CEO SUMMARY: While working in the office of a physician who was a client of Health Diagnostic Laboratory, a phlebotomist says he was instructed to write the same 10 diagnoses on every test requisition a doctor sent to HDL, a lab company in Richmond, Virginia. HDL is under federal investigation, according to published reports. The same 10 diagnoses were recorded for every patient even though some of these tests were appropriate only for women, the source said.
BY NOW, MOST CLINICAL LAB EXECUTIVES know that federal prosecutors are investigating five lab companies that provide lab tests to heart patients. This story was front-page news in The Wall Street Journal on September 8, 2014.
The lab companies identified by the WSJ as subjects of the investigation were:
- Health Diagnostic Laboratory in Richmond, Virginia.
- Atherotech Diagnostics Inc. in Birmingham, Alabama.
- Berkeley HeartLab Inc., in Los Angeles, California.
- BostonHeart Diagnostics Corp. in Framingham, Massachusetts.
- Singulex Inc., in Alameda, California.
Each of the labs denied the allegations and each said it was cooperating with the investigators, the Journal reported. (See TDR, September 22, 2014.)
In their coverage of the federal probe, WSJ reporters John Carreyrou and Tom McGinty described some of the alleged business practices that federal prosecutors were investigating. One example was an arrangement in which a lab company would pay a referring physician as much as $20 for processing and handling lab specimens. (See sidebar below.)
But The Wall Street Journal story did not identify additional schemes that allegedly violate federal Medicare laws and that one or more of these labs used. THE DARK REPORT has been in communication with a former worker for one of the labs under investigation who has provided information about these and other alleged illegal business practices.
Phlebotomist in Doc’s Office
This individual was employed by a temporary services company believed to be reimbursed by one of the lab companies under investigation. He is a phlebotomist who worked within the office of a physician who was a client of Health Diagnostic Laboratory (HDL). The phlebotomist asked that his name be withheld.
What this individual described is a business practice that will astonish experienced pathologists and lab professionals for its brazenness. Also amazing is another fact.
During the several years that this practice is alleged to have been operative, no Medicare or Medicaid official appears to have identified a pattern of identically-coded lab test claims for hundreds or thousands of patients that would easily be recognized as potential fraud and abuse and, no official initiated some type of audit or compliance action in response to such knowledge.
This questionable practice involved recording identical ICD-9 codes on every lab test request form. The phlebotomist says he was instructed by managers to record the same 10 diagnoses for every patient on every requisition for clinical laboratory testing. Statistically, it’s highly unlikely—if not impossible—that every patient, male or female, would have these identical diagnoses.
Same 10 Codes Each Claim
“I was a short-term contingent worker covering for a phlebotomist who was absent. I worked in a practice that uses HDL heavily,” the phlebotomist said. “I was instructed to write the same 10 billing codes on the lab test request form for every patient who was having the HDL baseline lab test panel done, and to write down a smaller number of codes for patients who were there to provide specimens for followup testing.(See sidebar at right.)
“These patients were walk-ins for a blood draw,” noted the phlebotomist. “They saw no provider, and I generated the lab test requisition. When I questioned managers about the legality of having a phlebotomist provide the billing codes, I was told that everyone who came to the practice was there for the same reason and so it was appropriate to order the same tests for every patient.
“Every patient had exactly the same diagnoses and yet the doctors weren’t writing the diagnoses on the lab test requisitions,” he stated. “I was instructed to write them even though it was illegal for me as a phlebotomist to determine any patient’s diagnosis for entry on a lab test requisition.
Phlebotomist Told to Give Every Patient Same 10 Codes
ONE PHLEBOTOMIST WORKING in an office with a physician who contracted with Health Diagnostic Laboratory was told to use these same 10 ICD-9 codes on test requisitions for every patient, regardless of whether the patient was male or female. A source told THE DARK REPORT the codes were:
- 627.2/.4 Menopause
- 627.2 Symptomatic menopausal or female climacteric states
- 627.4 Symptomatic states associated with artificial menopause
- 256.39 Suboptimal testosterone
- 244.9 Thyroid dysfunction
- V17.49 Family history of other cardiovascular diseases
- 780.79 Vitamin B deficiency
- 259.9 Unspecified endocrine disorder
- 796.4 Other abnormal clinical findings
- 272.0 Pure hypercholesterolemia
Essentially, this meant the doctor was putting the identical diagnoses codes on the lab test orders for each of his patients.”
This phlebotomist was also asked to engage in additional activity that would be a red flag for any knowledgeable laboratory compliance officer. “As a worker placed by a third-party in the doctor’s office, I was instructed to collect specimens not just for HDL, but also for BostonHeart Diagnostics and Singulex,” he said. “Plus, I was instructed to use the same 10 ICD-9 codes on lab test requisitions that went to BostonHeart and Singulex.”
Other Compliance Issues
These were not the only Medicare compliance issues associated with directions provided to this phlebotomist. He was also instructed to tell patients that they would never pay a dollar of their own money for these lab tests. “I found it equally unsettling when I was instructed to tell every patient that if he or she got a bill from an insurance company, that patient should call a sales representative from one of the labs,” explained the phlebotomist. “I was instructed to tell patients that they would not get a bill from an insurance company and if they did, this sales rep would take care of it.
“I was instructed to write on every bill: ‘If you receive a bill, contact NAME DELETED (a sales rep assigned to this physician’s account)’ and I would include his phone number,” he continued. “I was directed to say this to each patient, ‘If you get a bill, you will not have to pay as long as you call this sales rep’s number.’ As far as I know, the patients never had to pay if a health insurance company sent them bills for these lab tests. At that time, I assumed this sales rep was representing the labs that were getting patient specimens from this doctor’s office.”
Doctors Were Paid $60 to $100 in “Process Fees” from Three or More Labs for a Single Patient
IN ITS NEWS STORY about the federal investigation of the business practices of four lab companies performing heart testing last September, The Wall Street Journal did not provide details about one major type of alleged fraud and abuse.
The WSJ did report that at least one lab targeted in the investigation–Health Diagnostic Laboratory–was being investigated for allegedly paying a $20 processing fee for each specimen to the referring physician. Most lab compliance officers would question this fee as an inducement and a violation of Medicare anti-kickback statutes.
In their defense, the labs under investigation state they were paying fair market value for the labor and resources used by a physician to process, package, and transmit the specimen. But no major publicly-traded lab company appears to share that legal opinion or is known to engage in this practice of paying physicians to process lab specimens.
Sources tell THE DARK REPORT that this scheme was conducted at a much larger scale. If the physician collected a specimen from a single patient and sent aliquots of that specimen to other labs, each lab would pay $20 to that doctor. More than one source has said that there were many examples in which a single patient had specimens sent to HDL, BostonHeart Diagnostics, and Singulex. Each lab would pay a separate $20 processing fee. This generated $60 per patient for a doctor willing to participate in this scheme.
Other lab industry sources tell THE DARK REPORT that they know of situations in which some physicians were collecting this $20 processing fee from as many as five labs for specimens from a single patient! This was generating $100 in processing fees per patient at that doctor’s office.
The federal Office of the Inspector General issued a Special Fraud Alert on June 25 to address this practice. The lab companies under investigation say they no longer pay such processing fees. However, lab industry insiders say some offering heart testing have amended their arrangements to define physicians as independent paid contractors as a way to continue funneling some type of processing fee to participating physicians.
Pulling Aside the Curtain
It is not often that lab administrators and pathology get to read a more detailed explanation of alleged non-compliant sales and marketing schemes by an insider. Given the large volume of lab claims, it is also disappointing that, in such cases, federal and state prosecutors seem unable to hit offending labs–and their owners and executives–with tougher enforcement actions, including large financial penalties, loss of the Medicare license, and criminal charges that include prison time. It is for this reason that all forthcoming federal and state settlements will be closely watched by the lab industry.
