Laboratory Fraud

What is laboratory fraud?

Laboratory fraud includes schemes where clinical laboratories deliberately falsify analytical or quality assurance results, or falsify specific medical tests, or deceive doctors into ordering unnecessary tests by using deceptive requisition forms or other means.

Some of the most significant qui tam cases under the False Claims Act have involved health care fraud by clinical laboratories. In general, the Medicare program only pays for lab tests and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury.” See 42 U.S.C. § 1395y(a)(1)(A).

Clinical laboratories can defraud the Government when they provide and submit claims for multiple tests (sometimes referred to as test panels), when the doctor who supposedly ordered the multiple tests believed that he was ordering only one simple test. This scheme has been carried out by lab companies that provide blood tests, urine tests, or drug tests, among others. Often, the lab company deceives the doctor by using a test requisition form that is intentionally misleading; the doctor checks off a box thinking that he has ordered one test and, perhaps not having read all the “fine print,” does not realize that he may be ordering a series of tests.

Labs also may employ a coding practice known as “unbundling” to fraudulently maximize reimbursement from Government insurers. Unbundling occurs when a provider bills separately for components of a related group of procedures or tests, in circumstances where Government insurers require that all of the related services be billed under a single billing code.

Clinical laboratories can also violate the False Claims Act in other ways. For example, the lab might bill patients for tests even though laboratory personnel are aware that such tests have not really been performed. Or, the laboratory might be performing tests that the ordering physician believed were free of charge (or included in other lab charges), but the lab charges the patient (or insurer) for the extra tests.

Another very important area of lab fraud involves illicit relationships between referring providers and clinical laboratories. If a physician, hospital, or some other entity is routinely referring patients to a lab for tests, and the lab provides a benefit to the referring physician or entity to induce the referral, the lab (and referring individual or entity) may be violating the Anti-Kickback Statute, and, in turn, the False Claims Act. See 42 U.S.C. § 1320a-7b. Likewise, if the physician, hospital, or other healthcare provider owns a financial interest in the lab to which the provider is referring patients, the lab and the referring provider may be violating the Stark Act and the False Claims Act. See 42 U.S.C. § 1395nn.

VSG’s Qui Tam Attorneys Are Experienced in Handling Cases Involving Laboratory Fraud

A VSG partner represented a whistleblower in two qui tam False Claims Act cases alleging that UroCor, Inc., and Dianon Systems, Inc., medical laboratory companies, were billing Medicare for medically unnecessary lab tests that physicians did not even realize were being ordered. Those companies paid $9 million and $4.8 million, respectively, to resolve the qui tam suits, with the whistleblower client receiving more than a million dollars.