about 20 labs in the Sacramento area, where the settlement was announced. The settlement resolves allegations that Quest Diagnostics submitted duplicative claims to Medicare for certain venipuncture services, diagnostic tests, and certain panel tests and select components of those panels. The U.S. alleged that these duplicative payments violated the False Claims Act.
The government has kept a keen eye on laboratories over the past year. At several healthcare compliance conferences, U.S. attorneys have made it clear that they were interested in a wide array of potential laboratory billing abuse or fraud. At this past month’s 9TH Annual Aggregate Spend Conference, the government enforcement panel noted that lab cases were a major emerging trend for prosecutors’ offices. They specifically targeted overutilization for medically unnecessary lab work, including an example of labs running PCP (Angel Dust) tests on urine samples for patients over 70 years old, which the government stated was “ridiculous.”
“We are committed to fighting fraud and abuse to help preserve scarce Medicare funds for those who need it the most, the sick and the elderly.” said U.S. Attorney Benjamin Wagner in the Quest Press Release. The settlement resolves a lawsuit filed in the Eastern District of California under the qui tam provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery. According to DOJ, the whistleblower in this case will receive $358,000 of the recovery proceeds.
This case was investigated by the United States Attorney’s Office for the Eastern District of California. Assistant United States Attorney Catherine Swann handled the matter for the United States. “It’s not a huge settlement,” said Swann. “But it’s an important settlement because it stopped conduct that was ongoing.”
Importantly, the claims settled by this agreement are allegations only, and there has been no determination of liability. Quest denied any wrongdoing and says IT problems affected Medicare’s reimbursement for certain test codes. This resulted in duplicate payments to the company. Quest says it has updating billing systems to prevent it from happening again. (see Capital Public Radio)
The major cases in this arena have alleged that certain labs were paying kickbacks to doctors or pain clinics for referrals; this case does not allege such improper inducements, which is likely the reason for the lower-end monetary settlement. For example, earlier this year we outlined the case against a particular laboratory alleged to offer payments to physicians described as a “processing fee.” Physician offices often draw blood, process it, and then ship the specimen to clinical laboratories that offer diagnostic testing. Some labs enter into arrangements with physicians to compensate them for the time and effort involved in this process.
According to the Wall Street Journal article that initially put the spotlight on potential lab kickback arrangements, a particular company may “bundle[ ] together up to 28 tests it performs on a vial of blood, receiving Medicare payments of $1,000 or more for some bundles.” One company paid $20 per blood sample to most doctors ordering its tests. “For some physician practices, payments totaled several thousand dollars a week,” WSJ reports. In June of 2014, the HHS-OIG released a Special Fraud Alert, which cautioned that such payments present “a substantial risk of fraud and abuse under the anti-kickback statute.” OIG’s chief concern, they noted, was that physicians would do business with the lab that pays the most, rather than the best lab, and that physicians would order tests that are not medically necessary, particularly if the payment arrangement is tied to the number of referred tests.