Lab Fraud Alert: DOJ, FBI, HHS OIG Targeting Clinical Laboratories for Healthcare Fraud Related to COVID-19 Testing

Federal authorities including the U.S. Department of Justice (DOJ), Federal Bureau of Investigation (FBI), and U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) are targeting clinical laboratories for healthcare fraud related to COVID-19 testing. The DOJ has filed criminal charges in many cases already, and these agencies are continuing to investigate laboratories on a nationwide scale.

Combatting healthcare fraud has long been a federal law enforcement priority, and combatting fraud related to the COVID-19 pandemic has become a priority over the past year. With COVID-19 testing fraud bringing these two priorities together, clinical laboratories can expect to face swift and unrelenting prosecution if targeted in the current wave of enforcement activity.

Clinical Laboratories, Owners, and Executives Charged with Criminal Healthcare Fraud

The DOJ recently publicized nine cases in which it is pursuing criminal charges against a total of 14 defendants. These defendants include clinical laboratories, lab owners and executives, and others who are accused of using COVID-19 testing to fraudulently obtain patients’ information and bill for additional tests. As summarized in the DOJ’s News Release:

“[M]ultiple defendants offered COVID-19 tests to Medicare beneficiaries at senior living facilities, drive-through COVID-19 testing sites, and medical offices to induce the beneficiaries to provide their personal identifying information and a saliva or blood sample. The defendants are alleged to have then misused the information and samples to submit claims to Medicare for unrelated, medically unnecessary, and far more expensive laboratory tests, including cancer genetic testing, allergy testing, and respiratory pathogen panel tests.”

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The DOJ’s News Release goes on to state that the defendants allegedly did not provide COVID-19 test results, or provided unreliable test results, to patients in many cases, and in many cases they failed to provide the results for the additional unnecessary tests to patients and their doctors as well.

The current wave of enforcement action presents particular risks for molecular pathology laboratories. However, all types of clinical laboratories are facing scrutiny from the DOJ, FBI, and HHS OIG, and entities that offer COVID-19 testing sites or refer patients for testing are at risk as well. For example, in the nine cases referenced in the DOJ’s News Release, additional defendants include physicians and executives of home health agencies, marketing agencies, and consulting companies.

Authorities are Aggressively Targeting Clinical Laboratories and Others Accused of Coronavirus-Related Fraud

Given not only the substantial cost to Medicare but also the risks that these alleged fraudulent activities present for patients, the DOJ, FBI, and HHS OIG are aggressively targeting clinical laboratories and others accused of the types of testing fraud discussed above. The language used in the DOJ’s News Release makes this clear.

The DOJ is seeking criminal indictments in many cases, and it is continuing to pursue cases against entities and individuals across the country. FBI Director Christopher Wray has also stated that his agency will not be relaxing its efforts any time soon. As quoted in the DOJ’s News Release, “Medical providers have been the unsung heroes for the American public throughout the pandemic. . . . It’s disheartening that some have abused their authorities and committed COVID-19 related fraud against trusting citizens. The FBI, along with our federal law enforcement and private sector partners, are committed to continuing to combat healthcare fraud and protect the American people.”

The DOJ is pursuing multiple types of criminal charges in the cases that are currently pending. To date, the charges filed against clinical laboratories, lab owners and executives, and others have included:

• Conspiracy to Defraud the United States
• Theft of Government Property
• Payment of Kickbacks
• Healthcare Fraud
• Wire Fraud

All of these are serious criminal offenses that carry the potential for substantial fines and years or decades of federal imprisonment. Even individuals and entities accused of offering or soliciting (but not actually paying or receiving) kickbacks face these risks, as do those who participated in conspiratorial communications but did not directly participate in fraudulent testing or Medicare billing activities.

What Should Molecular Pathology Laboratories and Other Labs Be Doing?

With the DOJ, FBI, and HHS OIG focusing on clinical laboratories’ Medicare billings for testing services, what should lab owners and executives be doing to protect their companies (and themselves)? Even clinical laboratories that have not improperly billed Medicare should be taking proactive measures to mitigate their risk of facing criminal allegations in the event of a DOJ, FBI, or HHS OIG investigation. Some examples of these measures include:

Reviewing COVID-19 Testing Policies and Procedures

Clinical laboratories should carefully review their COVID-19 testing policies and procedures. Many laboratories established these policies and procedures quickly at the height of the pandemic; and, as a result, in many cases they are not as comprehensive and compliance-oriented as they should be. Now is the time for laboratories to make sure that their coronavirus-related protocols are up to standard. Laboratories should also ensure that their COVID-19 testing policies and procedures address the specific issues that have led to trouble for others—namely, using COVID-19 testing as a means to bill for other medically unnecessary tests.

Reviewing Medicare Billing Policies and Procedures

Clinical laboratories should also review their Medicare billing policies and procedures. This is something that laboratories (and other providers) should do on an annual basis anyway, as the rules and regulations change from time to time. Laboratories should make sure that their billing policies and procedures are up to date, that they are comprehensive, and that they are designed to both prevent and detect unlawful billings.

Documenting HHS OIG Compliance

The HHS OIG has published a “Model Compliance Plan for Clinical Laboratories”. This document should factor heavily into both the structure and content of clinical laboratories’ compliance programs. Not only are labs that fail to follow HHS OIG’s guidance more likely to face scrutiny, but investigations targeting alleged COVID-19 testing fraud could lead to scrutiny of laboratories’ other practices as well.

Documenting Medical Necessity for All Tests

One of the primary issues the DOJ, FBI, and HHS OIG are currently targeting is the use of patients’ information and samples to bill Medicare for medically unnecessary tests. With this in mind, laboratories should place particular emphasis on documenting the medical necessity of all tests they perform. According to HHS OIG’s “Model Compliance Plan for Clinical Laboratories”:

“Laboratory compliance plans should ensure that claims are only submitted to federally funded health care programs for services that the laboratory has reason to believe are medically necessary. Upon request, a laboratory should be able to provide documentation, such as requisition forms containing diagnosis codes, supporting the medical necessity of a service the laboratory has provided and billed to a Federal program. . . .

“In our opinion, laboratories can and should advise physicians that when they instruct the laboratory to seek Medicare reimbursement for tests ordered, they should only order those tests that they believe are medically necessary for the diagnosis and treatment of their patients.”

HHS OIG expects clinical laboratories to adopt policies and procedures that are designed to proactively mitigate against the risk of billing for medically unnecessary tests. As a result, when laboratories bill for medically unnecessary tests (or when there are questions regarding the medical necessity of tests), this will often lead to broader scrutiny of their compliance efforts.

Reevaluating Relationships with Marketers, Consultants, Physicians, and Other Third Parties

HHS OIG also expects clinical laboratories to take adequate measures to avoid entering into relationships with third parties that engage in fraudulent practices. This includes prohibited marketing practices, prohibited financial relationships, and Medicare billing fraud. Laboratories must conduct thorough due diligence prior to entering into relationships with marketers, consultants, physicians, and other third parties, and they must utilize appropriate contractual protections to avoid liability for third-party fraud.

What To Do When Facing a DOJ, FBI, or HHS OIG Investigation

These are all steps that clinical laboratories should take in order to mitigate their risk of facing a Medicare fraud investigation and to ensure that they will not be at risk for prosecution for COVID-19 testing-related fraud. But, what if your laboratory is already under investigation?

Clinical laboratories that are facing DOJ, FBI, and HHS OIG investigations related to COVID-19 testing need to engage experienced federal healthcare fraud defense counsel promptly. As shown by the pending cases discussed above, these investigations have the potential to lead to serious charges and substantial penalties. Experienced federal health care fraud defense counsel can engage with the DOJ, FBI, and HHS OIG to understand the scope of the investigation, identify the specific allegations at hand, and then execute a targeted defense strategy focused on securing a favorable pre-charge resolution.

Speak with a Federal Healthcare Fraud Defense Lawyer at Oberheiden P.C.

Our lab defense attorneys have extensive experience representing clinical laboratories, lab owners and executives, and others in Medicare fraud matters. If you have concerns about your lab’s COVID-19 testing procedures or Medicare billings, or if you have been contacted by agents from the DOJ, FBI, or HHS OIG, we encourage you to call 888-680-1745 or contact us online for a complimentary consultation.