Compliance Update

Peeking at Whistleblower Claims: How Labs Induce Physicians

Once-sealed qui tam lawsuit now is public, describes different schemes to reward referring docs

IN RECENT DECADES, probably no sector of the U.S. healthcare system has seen the level of fraud and abuse that seems to pervade the clinical laboratory industry. The common perception is that illegal inducements between lab companies and referring physicians are rampant and federal prosecutors have failed to bring enough violators to justice to effectively discourage these activities.

What is challenging for federal prosecutors charged with enforcing the federal Anti-kickback Statute, and the Stark Law on physician self-referral, is the myriad of creative ways lab companies invent to induce and reward physicians for their lab test referrals.

This is equally challenging for the independent labs and hospital lab outreach programs that compete against those labs willing to interpret federal compliance requirements aggressively.

Lawsuit Provides a Roadmap

However, now there is a document that is a good roadmap to understanding some of the methods a lab company can use to induce physicians. As The Dark Report researched the background behind the recent ruling by the judge in the whistleblower case filed by Chris Riedel against Boston Heart Diagnostics Corporation, one of the documents it reviewed is the second amended complaint in this case that was filed in October 2017 and is unsealed.

The lawsuit filed by the plaintiff, Riedel, provides great detail and documentation of specific ways that he alleges Boston Heart Diagnostics violated federal healthcare laws. This document opens a useful window on methods that some labs use to induce physicians for their lab test referrals.

When asked to comment on this lawsuit, a spokesperson for Boston Heart Diagnostics provided this statement: “Boston Heart is focused on helping healthcare providers and patients characterize disease, individualize treatments, and engage patients in their own heart health, in compliance with applicable laws and regulations. As Boston Heart fully cooperates with ongoing investigations, our policy is to not comment on pending litigation.”

In the lawsuit, Riedel describes how he was a Director on Boston Heart’s Board of Directors “from 2007 until majority control of the company was acquired by Bain Capital Venture Fund in late 2010. Mr. Riedel resigned from the Board around the fourth quarter of 2010. Prior to his resignation, Mr. Riedel had advised Boston Heart against engaging in the practices described in the complaint on several occasions.”

Thus, Riedel has first-hand knowledge of the business decisions made at Boston Heart during this time. Bain Capital sold its interest to Eurofins Scientific SE in February, 2015. Eurofins continues to own and operate Boston Heart Diagnostics today.

In the first section of the lawsuit, the plaintiff described “at least four forms of illegal kickbacks to doctors and clinics [utilized by Boston Heart] in order to induce those doctors and clinics to refer Medicare business to them, and to bill Medicare for redundant and unnecessary testing.”

Four Types of Inducements

Here are short descriptions of the four forms of “illegal kickbacks,” as described in the court document:

2. First, Defendant promised to doctors that it will waive co-payments or patient deductible payments from the doctors’ privately-insured patients. In exchange for this benefit, the doctors send all of their lipid-related business, including Medicare business, to Defendant. As such, the waiver of deductibles and co-payments constitutes illegal remuneration, designed by Defendant to induce the referral of Medicare business to Defendant.

3. Knowing co-pay waiver schemes were under scrutiny and illegal, Defendant tweaked its fraud in 2016 to charge patients a “special fee” named a “Know It Now Price.” This is the amount which will be charged to patients in lieu of a standard calculation of their co-pay or deductible. For 75% of the tests on the fee schedule, the charge is $2.00 or less. For 95% of the tests, the charge is $7.00 or less. This is a fraction of the co-payment requirement (usually in excess of $100) based on Boston Heart’s charges to insurance companies. Boston Heart’s sales representatives tell physicians these are not co-payments and the prices are substantially below Boston Heart’s costs.

4. Second, Defendant pays doctors kickbacks in the form of inflated “packaging” fees for drawing blood specimens and packaging them for shipping to the lab. The fees paid by Defendant far exceed fair market value and constitute illegal remuneration designed to induce the referral of Medicare business to Defendant.

5. A year after both a fraud alert issued by the Health and Human Services Office of the Inspector General (“OIG”), and after the Department of Justice intervened in a false claims act lawsuit against three of its competitors, and with knowledge its payments were illegal, Boston Heart took steps to conceal the direct payments from Boston Heart to physicians in two ways. First, Defendant began paying the fees to physicians’ staff or family members. Second, Defendant began making the payments through intermediary companies. A Boston Heart sales representative, Heidi Ann Mooney, described the change to a physician: “[The Department of] Justice said we can’t pay you directly, so we pay [a third party], they take some of the money and they pay you. It is all about perception.”

6. Third, some of the physicians that refer patients to Boston Heart are also shareholders of Boston Heart. The shareholder physicians engage in strictly prohibited self-referrals without disclosing their financial stake in Boston Heart to their patients. This is a violation of the Stark Law and of Federal prohibitions on self-referrals and anti-kickback laws. Every bill to Medicare for tests performed on a self-referred patient is a False Claim.

7. Fourth, Boston Heart paid outrageous consulting fees to referring physicians. For example, in 2012 and 2013, the Company paid over $200,000 to Jeff Young NP, and Dharmesh Patel MD, who were among the top referral sources to the Company. The physicians were paid under the group name Heart Attack and Stroke Prevention Alliance (HASPA, preventevents.com), located at 210 Liberty St., Jackson TN 38301. The consulting fees were paid primarily for these physicians to solicit physician clients for Boston Heart by speaking at seminars where they explained to physicians how much money they could make by receiving packaging fees and splitting specimens between multiple labs, and how Boston Heart’s large panels would have no impact on their patients. Detailed financial projections, based on the number of specimens submitted daily, and splitting specimens between 2 or 3 labs, were presented in handouts and slides.

Description of ‘Overbilling’

Many lab professionals wondered how some labs get paid much more money for certain lab tests. The court documents describe one way that the defendant lab company bills the Medicare program, as follows:

11. Boston Heart also overbills Medicare by performing and charging for medically unnecessary tests. Boston Heart bills Medicare for the individual components of its lipid panel test, rather than using the lipid panel CPT code for billing. Boston Heart added four additional tests to its pre-packaged lipid panel test beyond the industry standard, bloating a common panel with additional tests to inflate its bills to Medicare. Because Boston Heart’s lipid panel is not a standard lipid panel, and because Boston Heart bills for the individual components, it charges Medicare over $100 per panel test, rather than the $18.97 allowed for a lipid panel test.

12. The bloated panel also includes redundant and duplicative testing. Boston Heart’s panel includes both an Apo B test, and an LDL-P test. These tests measure the same thing: total LDL particles. There is no medical benefit to conducting both tests on a single patient because the tests provide the same medical information, and the course of treatment would not be affected by conducting both tests.

The judge’s ruling that is described on pages 10-12 deals with the plaintiff’s claim that the practice of a lab waiving patient deductibles and co-pays violates federal law and the judge will allow that claim to be heard as the case moves to trial.

Here is what the lawsuit said about the defendant’s practice of waiving charges to patients:

43. The deductible waivers are no different. Again, in the case of the Complete One panel, the deductible payment, if charged, could be the entire $614.29, depending upon the patient’s insurance plan and medical care. Boston Heart sales representatives encourage physicians to order additional tests with the Complete One pane [on the test request form]. Attached as Exhibit 3 is an Explanation of Benefits (“EOB”) for a panel of Boston Heart tests showing the total charges to be over $4,000. Despite the EOB showing the services were not covered, the patient was never charged for the tests.

44. Accordingly, the waiver of a deductible payment is a significant benefit that a physician can provide to his or her patients. Knowing this, Defendant promises physicians that it will waive deductibles, so long as the physicians send all of their lipid-related business—especially the highly profitable Medicare business—to the Defendant’s laboratory. Boston Heart waives the remaining fee, writing off hundreds or thousands of dollars of charges for some patients.

Clinical lab managers and pathologists seldom get to see a detailed description of the business practices used by labs accused of violating federal laws. This knowledge could help competing labs explain to physicians why certain of these practices could expose the physicians themselves to federal enforcement actions.

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