CGX, PGX, and Other Testing Laboratories are on the Front Lines of Telemedicine Fraud Investigations - Federal Lawyer
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CGX, PGX, and Other Testing Laboratories are on the Front Lines of Telemedicine Fraud Investigations

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Toxicology laboratories that work with telemedicine companies and marketing groups to identify Medicare beneficiaries and obtain testing orders can receive tens of millions of dollars per month in program-reimbursed funds. This makes them prime targets for federal healthcare fraud investigations.

Toxicology laboratories play a central role in modern healthcare. Once a physician assesses a patient’s symptoms and makes a preliminary differential diagnosis, laboratory testing confirms (or disaffirms) the physician’s suspicions so that the physician can prescribe and implement an appropriate course of treatment.

While this basic model has been around for decades, recent developments are changing the way that doctors interact with patients. In turn, toxicology laboratories are being forced to adapt the way they provide their services. In particular, the growth of the telemedicine industry has dramatically changed the patient care landscape; and, while there is nothing inherently unlawful about telemedicine, the relationships and interactions involved raise a number of potential issues under the federal Medicare billing regulations as well as the False Claims Act, the Anti-Kickback Statute, and various other federal laws.

The Risks of Federal Investigations Targeting Testing Laboratories Involved with Telemedicine

Why are federal authorities (including the U.S. Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the Office of Inspector General (OIG)) targeting telemedicine practice and testing laboratories’ role in telemedicine in particular? In a typical scenario, there are four parties involved (other than the patient), all of whom potentially stand to receive payment from Medicare – either directly or indirectly from another provider:

  • Marketing Group – The marketing group identifies Medicare beneficiaries (often by purchasing a list of names) and provides these beneficiaries’ names to a telemedicine company.
  • Telemedicine Company – The telemedicine company engages doctors to provide consultations to the Medicare beneficiaries identified by the marketing group.
  • Physician – The physician conducts consultations with the identified patients, and orders testing from the toxicology laboratory.
  • Toxicology Laboratory – The toxicology laboratory performs the ordered test and provides the results to the physician.

So far, nothing here should raise red flags (other than the fact that some marketing groups illegally buy and sell names of Medicare beneficiaries). However, from the toxicology laboratory’s perspective, there are a number of potential issues that can trigger Medicare fraud liability. Common factors leading to DOJ, FBI, and OIG investigations include:

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Dr. Nick Oberheiden
Dr. Nick Oberheiden



Lynette S. Byrd
Lynette S. Byrd

Former DOJ Trial Attorney


Brian J. Kuester
Brian J. Kuester

Former U.S. Attorney

Amanda Marshall
Amanda Marshall

Former U.S. Attorney

Local Counsel

Joe Brown
Joe Brown

Former U.S. Attorney

Local Counsel

John W. Sellers
John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara
Linda Julin McNamara

Federal Appeals Attorney

Aaron L. Wiley
Aaron L. Wiley

Former DOJ attorney

Local Counsel

Roger Bach
Roger Bach

Former Special Agent (DOJ)

Chris Quick
Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow
Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen
Ray Yuen

Former Supervisory Special Agent (FBI)

1. Repeat Business

In many cases, unbeknownst to the toxicology laboratory, the marketing group and telemedicine company are specifically targeting patients who are likely to be in need of expensive testing. Even the physicians involved may not be entirely aware of the volume and routine nature of their telemedicine practice (at least in comparison to the more “traditional” types of doctor-patient relationships). When high volumes of similar reimbursement requests generate from the same source, federal authorities will frequently view this as a potential red flag for Medicare fraud.

2. Expensive Testing

Once again, there is nothing inherently wrong with expensive testing. In the majority of cases, testing fees that appear “expensive” on their face will be fully justified by the capital investments and operating costs the tests require. However, with some types of tests and screenings – including CGX and PGX – having reimbursement rates as high as $18,000 per test, federal authorities are going to take a close look whenever a laboratory is collecting millions of dollars per month in high-dollar Medicare reimbursements.

3. Compensation Arrangements

One of the biggest issues for toxicology laboratories targeted in Medicare fraud investigations involves the nature of their relationship with the other entities involved in the telemedicine business. Ultimately, everyone gets paid; and, oftentimes, these other entities’ payment comes in the form of referral fees and other payments that qualify as illegal “kickbacks” under federal law. Under the Anti-Kickback Statute, it is illegal to pay referral fees and other forms of remuneration out of Medicare-reimbursed funds. So, if a laboratory pays a physician or telemedicine company for testing referrals, if it has any type of compensation-based relationship with a marketing group that sells lists of beneficiaries, or if it is a party to any other types of prohibited relationship, it can face civil or criminal prosecution under the Anti-Kickback Statute.

4. Lack of Medical Necessity

The other main issue for toxicology laboratories involves the requirement of “medical necessity.” Under the Medicare billing guidelines, all services billed to Medicare must meet the program’s definition of medical necessity. If a test is not medically necessary, then it is not eligible for reimbursement, and the simple act of billing for the test (even setting the actual receipt of payment aside) can be enough to trigger liability under the False Claims Act and the federal wire fraud statute, 18 U.S.C. § 1343, among other federal laws.

Of course, toxicology laboratories rely on physicians to only order medically-necessary tests, and they often rely heavily on physicians’ use of sound judgment when billing Medicare for testing services. Unfortunately, relying on a physician’s apparent medical judgment is not a defense in a federal Medicare fraud investigation. The volume of testing orders can come into play here as well, with the same tests being ordered over and over again potentially suggesting a lack of medical necessity.

In fact, what testing laboratories and their executives often do not know is that, in many cases, the physicians ordering tests based on telemedicine consultations spend just a few minutes with their patients. While testing laboratories can receive well over $10,000 for a single test, physicians are usually reimbursed just $25 to $40 for telemedicine consultations. As a result, telemedicine itself is a volume business, and marketing groups and telemedicine companies will often funnel physicians an extremely high volume of program beneficiaries who all appear to have similar testing needs.

5. Lack of Documentation

Throughout the telemedicine cycle, lack of documentation is a pervasive issue. With regard to medical necessity in particular, a dearth of clear, patient-specific physician notes is generally going to be a problem for the physician and the testing laboratory. As part of their compliance efforts, toxicology laboratories should implement safeguards to ensure the receipt, generation, and storage of adequate documentation, so that when federal agents come knocking they are prepared to prove that their Medicare billings are valid.

Avoiding Federal Charges and Penalties in Federal Medicare Fraud Investigations

With these considerations in mind, what can toxicology laboratories that routinely conduct CGX, PGX, and other forms of testing do to protect themselves in the event of a federal investigation?

  • Get Your Documentation in Order. When facing a federal Medicare fraud investigation, the importance of having adequate documentation cannot be overstated. From evidence of medical necessity to compliance program binders and training materials, it all matters, and toxicology laboratories that bill Medicare need to make adequate documentation a top priority.
  • Assess and Remedy Any Potential Issues. If any documentation is lacking, or if an existing telemedicine relationship violates the Anti-Kickback Statute, the issue should be addressed immediately. While it may not be possible to undo what has already been done, establishing compliance going forward and demonstrating proactive efforts to remedy past issues can prove tremendously important in the event of a federal inquiry.
  • React at the First Sign of an Investigation. When contacted by agents from the DOJ, FBI, OIG, or any other federal agency, it is important to take action promptly. Do not wait for the investigation to “unfold,” and do not wait until you have more information before seeking the best legal counsel. Prompt intervention is a critical component of an effective defense strategy, and your defense team should be able to act immediately even if you are unclear on the nature and scope of the government’s investigation.
  • Avoid Complacency. In the same vein, it is also critically important to avoid complacency. In other words, under no circumstances should you assume that everything will be fine – even if you are certain that you have not intentionally overbilled Medicare or paid a marketing group for patient names. The reasons for this are twofold: (i) unintentional billing violations can still trigger civil penalties (including recoupments, fines, and Medicare exclusion); and, (ii) while you might not have been intentionally complicit in unlawful activity, someone else may have.
  • Engage Experienced Medicare Fraud Defense Counsel. Due to the complexities involved in federal telemedicine investigations and the potential for severe penalties for Medicare fraud, toxicology laboratories targeted by the DOJ, FBI, OIG, and other federal agencies must engage experienced defense counsel immediately. At Oberheiden, P.C., our lawyers have extensive experience representing toxicology laboratories in telemedicine fraud investigations, and we have defended more than 2,000 clients against allegations of Medicare fraud.

Speak with an Experienced Medicare Fraud Defense Lawyer at Oberheiden, P.C.

If your toxicology laboratory’s telemedicine-related Medicare billings are under investigation, our federal lab defense lawyers can use their experience to protect you. Additionally, our healthcare fraud defense attorneys assist service providers and businesses under investigation for alleged Qui Tam Lawsuit, Stark Law, False Claims Act, or Anti-Kickback violations.

For more information about our Medicare fraud defense practice, or to speak with a member of our defense team about your telemedicine investigation in confidence, call 888-680-1745 or request a free initial case assessment online now.

Oberheiden P.C. serves clients in Atlanta, Miami, Houston and all cities nationwide. 

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