Outpatient Lab Issues, Article III – Selected Recent Enforcement Actions

February 18, 2018

Government enforcement actions against laboratories and lab management companies trended strongly toward the end of 2017 and have carried over into 2018. This article provides highlights from a few recent enforcement actions involving labs.

Primex/DNA Stat - $3.77 million total to settle FCA Allegations[1]

Primex Clinical Laboratories, LLC (“Primex”) has agreed to pay $3.5million and entered into a Corporate Integrity Agreement to settle False Claims Act allegations regarding kickbacks and illegal arrangements with a lab management company. The CEO and owner of DNA Stat, LLC, the lab management company, agreed to pay $270,000 to resolve similar allegations. Primex provides diagnostic testing services, including pharmacogenetic testing. DNA Stat was a lab management company that employed sales representatives and licensed pharmacists. Primex and DNA Stat entered into a services agreement related to pharmacogenetic testing services in which DNA Stat provided physicians with in-office medical technicians. It was alleged that Primex submitted false claims to Medicare based on violations of the Anti-Kickback Statute:

  • Allowing DNA Stat to provide physicians with in-office medical technicians that induced physicians to order pharmacogenetic tests from Primex;
  • Allowing DNA Stat to enter into agreements with individuals where payments took into account the volume or value of referrals for pharmacogenetic tests from Primex; and
  • Entering into an agreement with DNA Stat where compensation took into account the volume or value of referrals, with the intention of inducing physicians to order pharmacogenetic tests from Primex.

There were also allegations that some of the claims for pharmacogenetic testing were not medically necessary. This action and the resulting settlement underscore the potential problems with marketing arrangements and lab or lab management companies placing medical technicians or other staff in physician offices.


Biodiagnostic Laboratory Services, LLC – One for the Record Books[2]

The latest in a long and record-setting number of convictions arising from a lab kickback/bribery scheme resulted in Dr. Jorge J. Figueroa of Wayne, New Jersey, being sentenced to 37 months in prison after previously pleading guilty to accepting bribes. Figueroa admitted to accepting checks, cash, and other bribe payments of approximately $200,000 from Biodiagnostic Laboratory Services, LLC (“BLS”) employees and associates between May 2007 and April 2013. In exchange for the $200,000 in payments, Figueroa generated more than $1.4 million in lab business for BLS. Figueroa is the 37th doctor among 51 convictions so far resulting from the BLS scheme that generated over $100,000 million in payments to BLS from Medicare and private insurers. Figueroa will pay a $7,500 fine and forfeit $199,899 in addition to serving his sentence.


Mercy Hospital - $1.5 million to settle FCA Allegations[3]

The DOJ announced on November 1, 2017 that Mercy Hospital in Maine has agreed to pay $1,514,000 to resolve allegations under the FCA that it overbilled Medicare and MaineCare (Maine’s Medicaid program) from 2011 to 2013. The overbilling resulted from the use of a modifier to receive payment for multiple same-day urinalysis drug screens performed by affiliated Mercy Recovery Center that did not arise from separate medically necessary encounters with the same patients on the same days. Instead the drug screens should have been bundled and billed as a single claim per patient encounter.


Total Lab Care LLC - $212,500 Fine plus permanent exclusion from Federal Healthcare Programs for kickback arrangement[4]

Recently, Total Lab Care LLC settled FCA allegations that it paid improper financial remuneration to physicians for referring toxicology samples, resulting in claims that were tainted under the Anti-Kickback Statute. To settle the case, Total Lab Care, LLC agreed to a $212,500 penalty and permanent exclusion from participation in any federal healthcare program (Medicare, Medicaid, etc.). This case is another reminder of the government’s hard stance against fraud and abuse and its position that “llegal arrangements in order to boost profits at the expense of taxpayers will not be tolerated.”


[1] Laboratory and Owner of Lab Management Services Company to Pay $3.77 Million to Resolve Kickback and Medical Necessity Claims, United States Department of Justice: U.S. Attorney’s Office, Northern District of Texas (January 25, 2018), available at https://www.justice.gov/usao-ndtx/pr/laboratory-and-owner-lab-management-services-company-pay-377-million-resolve-kickback.

[2] Passaic County, New Jersey, Man Sentenced to 37 Months in Prison for Taking Bribes for Referring Tests to New Jersey Clinical Lab, United States Department of Justice: U.S. Attorney’s Office, District of New Jersey (December 6, 2017), available at https://www.justice.gov/usao-nj/pr/passaic-county-new-jersey-man-sentenced-37-months-prison-taking-bribes-referring-tests.

[3] Mercy Hospital Pays $1,514,000 to Settle False Claims Act Allegations, United States Department of Justice: U.S. Attorney’s Office, District of Maine (November 1, 2017), available at https://www.justice.gov/usao-me/pr/mercy-hospital-pays-1514000-settle-false-claims-act-allegations.

[4] Jacksonville Toxicology Laboratory Agrees to Fine, Plus Permanent Exclusion from Participating in Federal Healthcare Programs, United States Department of Justice: U.S. Attorney’s Office, Middle District of Florida (October 20, 2017), available at https://www.justice.gov/usao-mdfl/pr/jacksonville-toxicology-laboratory-agrees-fine-plus-permanent-exclusion-participating.

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