Two Federal Court Decisions Are Bad News for Labs

Every pathologist and clinical lab administrator should pay attention to two federal court decisions made recently in two different legal cases. One decision is bad news for the entire clinical lab industry. The other is bad news for lab companies that push compliance with federal anti-kickback laws.

The most important court decision came in the American Clinical Laboratory Association’s (ACLA) lawsuit against the federal Department of Health and Human Resources. ACLA is challenging how the agency followed the Protecting Access to Medicare Act (PAMA) statute and learned, this week, that the federal judge had dismissed the ACLA’s claims for lack of “subject matter jurisdiction.” As of this date, however, the judge had not dismissed the case.

This ruling was a disappointment for the clinical laboratory industry. There is solid evidence that Medicare officials did not follow the language of the PAMA law nor the intent of Congress when it passed this law. That is why ACLA and others were hopeful that this lawsuit had the potential to convince a judge that the Centers for Medicare and Medicaid Services had failed to properly implement the requirements of PAMA and give the judge reason to issue directives to CMS requiring them to correct these failings.

The second important court decision was made in the whistleblower case of Chris Riedel against Boston Heart Diagnostics Corporation. In simple terms, the federal district court judge ruled that: 1) clinical laboratories that pay for packaging and handling of patients’ specimens; and/or, 2) give discounts to patients for copayments and deductibles could be liable for filing false claims.

Several attorneys state that this ruling sets a new standard for how clinical labs and other providers comply with federal anti-kickback law. “Because these theories stem from a federal district court decision, lawyers can rely on them as persuasive authority in other federal courts nationwide,” stated Justin T. Berger, an attorney representing the plaintiff in the case against Boston Heart. He is a principal at the law firm of Cotchett, Pitre and McCarthy, LLP. Stated differently, this ruling means labs that offer inducements for specimen processing, or that do not bill patients for the balance of their charges, may now be subject to claims of filing false claims.