Learning from Genetic Testing and Kickbacks
A shift in scams run by the types of bad actors involved in 2019's $1.2 billion brace fraud has new lessons HME providers should take a moment to understand.
- By Jeffrey S. Baird
- Jun 01, 2020
The Department of Justice (DOJ) and Office of Inspector
General (OIG) are targeting genetic testing labs (GTLs) after uncovering a scam
very similar to the $1.2 billion “Operation Brace Yourself” fraud run by a group
of lead generation companies (LGCs), DME suppliers, sham telehealth companies,
and telehealth physicians. Now, the LGCs and sham telehealth companies
have moved into a new scheme: genetic testing, which the government is aggressively
pursuing with enforcement actions. An Oct. 9, 2019 DOJ press release
states, in part:
“The Justice Department announced today that UTC Laboratories Inc.
(RenRX) has agreed to pay $41.6 million, and its three principals, Tarun Jolly
M.D., Patrick Ridgeway, and Barry Griffith, have agreed to pay $1 million to
resolve allegations that they violated the False Claims Act by paying kickbacks
in exchange for laboratory referrals for pharmacogenetic testing and
for furnishing and billing for tests that were not medically necessary … The
government alleged that between 2013 and 2017, UTC and its principals offered
and paid remuneration to physicians to induce the ordering of pharmacogenetic
tests, purportedly in return for their participation in a clinical trial … The
government also alleged that UTC and its principals offered and paid remuneration,
including sales commissions, to entities and individuals as part of the
scheme … The settlement … resolves allegations in six lawsuits … filed under
the qui tam, or whistleblower, provisions of the False Claims Act, which permit
private individuals to sue on behalf of the government for false claims and to
share in any recovery. The Act also allows the government to intervene and take
over the action, as it did in these cases. The whistleblower shares to be awarded
have not yet been determined … .”
DME suppliers can derive six important lessons from this:
A Kickback Results in a False Claim. Most DME suppliers understand that
if they bill for a product not delivered—or deliver one type of product and
deliver another type of product—then a “false claim” arises. Equally as important,
however, is that if a supplier is engaged in a kickback arrangement, then
claims that ultimately arise out of that arrangement are also “false claims.”
Large Claims Submissions Invite Scrutiny. Government health care
programs and commercial insurers (collectively referred to as “Third Party
Payors” or “TPPs”) have edits in place that spot claims submissions that are “out
of the ordinary.” Examples are:
- A DME supplier has a history of submitting claims (i) at a historically established
dollar level and (ii) for particular products. But then the TPP notices a
spike in the dollar amount of claims submissions for a particular product.
- A supplier submits a noticeably greater number of claims for a particular
product category than other suppliers.
Every Employee is a Potential Whistleblower. If a DME supplier is doing
something it should not be doing, then someone knows about it. That “someone”
is usually an employee. Virtually all employees are aware of whistleblower
lawsuits. If an employee witnesses fraudulent actions by his/her employer, then
the employee may be motivated to gather information and then hire an attorney
who specializes in filing whistleblower lawsuits. The lawsuit will be in the name
of the employee and also in the name of the United States. The lawsuit will be
filed in federal court and it will “go under seal.”
This means that no one knows about the lawsuit except for the government.
A civil Assistant U.S. Attorney (“AUSA”) will review the lawsuit and will likely
appoint agents to investigate the allegations set out in the lawsuit. This investigation
may take six to 12 months. After the investigation is completed, or
even if it is still ongoing, if the AUSA concludes that the whistleblower lawsuit
has merit, then the DOJ will “intervene.” This means that the DOJ will take
over prosecuting the lawsuit and the employee (and his/her attorney) can pretty
much “sit on the sidelines.”
It is at this time that the lawsuit is unsealed and is served on the employer. The
lawsuit is based on violation of the federal False Claims Act (“FCA”). Normally,
whistleblower lawsuits are settled, with the whistleblower (“relator”) receiving
15 percent to 20 percent of the settlement proceeds. If the civil AUSA concludes
that the facts indicate that a crime was committed, then the civil AUSA will
hand the file over to a criminal AUSA to determine if, in addition to the civil
allegations set out in the whistleblower lawsuit, the DOJ wants to bring criminal
charges against the employer.
Avoid Sham Clinical Trials. “If it looks like a duck, sounds like a duck, and
walks like a duck, then it is a duck.” This phrase applies to fraud arrangements.
At the end of the day, a DME supplier cannot hide fraud. The supplier may
attempt to disguise the fraud, but eventually the existence of fraud will come
out. This is true with sham clinical trials. A legitimate clinical trial can be one
that is (i) connected to a hospital, (ii) connected to a medical school, and/or (iii)
overseen by an Institutional Review Board (“IRB”). A sham clinical trial is one
that is merely a subterfuge designed to funnel money to referring physicians.
1099 Independent Contractor Marketing Reps. The federal anti-kickback
statute (AKS) bars a DME supplier from giving anything of value (e.g., commissions)
to persons/entities in exchange for (i) referring patients covered by a
federal health care program (FHCP), (ii) arranging for the referral of FHCP
patients, or (iii) recommending the purchase of a product or service covered
by an FHCP. If a supplier pays commissions to 1099 independent contractor
marketing reps for generating FHCP patients, then the AKS is likely violated.
The safest course of action is for marketing reps to be bona fide employees of the
supplier. A supplier can pay a W2 marketing rep (i) a base salary plus (ii) discretionary
bonuses based on a various factors, including generation of business.
Products and Services That Are Not Medically Necessary. Let’s talk about
back braces. For decades, Medicare beneficiaries got along just fine without
back braces. And then about five years ago, a huge number of beneficiaries
received back braces. Was this spike in demand driven by the medical needs
of the beneficiaries—or was this spike driven by the Operation Brace Yourself
players? The same holds true for the bad actors in this latest genetic testing
example. So, if DME supplier finds itself submitting a large number of claims
for products and/or services that were not used very much in the past, then the
supplier will find itself in the government’s crosshairs.
This article originally appeared in the May/June 2020 issue of HME Business.
Jeffrey S. Baird, Esq. is chairman of the Health Care Group at law firm Brown & Fortunato, P.C., where he represents pharmacies, HME companies, and other healthcare providers throughout the United States. He can be reached at (806) 345-6320 or firstname.lastname@example.org.