Bostwick Laboratories settles whistleblower suit for $6.05 million

Bostwick-Laboratories-sign

Bostwick Laboratories (BL) has settled the federal qui tam (whistleblower) lawsuit filed by Michael Daugherty of LabMD that alleged False Claims Act violations for $6.048 million.  This settlement does not resolve allegations against Dr. David Bostwick, who is a separate defendant in the case.

I first wrote about this case in January 2013, when Senior District Judge Arthur Spiegel denied BL’s motion to dismiss, and again in May 2014 to simply provide a quick update on where the case stood.

Briefly, Mr. Daugherty alleged BL and Dr. Bostwick (from my previous post):

  1. Routinely (not on a case by case basis) perform fluorescent in-situ hybridization (FISH) testing on atypical urine cytology cases regardless of whether the referring clinician requested FISH testing and then bills the government for the tests; and
  2. Perform other tests of dubious necessity without a physician order and also bills those to government payors; and
  3. Perform both the professional and technical components of FISH testing, but allow the referring physicians to bill for the professional component; and
  4. Charge referring physicians a reduced amount for the FISH technical component, which allows the referring physicians to mark up and bill Medicare for the full amount, and pocket the difference.

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Quest Diagnostics, LabCorp accused of duplicative testing, billing in recently unsealed suit

Quest

A former phlebotomist for Quest Diagnostics filed a qui tam (whistleblower) suit on July 27, 2012, alleging her former employer and LabCorp knowingly submitted “false and fraudulent claims to the United States and the State of California…for the same tests, performed on the same day, on the same patient” since at least 2002.  The suit was unsealed on October 6th, 2014 after a US District judge denied the federal government’s motion for a fifth extension of time to consider whether it would intervene in the suit.

Complaint

According to the complaint, Elisa Martinez was hired by Quest to work as a phlebotomist at its patient service center (PSC) in Red Bluff California.  She was placed on leave under the Family and Medical Leave Act for undisclosed reasons in February 2011 and was terminated in June 2011.

Just before she advances her allegations, Ms. Martinez highlights the fact Quest paid $302 million in 2009 and Quest and LabCorp paid $241 million and $49.5 million, respectively, in 2011 to settle fraud allegations.

She then provides four examples in which Quest received orders from different physicians to perform the same tests on the same patient and instead of merely sending the results of one set of tests to the ordering physicians, allegedly performed duplicate blood and urine testing and billed Medicare twice.

In one case, Ms. Martinez says a phlebotomist poured urine from one specimen cup into a second cup so as to facilitate the duplicate testing.

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Owner of Bristol Laboratories indicted for healthcare fraud and kickbacks

Scales of Justice

Beth Palin, a non-practicing attorney and owner of Bristol Laboratories (BL) and Mountain Empire Medical Care (MEMC), has been indicted by a federal grand jury on charges of healthcare fraud, conspiracy to commit healthcare fraud and offering or paying a kickback.  Palin’s husband, Joseph Webb, was indicted on the same charges, and otolaryngologist Dr. Mary Curtiss was indicted on charges of healthcare fraud, conspiracy to commit healthcare fraud and receiving a kickback.

Allegations

Dr. Curtiss, who has an ENT practice in a nearby town, was an employee of MEMC and “purported” to run a substance abuse treatment program there for which she was paid $1400 per day “regardless of the number of patients she saw or the amount of work she did.”

Although Dr. Curtiss was an employee of MEMC, she or her husband would pick up her paychecks at Bristol Laboratories.

Dr. Curtiss ran a cash-only enterprise at MEMC and charged patients up to $250 for an initial visit and up to $110 for each subsequent weekly visit.  In addition, MEMC and Dr. Curtiss performed a dip stick urine test on every patient every week, but whether any further testing was performed depended on the patient’s insurance status.

If the patient was insured, BL (which did accept private and government insurance) would also perform in-house qualitative testing and then send the sample to an unnamed lab in Denver for quantitative testing.  If the patient was uninsured, they would be asked to pay $10-25 for the dip stick urine drug test and no additional testing would be performed.

This algorithm was followed regardless of the treatment needs of individual patients.

BL would be reimbursed the following for each in-house drug screen:

  • Medicare-up to $321.76
  • Virginia Medicaid-up to $118.53
  • TennCare-up to $256.72
  • Private insurance-up to $1218.75

The Denver lab would be reimbursed the following for each quantitative test:

  • Medicare-up to $321.76
  • Virginia Medicaid-up to $112.59
  • TennCare-up to $209.74
  • Private insurance-up to $582.35

A BL employee was always present at MEMC, and would perform the functions of receptionist, office manager and urine collector.  This employee would actually order the “appropriate” drug testing based on the patient’s insurance status; Dr. Curtiss would merely pre-sign blank order forms.

The government alleges Palin and Webb required Dr. Curtiss to order “…excessive, medically unnecessary quantitative and qualitative urine drug screens from Bristol Labs”, the results of which were not used to “guide treatment of MEMC’s patients.”

The indictment also discusses the actions of a now-deceased anesthesiologist whose practice was set up in a similar fashion to Dr. Curtiss’ and also sent urine drug tests to BL.  In fact, Dr. Curtiss briefly worked for this anesthesiologist before becoming employed by MEMC.

Possible sentences

According to the Department of Justice, each defendant faces up to 25 years in prison and $750,000 in fines if convicted.

The full indictment is here.

Abington Memorial Hospital laboratory accused of Medicare, Medicaid fraud

AMH logo

A former employee of Abington Memorial Hospital (AMH) in Pennsylvania has filed a federal lawsuit that alleges the hospital laboratory committed Medicare and Medicaid fraud and that she was retaliated against and wrongfully terminated after she informed hospital administration of the lab’s actions.

Background/Allegations

Ms. Joanne Cleighton was hired by AMH in February 1988 to work in the registration office.  Two years later she was promoted to supervisor and fourteen years after that she was promoted to manager. During the entire course of her employment at AMH, Ms. Cleighton claims her disciplinary record was “spotless”.

One of the responsibilities of the registrars at AMH was to enter patient insurance and billing information for outpatient tests, including laboratory tests, and generate an encounter number.  After doing this, the registrar would forward the physician’s orders for laboratory testing to the lab.  Lab employees would append the appropriate CPT code, which would then be used for billing claims.

If, however, the registrars received orders for routine blood work for a patient covered by Medicare Advantage (Part C) or Medicaid, the registrars did not generate an encounter number.  Instead, they were to simply highlight to which outside laboratory the specimens were required to be sent per the Medicare/Medicaid administrator.

Around May 2013, Ms. Cleighton overheard a lab employee state AMH lab employees were marking orders for routine blood work as STAT so that AMH could perform the testing instead of an outside lab. AMH was apparently permitted to perform STAT testing for Medicare/Medicaid patients so long as the physician ordered it STAT.

Ms. Cleighton informed the employee this was improper, and also informed the lab manager at the time.  A month or so later, a meeting attended by Ms. Cleighton, the lab manager and a hospital administrator was held, and AMH reportedly admitted there were some things being done incorrectly in the lab and that “changes would be made”.

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Laboratory referral kickbacks at heart of $24.5 million settlement and Indian TV sting op

DOJ

US lab kickback settlement

Alabama-based Infirmary Health System (IHS), Infirmary Medical Clinics (IMC), Diagnostic Physicians Group P.C. (DPG) and two clinics run by IMC have agreed to pay $24.5 million to settle allegations they violated the Stark Law and Anti-Kickback Statute by engaging in a scheme to compensate physicians for laboratory and radiology referrals.

Dr. Christian Heesch, a physician formerly employed by DPG, filed the whistleblower suit in 2011, and the federal government elected to intervene in July 2013.

The government alleged IHS, through its subsidiaries and clinics, paid physician-owned DPG “a percentage of collections on items and services performed or referred by DPG physicians” to IHS-affiliated clinics that performed clinical laboratory and diagnostic imaging tests from 2005 to 2011.  DPG then compensated individual physicians for their referrals.

The government stated IHS did this so as to:

…keep DPG and its physicians affiliated with [IHS], to prevent them from affiliating with competitors, and to induce DPG physicians to refer federal health care business to IHS subsidiaries…in violation of the Anti-Kickback Statute and the FCA.

According to a 2013 article from AL.com, it was also alleged federal health programs paid at least $521.6 million in false claims between 2004 and 2010, and physicians at DPG received more than $18.6 million in bonuses during the same time frame.

DPG deliberated its compliance with the Stark Law beginning as early as 2002, and again in 2007 and 2008, according to court records.  In June 2010, a meeting took place in which DPG’s attorney told both DPG executives and IMC employees their arrangement likely violated the Stark Law, but despite this, no changes were made.

Dr. Heesch will receive $4.41 million of the settlement.

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Franey Medical Laboratories not guilty of Medicaid fraud and kickbacks

Franey Medical Laboratories (Capewide Enterprises)

Franey Medical Laboratories (Capewide Enterprises)

Franey Medical Laboratories (FML), a Massachusetts drug testing lab, and its vice president, Kathleen Franey-Lopes, have been found not guilty of providing kickbacks for Medicaid and private insurance patients, and of filing a false Medicaid claim.

Charges were originally filed against FML, Ms. Franey-Lopes and the office manager of drug testing laboratory Caritas Medical Laboratory (CML), Renee Andrews, back in March 2013.  Ms. Andrews was charged with accepting Medicaid and private insurance kickbacks and filing false Medicaid claims.

As best I can tell from available sources, internist Dr. Richard Ng, who was charged with multiple counts of illegal prescribing, Medicaid false claims and Medicaid excess charges at the same time as the others, owned a drug abuse clinic as well as CML.

According to the Cape Cod Times:

In March 2007, Franey Medical Lab began doing urine drug screen tests for the Caritas Medical Lab in Brighton, where Andrews was the manager, according to court records filed by the state. At that time, Franey Medical Lab hired and began to pay three full-time employees who worked at Caritas and processed drug-screen tests for Franey, according to court records.

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OIG Issues Special Fraud Alert on Specimen Processing and Registry Arrangements

OIG HHSThe Office of the Inspector General (OIG) for the Department of Health and Human Services (HHS) issued a Special Fraud Alert on June 25th that discusses how specimen collection and registry arrangements between laboratories and referring physicians may violate the Anti-Kickback Statute (AKS).

Once again, Mr. Lee Dilworth, Chief Legal and Administrative Officer of American Pathology Partners, offered to explain just what this means for laboratories.

Many, many thanks to Mr. Dilworth for taking the time to do this.


It’s a rare day when the OIG issues a “Special Fraud Alert” specific to the lab industry, but it did so on June 25th.  The OIG is the Office of Inspector General at the Department of Health and Human Services.  It investigates healthcare fraud, most frequently under the Federal anti-kickback statute (AKS).   It’s a crime under the AKS to knowingly and willfully offer, pay, solicit or receive any remuneration to induce, or in return for, referrals of items or services paid for by any Federal health care program.  Violators commit a felony punishable by fines, imprisonment, and exclusion from Medicare.

The OIG has now highlighted two types of arrangements between labs and physicians that it considers “suspect” under the AKS:

  • Specimen Processing Arrangements — payments by a lab to referring physicians for collecting, processing and packaging specimens sent to the lab; and
  • Registry Arrangements — payments by a lab to referring physicians for submitting patient data to a registry or database, for instance, as part of the lab’s R&D program.

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Quest Diagnostics succeeds in cutting whistleblower suit down

 

(Star-Ledger)

(Star-Ledger)

Dr. James Judd, a family practitioner at Hatboro Medical Associates (HMA) in Hatboro, Pennsylvania, filed a qui tam (whistleblower) lawsuit against Quest Diagnostics in 2010, accusing the lab giant of providing kickbacks to HMA and other providers in exchange for referral of lab testing since 2005.  Quest filed a motion to dismiss the entire suit, and a US District judge recently granted Quest’s motion for the vast majority of Dr. Judd’s claims.

Background

Dr. Judd claimed Quest induced HMA and medical practitioners in numerous other states to refer work to Quest by providing laboratory collection supplies including non-safety phlebotomy needles as well as “test kits for in-office testing and other medical and office supplies at no charge and agree[ing] to perform substance abuse testing at discounted rates”.

He also alleged Quest “locks in referral by giving Providers free access to its patient database for purposes of ordering tests and reporting test results.”

Dr. Judd stated HMA and other practitioners did in fact refer lab work to Quest because of the inducements, and as a result, submitted false claims to Medicare for blood collection and in-office testing due to the fact free supplies provided from Quest were used to perform the services.

HMA submitted approximately 4,950 false claims for venipuncture (reimbursed $3.00 per), 320 claims for hemoccult tests (reimbursed $4.66 per), and 18 claims for in-office Strep tests (reimbursed $15.77 per).

He also went on to allege HMA entered into an agreement with Quest to provide 80 tests at a discounted rate for HMA’s managed care patients, and gave two examples: 1) Quest charged HMA $14 for a lipid panel that Medicare reimburses $18.72, and 2) Quest charged HMA $9 for an HDL test that Medicare reimburses $11.96.

Dr. Judd also alleged HMA entered into a similar arrangement with Quest for substances of abuse testing, and that Quest provided HMA with free office supplies, including “computer equipment, printers, a fax machine and computer software” as well as subsequent “printer supplies, such as paper and toner.”

Quest’s motion to dismiss

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Palmetto GBA defining pathology Medicare fraud with new standards

Palmetto

Palmetto GBA, the Medicare Administrative Contractor (MAC) for Jursidiction 11 (the Carolinas and Virginias), is taking the rather extraordinary step of defining, using an evidence-based approach, the standards by which certain specimens should be pathologically evaluated.  By doing this, Palmetto is placing itself at the forefront of combating Medicare fraud by pathologists and in-office laboratory owners.

Gastric Biopsies

The most recent example of this endeavor came on May 30th with the release of “Special Stains and Immunohistochemistry (IHC) Indications for Gastric Pathology (M00097)”.

To begin with, Palmetto assigns responsibility for the ordering of special stains and IHC to the pathologist, which is completely correct.

It then goes on to say that, in most cases, it is not “reasonable or necessary” to perform special stains to look for intestinal metaplasia, or to order a special stain or IHC to look for Helicobacter species.

It further states it is also not reasonable or necessary to order special stains and/or IHC up front (standing order) before examining the H&E slide.

Using recent literature articles (which are cited), Palmetto states special stains and IHC only need to be performed on 20% or fewer gastric biopsies, and provides a few examples of when ancillary stains are appropriate.

Palmetto recommends pathologists perform a self-assessment to ensure ancillary stains (88312, 88313, G0461 and G0462) are ordered on no more than 20% of gastric biopsies (88305).

The article ends with the following:  “Providers that exceed the 20 percent criteria may be subject to additional action.”

Breast

On May 5th, Palmetto released Immunohistochemistry (IHC) Indications for Breast Pathology (M00094)” which states it will only pay for ER, PR and Her-2/neu IHC stains on breast specimens and specimens which contain breast cancer metastases.

While it states it will no longer reimburse for other biomarkers such as Ki-67, PI3K and gene expression assays, it did not define a utilization ceiling.

It’s about time

I applaud Palmetto for its efforts on this, as this type of abuse has been going on for years.

As proof of this, I came across an excellent article written by Dr. Keith Kaplan, a GI pathologist who also writes the Digital Pathology Blog, about overutilization of “automatic” ancillary stains on GI biopsies way back on July 9, 2008.

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Calloway Laboratories settlement; Carolina Liquid Chemistries raided; 24,000 drug tests for 145 patients

 

(Winston-Salem Journal)

(Winston-Salem Journal)

Calloway Laboratories has agreed to pay over $4.675 million to settle allegations it fraudulently billed Medicare and West Virginia Medicaid. Carolina Liquid Chemistries (CLC), a North Carolina company which makes and refurbishes chemistry analyzers, was recently raided by federal investigators as part of an investigation into potentially $135 million worth of wire and health care fraud.  Reuters has a nice article which, using 2012 Medicare data, highlights how just three physicians billed Medicare for 24,000 drug tests on only 145 patients.

Calloway Laboratories settlement

An investigation by West Virginia Medicaid and the Department of Health and Human Services uncovered that Calloway Labs, a Massachusetts-based urine drug toxicology laboratory, had repeatedly billed Medicare and WV Medicaid for “pathology services” it did not provide between 2009-April 2013.

Unfortunately, the press release does not go into a tremendous amount of detail about the coding specifics, but basically, Calloway allegedly performed a type of “medical review” with its urine drug testing that was not reimbursable.  It then coded for a “pathology service” that was not necessary and was not ordered by referring physicians, but was reimbursable.

Calloway Labs was acquired by Ampersand Capital Partners in late 2012, and importantly, the issues uncovered in this investigation began under Calloway’s previous management.

On its website, the company states the matter was simply “a disagreement about services ordered and performed, but not covered” and it agreed to settle “without an admission of liability.”

This is the second settlement in the last two years for Calloway.  In early 2012, it paid $20 million to settle charges it defrauded Massachusetts Medicaid.

Carolina Liquid Chemistries

The FBI alleges CLC claimed to physicians its bench top analyzers and reagents were capable of providing quantitative urine drug screen results when in fact they could only provide qualitative results.

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