Pulling Aside the Curtain on Alleged Lab Fraud

IN RECENT YEARS, MANY CLINICAL LAB ADMINISTRATORS AND PATHOLOGISTS have looked with dismay at the increased fraud associated with the laboratory test referrals of office-based physicians. High-profile federal cases involving lab companies accused of fraud garner national headlines.

Small companies sending sales reps into physicians’ offices, however, have changed the landscape in 2018 versus that of 1998 by offering myriad inducements for lab test referrals. Today, office-based physicians are inundated with visits from sales reps representing many different lab companies. A significant number of these lab companies are willing to offer doctors different inducements that labs with more rigorous compliance policies would view as violations of the anti-kickback statute and the Stark Law. Unfortunately, there are large numbers of doctors who are willing to accept these inducements or kickbacks. And, a significant number of physicians are motivated to inflate the amount of inducements they receive by ordering large numbers of medically unnecessary tests for their patients!

Given the hundreds—probably thousands—of small lab entities that now play in this sector of healthcare, it is a daunting challenge to investigate all the suspected cases of fraud, let alone initiate successful actions to shut these labs down or hold their owners and officers accountable for their actions.

Both federal healthcare prosecutors and private health insurers face this challenge every year. Federal cases have a high bar to meet to prosecute and convict criminal wrong-doing. Civil actions also must overcome serious challenges when private companies accuse labs of wrong-doing. For their part, private payers find themselves playing “whack-a-mole” with lab entities they believe are engaged in wrongful business practices. They can revoke billing privileges for one lab company and, days later, the same owners and officers are submitting claims under a newly-incorporated and newly-named lab entity.

To help lab administrators and pathologists understand this problem, we’ve spent more than a year researching just one lawsuit involving a national health insurer and a group of related healthcare companies, including numerous labs, named as defendants in multiple lawsuits. On pages 12 through 22, we have published the first results of this investigation. It is a complex story that deserves a careful reading.


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