The single biggest focus of Department of Justice (“DOJ”) has been a crackdown on laboratories alleged “fraudulent” billing. Starting five years ago, the DOJ has aggressively prosecuted lab owners, executives, and employees who it suspects has engaged in one of several “schemes”.
As part of successive, nationwide operations in 2019 and continuing through 2022, DOJ has arrested dozens of individuals from coast to coast for billions in alleged fraudulent billings. The focus of these operations has shifted from blood/toxicology, to pharmacogenomics, cancer testing, cardiovascular testing, and COVID-19 testing.
Lab owners and executives who are active in the industry should look to past enforcement actions to identify what DOJ perceives to be “red flags”. DOJ’s theories focus on three complimentary approaches: (1) how labs obtain patients, (2) the underlying medical necessity of the tests, and (3) how the claims are billed.
Getting Patients: Is it “Marketing” or a Kickback?
One popular theory of enforcement by DOJ and its agency partners is to view certain marketing and business development activities as “kickbacks”. The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (“AKS”), arose out of Congressional concern that providing things of value to those who can either offer/direct or solicit/receive “referrals”.
The AKS prohibits any person or entity from knowingly and willfully soliciting or receiving “remuneration” in return for referring a person for the furnishing of any service for which payment may be made in whole or in part by a “Federal health care program.” “Remuneration” under the AKS includes anything of value in any manner or form whatsoever, including intangible or indirect economic benefits such as the opportunity to earn tangible money.
A common defense to an AKS investigation is that the DOJ cannot prove a defendant acted “willfully” to violate the law. Willfulness under the AKS requires that the defendant intended to violate the law. But a person “need not have actual knowledge of [the AKS] or specific intent to commit a violation of [the AKS].” 42 U.S.C. § 1320a-7b(h).
Put in the simplest terms, the DOJ will try to show that a company or individual knew what they were doing was illegal at the time they were engaging in the conduct. While a challenge in some cases, one popular tactic is to find marketing arrangements where documents represent the relationship one way, but the reality is something different. DOJ will carefully review invoices, contracts, emails, text messages, and financial statements to answer the fundamental question: regardless of what the parties say on paper, are they really paying for patient referrals?
If DOJ thinks the answer is “yes,” the company and individuals involved will be under criminal and civil scrutiny.
Is it Medically Necessary?
Providers must certify that their services are “reasonable and necessary.” 42 U.S.C. § 1395n; 42 U.S.C. § 1395y(a)(1)(A). A service is expressly excluded from coverage if it is “not reasonable and necessary” for “the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member.” 42 C.F.R. § 411.15(k).
There are certain exceptions to these otherwise bright-line rules for COVID-19 testing. In the COVID-19 arena, Medicare covers diagnostic viral testing for patients. Under revised rules finalized September 2, 2020, Medicare will pay for one COVID-19 without the order of a physician or other health practitioner. For any additional tests, a lab must have a physician order. Medicare and other federal payors do not pay for screening or community testing, even if mandated by an employer or local government.
Notwithstanding those limited exceptions, DOJ views lab tests ordered by a doctor who is not the actual treating physician to be inherently suspect. DOJ and its law enforcement partners use sophisticated data analysis to identify discrepancies between the ordering physician and a patient. Agents will analyze whether a patient has a history with the ordering provider. “Telemedicine” doctors are likely to draw a high degree of criminal scrutiny.
If there appears to be no relationship, federal agents may interview doctors who appear in the data to be the patient’s actual doctor and then use that doctor to pit the two medical professionals against one another as to the necessity of the test. Lab owners should scrutinize relationships with ordering providers to ensure strict compliance with federal regulations.
How Is it Billed?
Generally, it is not appropriate to bill Medicare for services that are not covered as if they are covered. When billing for non-covered services, whoever submits the claim must use the appropriate billing modifier indicating the service provided was a non-covered service by CMS.
“Stacking” of CPT codes, as it is sometimes called, is nothing new to Medicare. As it relates to lab testing, Medicare has specifically advised providers that “the performance of multiple molecular tests regardless of whether the requisition lists the tests as a panel or individually and completed on a single sample is considered to be a panel of tests and should be billed under a single CPT code to prevent stacking of codes.” Billers may use “modifiers” to boost reimbursement. By utilizing multiple CPT codes with modifiers, payment will be made for each of “stacked” codes.
Likewise, in the COVID-19 world, a common area of focus is the type of test billed. Medicare reimburses for clinical diagnostic lab using high-throughput technologies. Rapid tests do not qualify and are subject to a separate reimbursement policy. A lab cannot perform one kind of test (rapid) but bill as if they performed a different test (PCR).
The Prosecutors
There are United States Attorney’s Offices across the country with largely decentralized leadership. In addition to these prosecutors deployed locally across the country, the DOJ has created and increasingly grown specialized Health Care Fraud Strikeforce teams across the country. The Strikeforce attorneys are highly knowledgeable.
The sole enforcement focus of these “Strikeforce” prosecutors is health care fraud criminal prosecutions. Known for their aggressiveness, any individual or company who finds themselves across the table from one of these Strikeforce prosecutors should be very wary. Unlike their counterparts in U.S. Attorney’s offices who may have a colleague who is handling civil False Claims Act cases down the hall, the only question that Strikeforce prosecutors seek to answer is whether to commence a criminal prosecution.
What’s Next?
The DOJ’s actions have provided some clear signs of the government’s views on potentially problematic lab operations and relationships. COVID-19 and other lab testing will continue to be one of—if not the-top priority for DOJ enforcement in the years to come. As COVID-19 moves into a more manageable pandemic phase, the DOJ will begin to aggressively crack down on labs who billed during the peak spikes of years past Medicare, Medicaid, and Health Resources and Services Administration or HRSA.
While many individuals and businesses have already been ensnared in these DOJ operations, it is a certainty that the DOJ’s aggressiveness has only just begun. Businesses and individuals in the lab world should prepare now to understand potential issues, adopt risk mitigation strategies, and protect their businesses and livelihood. As DOJ offices across the country begin to analyze data and additional resources arrive in the field, many more businesses will see subpoenas, search warrants, and knocks on the door.
Tom Clarkson is a former federal prosecutor who practices across the country. Tom led Department of Justice units in investigations that resulted in dozens of convictions in the government “takedowns” of Operations Brace Yourself, Double Helix, and Rubber Stamp. Tom now counsels businesses and individuals to help proactively identify potential issues and design strategies to minimize risk for those facing the risk of audit or potential investigation.