Clinical labs are critical to today’s healthcare system. Many hospitals and healthcare centers benefit from the services of these specialized facilities, which enable blood testing, urinalysis and other laboratory services that help with the proper diagnosis and treatment of patients.
Since these facilities generally face less scrutiny than full-service healthcare centers, they happen to be a prime target for Medicare and Medicaid fraud. Clinical lab fraud cases are therefore particularly reliant on whistleblower reports.
Recurring clinical lab fraud cases
In October 2015, California-based Millennium Health paid $256 million to settle the qui tam allegations leveled against it. The company was accused of paying kickbacks to doctors and billing the government for unnecessary testing, including unwarranted genetic testing.
Millennium has hardly been the only one to face clinical lab fraud allegations. In April 2015, after a three-year investigation, two other clinical labs reached a $48.5 million settlement with the U.S. government. As seen in the Millennium case, the hefty sum pertained to allegations that the labs had orchestrated a kickback scheme and billed federal healthcare programs for unnecessary lab procedures.
One of the most widely publicized clinical lab fraud cases in U.S. history saw almost 40 healthcare providers pleading guilty to participation in a bribery scheme. Biodiagnostic Laboratory Services LLC, based in Parsippany, New Jersey, was the subject of the 2013 case and its considerable fallout. According to the allegations, hundreds of doctors helped defraud $100 million from healthcare programs by accepting kickbacks in exchange for patient referrals to this particular lab.
Even household names like Quest Diagnostics have been accused of clinical lab fraud. The corporation occupies a massive presence in the U.S. laboratory testing market, and in 2015 it settled double-billing allegations for almost $1.8 million. The allegations were tied to venipuncture services and panel tests.
Clinical Laboratory Improvement Amendments (CLIA)
A number of regulations and industry standards govern the conduct and operations of clinical labs. The CLIA program was created to better regulate clinical lab procedures and ensure that patients receive quality, appropriate care. It requires that equipment, protocol, personnel and the facilities themselves be up-to-par with noted industry standards.
In addition, the False Claims Act explicitly prohibits unnecessary testing and kickback schemes. The laws notwithstanding, the structure and independence of clinical labs creates a unique risk for fraud. Healthcare centers with a direct treatment focus are more likely to have direct oversight than clinical labs, where the services provided are usually limited to testing.
An Office of the Inspector General (OIG) report in 2010 highlighted an unusual number of clinical labs whose Medicare billing raised red flags or deviated significantly from official standards, amounting to $1.5 billion in potentially unwarranted Medicare costs. Medicare is responsible for the majority of clinical lab payments in the U.S., and over 1,000 clinical labs were found to have questionable billing practices for Medicare Part B.
A few of the red flags that the OIG noted in the report included:
- An unusually high number of claim submissions per patient
- Many instances of duplicate lab tests
- Consistent submission of claims tied to an ineligible physician or incorrect physician details
As the agency explains, there can be legitimate reasons that clinical labs raise these red flags, but the scope of existing fraud cases suggests that at least some of these labs may be deliberately abusing federal healthcare systems to receive unearned reimbursements.
Common clinical lab fraud schemes
Clinical lab fraud can be difficult for regulators to detect, because there still isn’t sufficient oversight in many of these locations.
Even for people who work in clinical labs, it can be challenging to determine whether the referrals are conducted appropriately, because so many different healthcare professionals are often involved between the doctor prescribing the lab test and the administration of the test itself.
That gap can easily cause the person actually administering the test to stay in the dark about whether it is truly necessary, and whether the doctor who prescribed it received unfair compensation for the referral. It’s crucial, therefore, for providers at every point in the lab testing process to have a general awareness of what clinical lab fraud may look like. The most common fraud schemes include:
- Kickbacks: It is not lawful for labs to entice physicians to refer patients for testing by offering them money, gifts, or any financial or business arrangement that could create a conflict-of-interest.
- Shell companies: In the context of fraud, these companies are created or used primarily to facilitate kickback schemes and increase patient referrals. They can also be utilized to covertly funnel lab proceeds to referring physicians.
- Unnecessary testing: Some healthcare providers recommend lab tests that do not actually benefit the patient, including any test clearly unrelated to the patient’s suspected or diagnosed condition. If a patient comes in for a cholesterol test, for example, it may not be appropriate to submit him to a slew of obscure genetic tests unrelated to his cholesterol and then request high reimbursements from Medicare for the unnecessary genetic testing.
The normalization of fraud
Medicare is an increasingly complex program, and its regulations and billing requirements are always subject to change. While the CMS is relatively unconcerned with honest mistakes that arise from this complexity, deliberate healthcare fraud schemes can and will be investigated.
Though it’s an ugly thought, fraud exists in every facet of the healthcare sector. Clinical labs don’t always receive the same scrutiny or publicity as hospitals and hospices, so they are unfortunately hotbeds for fraudulent activity.
Given how much healthcare providers and patients rely on clinical labs, it’s incredibly important that fraud there is spotted and addressed in a timely manner.
Until there is more efficient oversight of these facilities, the government relies heavily on the integrity and forthrightness of the healthcare providers who work for or with clinical labs.
Like other federal healthcare whistleblowers, those who report clinical lab fraud are protected by law and, in qualifying cases, can earn substantial rewards as a result of their willingness to speak up. Without whistleblowers, it is all too easy for the perpetrators of clinical lab fraud to continue misusing billions of taxpayer dollars every single year. It’s not about just money at stake, either—it’s the integrity of the healthcare system and the safety of all of the people who rely on it.