How Lab Fraud Hurts Hospital Labs, Pathologists

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ONCE AGAIN, A HIGH-PROFILE LAB COMPANY faces allegations of fraud and abuse. This time it is True Health Diagnostics of Frisco, Texas. Details of this case were revealed last month when True Health filed a lawsuit in a federal court in Texas against the agencies running the federal Medicare program.

In its lawsuit, True Health denies the allegations of fraud. As of press time, True Health had not responded to The Dark Report’s request for comments on this case and the allegations of fraud.

It is important for all lab executives and pathologists to know about these cases of alleged fraud and abuse involving lab companies, for two reasons. First, it helps lab professionals recognize fraudulent schemes and understand the details of how they work and the often-clever ways referring physicians and patients may be illegally induced to order lab tests in violation of state and federal law.

Second, knowledge of the specifics and the extent of alleged examples of lab fraud and abuse are necessary if honest lab professionals are to understand why some in Congress and the federal Centers for Medicare and Medicaid Services (CMS) want to take punitive actions to curb fraud, but which apply to the entire clinical laboratory industry.

It is a fact of life that bad players cause governments to pass restrictive laws to control behavior that also burden honest citizens. Remember how, in 1997, the federal government’s LabScam prosecutions (the unbundling of tests billed to the Medicare program) were the reason that a new federal requirement was implemented that required all labs to create and follow the laboratory model compliance program. (See TDR, Mar. 10, 1997.)

Thus, as you read our intelligence briefing about the True Health lawsuit and what the court documents say about the allegations of fraud and abuse, keep in mind that it is these types of fraudulent activities—and the hundreds of millions of dollars in fraudulent lab test claims being paid by the Medicare program—that causes Congress and CMS officials to act punitively against all labs. Whether it is restrictive coverage guidelines, artificially cheap reimbursement for lab tests, or similar policies, their goal is to curb fraud and protect the public purse. That is why a handful of fraudsters can hurt the entire clinical laboratory industry.

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