False Claims Settlements Illustrate Compliance Challenges for Clinical Labs

Two recent settlements illustrate some of the compliance challenges facing clinical laboratories that perform urine drug testing (UDT). Both settlements involve a clinical laboratory resolving allegations that the lab violated the False Claims Act (FCA).

In the first case, the Department of Justice (DOJ) alleged that the lab performed and then billed federal health care programs for both presumptive testing and confirmatory testing. DOJ alleged that the lab was performing both tests at approximately the same time and providing both results to providers simultaneously. DOJ alleged that this rendered one test or the other medically unnecessary: either there was no result to confirm because the presumptive test came back negative, or the presumptive test was unnecessary because the provider already had the confirmatory test in hand. The lab agreed to pay $16 million to resolve these allegations.

In the second case, a physician practice referred UDTs to its in-house clinical laboratory. DOJ alleged that the physicians ordered excessive and unnecessary UDTs for patients without any individualized assessment of clinical need and caused these claims to be submitted to federal healthcare programs. The physicians agreed to pay $3.9 million to resolve these allegations.

Both cases involved alleged violations of the FCA. Originally introduced to address unscrupulous government contractors during the Civil War, the FCA has become a popular tool for prosecuting alleged healthcare fraud. In general, the FCA imposes civil liability for knowingly submitting false claims to the government. Importantly, the FCA carries severe consequences, including treble damages and a per-claim penalty that increases each year with inflation ($11,803 per claim for 2021). The FCA also allows individuals to initiate the prosecution under a qui tam action, in which the government may decide to intervene and wherein the individual is entitled to a share of the government’s recovery.

In addition to the FCA, any arrangement involving referrals to a clinical laboratory should also account for the Eliminating Kickbacks in Recovery Act (EKRA). EKRA, enacted in 2018, provides criminal penalties for paying, receiving, or soliciting any remuneration in return for referrals to recovery homes, clinical treatment facilities, or laboratories. Although initially intended to apply only to substance abuse and recovery, EKRA was written so broadly that it likely applies to all clinical laboratory services, regardless of payor. Like Stark and AKS, EKRA also provides exceptions. However, they are far fewer in number and often narrower than their counterparts in the older statutes, and the regulations governing them are still unfolding.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding laws and regulations regarding clinical laboratories. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney  at 248-544-0888 or wapc@wachler.com.