Clinical laboratory testing implicated in national healthcare fraud sting

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A coordinated national healthcare fraud enforcement effort across the U.S. surged to a value of $2.75 billion with more than double the number of individuals charged over last year, according to a new 2024 report from the U.S. Department of Justice (DOJ). For another year in a row, clinical laboratory testing fraud schemes appeared throughout.

The government now uses sophisticated data analytics to rewrite the fraud fighting playbook, essentially monitoring billing trends, identifying aberrant providers, and helping prosecutors spot emerging schemes, according to the U.S. Department of Health and Human Services and Inspector General Christi Grimm.

"We're also cracking down on schemes that trick Medicare enrollees into obtaining expensive genetic testing without regard for medical necessity," Grimm said in a June 27 press conference announcing the U.S. government's 2024 National Health Care Fraud Enforcement Action.

Across 32 federal districts, the U.S. charged 193 defendants, including 76 licensed medical professionals, more than double the number of people charged over last year, according to DOJ stats.

Map of federal districts and states participating in the 2024 coordinated healthcare fraud enforcement effort.Map of federal districts and states participating in the 2024 coordinated healthcare fraud enforcement

Perhaps not surprising to clinical laboratory directors and administrators, four types of clinical laboratory tests appear throughout this year's sweep:

  1. COVID-19 testing using polymerase chain reaction (PCR) nucleic acid amplification lab tests and point-of-care antigen tests
  2. Cancer genetic testing using DNA sequencing
  3. Cardiovascular genetic testing designed to identify mutations in genes that increase risk of cardiovascular diseases (tests used for limited circumstances that are not intended to be used for routine screening)
  4. Pharmacogenetic (PGx) testing to detect increase susceptibility to adverse drug reactions

As in previous years' enforcement actions, the charges range from conspiracy to commit healthcare fraud, conspiracy to violate the Anti-Kickback Statute, and paying and receiving healthcare kickbacks, to money laundering, and more. Over a quarter of the defendants charged are medical professionals, the DOJ reported.

In the Southern District of Texas, Northern District of Texas, and District of New Jersey, for example, clinical laboratory owners allegedly paid illegal kickbacks and bribes, including to telemedicine companies, in exchange for order referrals for unnecessary genetic testing. The results of these genetic tests — which were supposed to detect genetic mutations that could indicate an elevated risk of cancer, cardiovascular disease, Parkinson’s disease, and other serious illness — were not used in the patients’ treatment, according to the DOJ's 2024 digest of actions.

Among the largest stings are two Texas-based clinical laboratory operations.

Proactive data analysis led to investigating a spike in genetic testing claims at a laboratory in Houston. Both Bio Choice and Bios Scientific labs were named in an alleged $359 million fraud and conspiracy operation involving call centers and telemedicine doctors. In this case, the owner of the two laboratories entered into an agreement for the referral of Medicare beneficiary DNA samples and signed doctors’ orders for genetic testing that were used to bill Medicare through the labs, according to the DOJ. The alleged kickback arrangement was concealed through flat-fee contracts.

In the other Texas case, an alleged scheme valued at $335 million named two clinical laboratories, Axis Professional Labs and Kingdom Health Laboratory in Farmers Branch near Dallas. This one involves false and fraudulent Medicare claims, per-DNA sample kickbacks, and unnecessary cardiac genetic tests. The alleged scheme was concealed by a sham contract for software and technology services, among other claimed services. Marketers allegedly engaged other companies to solicit Medicare beneficiaries through telemarketing and then “doctor chased” (obtaining the identity of beneficiaries’ primary care physicians and pressure the doctors to approve cardio genetic testing orders) for patients who purportedly had already been qualified for the testing, according to the DOJ. Medicare paid Axis and Kingdom at least $54 million.

Elsewhere, a case out of the Southern District of Alabama alleges a nearly $20 million over-the-counter COVID-19 test fraud scheme. This operation was based on purchasing and selling hundreds of thousands of Medicare beneficiary identification numbers (BINs) and personal data to labs around the country. The BINs were used to bill Medicare for test kits, many of which had not been requested by the beneficiaries, the DOJ said. In addition, TeleMD and its owner Brian Cotugno were never enrolled as Medicare providers, the case noted.

In the Middle District of Florida, Medicare paid approximately $4.5 million on cancer genetic testing claims in one case. Here, marketers were paid on a per-patient basis to recruit Medicare beneficiaries to request cancer genetic testing tests that were not medically necessary. In the Southern District of Florida, an alleged $65 million scheme involved kickbacks and bribes to physicians and patient recruiters, again, for genetic tests that were not medically necessary. This case named the firm Innovative Genomics.

In Michigan, the DOJ noted cases that combined durable medical equipment with genetic testing services and telemedicine. One case that involved an independent contractor in India and another case that involved an enrolled physician certifying orders in a matter of seconds without meaningful review amounted to nearly $30 million in Medicare payments that were based on alleged false and fraudulent claims.

Overall, the various alleged health care fraud schemes involve approximately $2.75 billion in intended losses and $1.6 billion in actual losses, according to the DOJ. In connection with the coordinated nationwide law enforcement action, and together with federal and state law enforcement partners, the government also seized over $231 million in cash, luxury vehicles, gold, and other assets.

Separately, the Center for Program Integrity of the Centers for Medicare and Medicaid Services (CPI/CMS) announced that it took adverse administrative actions in the past six months against 127 medical providers for their alleged involvement in healthcare fraud.

For a July 2 blog post at Robinson Cole, health law attorney Danielle Tangorre said that the widespread enforcement action is a timely warning to telemedicine providers and clinical laboratories of the need to comply with fraud and abuse laws.

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