Attention Medical Labs and Doctors: OIG Issues Genetic Testing Fraud Alert

Genetic testing can provide valuable indicators about a patient’s propensity for developing diseases. But while its prospects are promising across the medical spectrum, it remains a high-reimbursement service in an industry that regulators view as fertile ground for fraud.

For those who refer and bill for genetic testing, the message is clear: Centers for Medicare & Medicaid Services (CMS) and the U.S. Department of Health and Human Services’ Office of the Inspector General (OIG) are on high alert for providers, clinical laboratories, diagnostic facilities, and recruiters who participate in schemes and improper referral structures that violate federal health care regulations.

Because health care fraud investigations can expose physicians and medical labs to considerable consequences, those operating in this space must take preemptive measures to ensure compliance and seek counsel as soon as they receive notice of an audit or investigation.

Landmark Takedown Prompts Genetic Testing Fraud Alert

In 2019, the OIG and its law enforcement partners exposed a genetic cancer testing scheme that was among the largest health care fraud schemes ever charged. The enforcement action prompted the OIG to issue a nationwide genetic testing fraud alert to warn consumers (and providers) to be alert for fraud.

According to the DOJ, the takedown resulted in criminal charges against 35 individuals alleged to have fraudulently billed Medicare more than $2.1 billion for cancer genetic testing lab (CGx) tests. The scheme, regulators alleged, worked as follows:

• Recruiter (marketer) gets Medicare beneficiary to take genetic test.
• Recruiter pays doctor kickback in exchange for ordering lab tests.
• Clinical lab processes test and bills Medicare.
• Medicare reimburses lab for the test and lab shares proceeds with recruiter.

Among the defendants were CEOs, CFOs, and others associated with dozens of telemedicine companies and cancer genetic testing laboratories, as well as nine physicians.

Given the scope of this single scheme, federal regulators have since engaged in aggressive efforts to investigate genetic testing fraud, levy criminal charges, and secure what are often sizable recoveries via civil settlements under the False Claims Act (FCA), Anti-Kickback Statute (AKS), Stark Law, and the Eliminating Kickbacks in Recovery Act (EKRA).

According to the American Bar Association, the federal government has launched over 300 investigations into genetic testing fraud, many of which are ongoing.

Red Flags that Alert OIG Investigators to Medical Lab Fraud Schemes

Federal regulators look into many red flags and violations when investigating genetic testing fraud. These include:

• Physician referral fees. Federal health care laws such as the AKS and Stark law make it illegal to solicit, receive, pay or offer any remuneration in exchange for referring patients for genetic testing services paid by federal health programs. Because referrals arising from violations of the AKS are by definition a false claim, the government may also pursue charges under the FCA.
• Management Services Organizations (MSO). MSOs have become common in the diagnostic lab industry, but their legitimacy is often scrutinized by federal regulators leery of arrangements in which intermediaries launder kickbacks between labs and referring physicians. MSOs may also run afoul of Texas’ Corporate Practice of Medicine (CPOM) doctrine that prohibits the corporate practice of medicine if not set up and executed correctly.
• Pass-through billing. Pass-through billing arrangements may involve physicians who purchase tests from labs and bill payers for testing. While not illegal in every state, such arrangements may violate federal fraud and abuse laws such as the AKS or Stark Law, particularly when tests sold at less than fair market value allow referring physicians to unduly profit from referrals.
• Payments to marketers. Paying commissions to independent marketers / 1099 salespeople is common in the diagnostics industry, but such payments can expose both marketers and labs to AKS liability.
• Remuneration to patients. Labs may waive or substantially reduce copays or offer some other form of patient remuneration to entice patients who may be deterred by the large copays that accompany these expensive tests. Copay waivers and financial assistance provided without reasonable consideration of a patient’s financial situation may violate the AKS.
• Medically unnecessary testing. Federal regulators heavily scrutinize policies that may encourage physicians to order unnecessary tests or bring the legitimacy of those tests into question. Providers who refer such tests must ensure they are reasonable and necessary for the diagnosis or treatment of an established condition, and that any arrangements they enter into with health care companies don’t bring the quality of their care into question.
• Upcoding. Auditors and regulators are keen to crack down on upcoding where providers bill payers for more expensive tests, or for a battery of tests, than those that were actually performed. Keeping detailed records and documentation of tests performed / ordered can help providers avoid unwanted attention or audits that turn into full-blown investigations.

Legal and Regulatory Counsel for Health Care Providers & Medical Labs

Genetic testing may have legitimate and promising potential, but its high-reimbursement rates and history of fraud and abuse make it a space laden with risks. Performing the necessary due diligence and ensuring ongoing compliance with EKRA and other laws that govern medical professionals and diagnostic labs is critical to staying out of the federal government’s cross-hairs.

At Hendershot Cowart P.C., our health and medical law team has decades of experience counseling providers, practices, testing laboratories, and health care companies in a range of matters involving regulatory compliance, telemedicine, and Medicare fraud. Whether you are starting a practice or medical testing lab, expanding contractual relationships, or facing an audit or OIG investigation, our team is available to provide immediate and personalized legal support.

Call (713) 909-7323 or contact us online to speak with an attorney.