Novel scheme by medical laboratory company to induce patients to collect and return their own specimen for testing is central to a federal whistleblower case alleging violations of the Anti-Kickback Statute
Handing out gift cards only to patients who return a specimen to a clinical laboratory company for colorectal cancer screening is a unique approach that is now at the center of a federal qui tamcase filed by a retired Indiana pathologist.
The defendant in this whistleblower lawsuit is Exact Sciences Laboratories and its parent company Exact Sciences Corporation (NASDAQ:EXAS). Last month, a federal judge ruled the court case will proceed following attempts by the defendant’s attorneys to have the case dismissed.
The plaintiffs (United States of America ex rel. Niles Rosen, MD) allege Exact Sciences Laboratories violated the Federal Anti-Kickback Statute (AKS) and False Claims Act by offering $75 gift cards to induce patients to return self-collected fecal samples for the lab’s Cologuard at-home colon cancer screening kit through its Patient Compliance Program.
Exact Sciences refuted the allegations and moved to have the case dismissed claiming it “had a good faith belief that its [Patient Compliance Program] complied with the law and thus lacked the requisite intent for a violation of the AKS,” according to court documents. The court denied Exact Sciences’ motion to dismiss.
“We are grateful for the hard work and courage of those private citizens who bring evidence of fraud to the Department’s attention, often putting at risk their careers and reputations,” said Brian Boynton, JD (above), Principal Deputy Assistant Attorney General and head of the federal Department of Justice (DOJ) Civil Division in a February 7, 2023, DOJ statement. “Our ability to protect citizens and taxpayer funds continues to benefit greatly from their actions.” Clinical laboratory managers will want to follow this and other qui tam cases claiming violation of anti-kickback laws. (Photo copyright: Department of Justice.)
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Was Exact Sciences’ Patient Compliance Program a Kickback?
Cologuard is a non-invasive testing kit utilized by people to screen for colorectal cancer in the privacy of their own homes. It is intended for those over the age of 45 who are at low or average risk for the disease. Exact Sciences regularly runs television advertisements urging individuals to be screened for colorectal cancer using the Cologuard test.
Following a physician’s order, and after receiving the testing kit in the mail, individuals collect a stool sample using the specimen container in the kit and return the sample to Exact Sciences Laboratories (ESL) for analysis. The test works by looking for certain DNA markers and blood in the stool sample.
According to Report on Medicare Compliance from the Health Care Compliance Association (HCCA), in 2017, a gastroenterologist ordered the Cologuard kit for Rosen, the whistleblower, but Rosen chose not to return a stool sample to ESL. A few months later, ESL sent Rosen a letter offering him a $75 Visa gift card if he performed the at-home specimen collection and then returned it to ESL by March 22, 2018. Persuaded by the offer, Rosen collected a sample, returned it to ESL, and received the gift card.
As part of its Patient Compliance Program, ESL analyzed Rosen’s sample and received $499 from Medicare for performing the test. The complaint filed against Exact Sciences states Medicare paid Exact Sciences more than $160 million for a total of 334,424 Cologuard tests in 2018 while the company offered “unlawful cash equivalent inducements directly to Medicare beneficiaries,” COSMOS reported.
“It was a straight-up kickback,” Rosen’s attorney Marlan Wilbanks, JD, Senior Partner at Atlanta law firm Wilbanks and Gouinlock, told COSMOS. “You can’t offer cash or cash equivalents to anyone to induce them to use a government service.”
DOJ Elects to Not Intervene in Lawsuit
In February 2020, Exact Sciences received a civil investigation demand by the US Department of Justice (DOJ) regarding the gift card incentive. The DOJ later filed a notice that it had elected to decline intervention in the lawsuit. This action did not prevent Rosen from continuing with the lawsuit. Accordingly, in April of 2021, he filed an amended complaint against Exact Sciences alleging violations of the Federal Anti-Kickback Statute and False Claims Act.
Rosen is seeking a monetary award for himself, and on behalf of the US government, for civil penalties, treble damages, fees, and costs.
According to Report on Medicare Compliance, Exact Sciences “refuted the allegations and asserted, among other things, that the arrangement qualifies for the preventive care safe harbor to the anti-kickback statute (AKS) and that the complaint fails for many reasons.”
Exact Sciences also noted in its motion to dismiss that “encouraging a patient to have a medical service that was already ordered by a provider isn’t an inducement under the AKS.”
At this time, the case remains unresolved and continues in federal court.
DOJ Recovers Billions of Taxpayer Dollars from AKS Violations
A qui tam lawsuit or action is a method available for individuals to help the government circumvent fraud and recover money for taxpayers. Types of fraud included in these cases often pertain to Medicare and Medicaid services, defense contractor fraud, and procurement fraud.
According to the DOJ, over $1.9 billion was recovered as a result of qui tam lawsuits pursued by either the government or whistleblowers during fiscal year 2022. The number of these types of lawsuits has increased dramatically over the years with a total of 652 qui tam cases filed in 2022 alone.
Thus, clinical laboratory professionals should be aware that this type of novel scheme to generate more patients could possibly lead to legal issues. Dark Daily would like to credit Laboratory Economics for calling attention to this fascinating case of alleged illegal inducement involving a medical laboratory company.
Healthcare attorneys advise medical laboratory leaders to ensure staff understand difference between EKRA and other federal fraud laws, such as the Anti-kickback Statute
More than four years have passed since Congress passed the law and yet the Eliminating Kickbacks in Recovery Act of 2018 (EKRA) continues to cause anxiety and confusion. In particular are the differences in the safe harbors between the federal Anti-Kickback Statute (AKS) and Stark Law versus EKRA. This creates uncertainty among clinical laboratory leaders as they try to understand how these disparate federal laws affect business referrals for medical testing.
According to a news alert from Tampa Bay, Florida-based law firm, Holland and Knight, “EKRA was enacted as part of comprehensive legislation designed to address the opioid crisis and fraudulent practices occurring in the sober home industry.” However, “In the four years since EKRA’s enactment, US Department of Justice (DOJ) enforcement actions have broadened EKRA’s scope beyond reducing fraud in the addiction treatment industry to include all clinical laboratory activities, including COVID-19 testing.”
It is important that medical laboratory leaders understand this law. New cases are showing up and it would be wise for clinical laboratory managers to review their EKRA/AKS/Stark Law compliance with their legal counsels.
“Keeping in mind that [EKRA is] a criminal statute, clinical laboratories need to take steps to demonstrate that they’re not intending to break the law,” said attorney David Gee, a partner at Davis Wright Tremaine, in an exclusive interview with The Dark Report. “[Lab leaders should] think about what they can do to make their sales compensation program avoid the things the government has had such a problem with, even if they’re not sure exactly how to compensate under the language of EKRA or how they’re supposed to develop a useful incentive compensation plan when they can’t pay commissions.” David Gee will be speaking about laboratory regulations and compliance at the upcoming Executive War College in New Orleans on April 25-26, 2023. (Photo copyright: Davis Wright Tremaine.)
How Does EKRA Affect Clinical Laboratories?
The federal EKRA statute—originally enacted to address healthcare fraud in addiction treatment facilities—was “expansively drafted to also apply to clinical laboratories,” according to New York-based law firm, Epstein Becker and Green. As such, EKRA “applies to improper referrals for any ‘service,’ regardless of the payor. … public as well as private insurance plans, and even self-pay patients, fall within the reach of the statute.”
In “Revised Stark Law, Anti-Kickback Statute Rules Are Good News for Labs,” Dark Daily’s sister publication The Dark Report noted that EKRA creates criminal penalties for any individual who solicits or receives any remuneration for referring a patient to a recovery home, clinical treatment facility, or clinical laboratory, or who pays or offers any remuneration to induce a referral.
According to Epstein Becker and Green, EKRA:
Applies to clinical laboratories, not just toxicology labs.
Has relevance to all payers: Medicare, Medicaid, private insurance plans, and self-pay.
Is a criminal statute with “extreme penalties” such as 10 years in prison and $200,000 fine per occurrence.
Exceptions are not concurrent with AKS.
Areas being scrutinized include COVID-19 testing, toxicology, allergy, cardiac, and genetic tests.
“For many clinical laboratories, a single enforcement action could have a disastrous effect on their business. And unlike other healthcare fraud and abuse statutes, such as the AKA, exceptions are very limited,” Epstein Becker and Green legal experts noted.
“Therefore, a lab could potentially find itself protected under an AKS safe harbor and still potentially be in violation of EKRA,” they continued. “The US Department of Health and Human Services (HHS) and the DOJ have not provided any clarity regarding this statute (EKRA). Without this much needed guidance clinical laboratories have been left wondering what they need to do to avoid liability.”
EKRA versus AKS and Stark Law
HHS compared AKS and the Stark Law (but not EKRA) by noting on its website prohibition, penalties, exceptions, and applicable federal healthcare programs for each federal law:
AKS has criminal fines of up to $25,000 per violation and up to a five-year prison term, as well as civil penalties.
The Stark Law has civil penalties only.
AKS prohibits anyone from “offering, paying, soliciting, or receiving anything of value to induce or reward referrals or generate federal healthcare program business.”
The Stark Law addresses referrals from physicians and prohibits the doctors “from referring Medicare patients for designated health services to an entity with which the physician has a financial relationship.”
EKRA is more restrictive than AKS, as it prohibits some compensation that AKS allows, healthcare attorney Emily Johnson of McDonald Hopkins in Chicago told The Dark Report.
Recent enforcement actions may help lab leaders better understand EKRA’s reach. According to Holland and Knight:
Malena Lepetich of Belle Isle, Louisiana, owner and CEO of MedLogic LLC in Baton Rouge, was indicted in a $15 million healthcare fraud scheme for “allegedly offering to pay kickbacks for COVID-19 specimens and respiratory pathogen testing.”
In S-G Labs Hawaii, LLC v. Graves, a federal court concluded the laboratory recruiter’s contract “did not violate EKRA because the recruiter was not referring individual patients but rather marketing to doctors. According to the court, EKRA only prohibits percentage-based compensation to marketers based on direct patient referrals.”
In another federal case, United States v. Mark Schena, the court’s rule on prohibition of direct and indirect referrals of patients to clinical labs sent a strong signal “that EKRA most likely prohibits clinical laboratories from paying their marketers percentage-based compensation, regardless of whether the marketer targets doctors or prospective patients.”
What can medical laboratory leaders do to ensure compliance with the EKRA law?
In EKRA Compliance, Law and Regulations for 2023, Dallas law firm Oberheiden P.C., advised clinical laboratories (as well as recovery homes and clinical treatment facilities) to have EKRA policies and procedure in place, and to reach out to staff (employed and contracted) to build awareness of statute prohibitions and risks of non-compliance.
One other useful resource for clinical laboratory executives and pathologists with management oversight of their labs’ marketing and sales programs is the upcoming Executive War College on Diagnostics, Clinical Laboratory, and Pathology Management. The conference takes place on April 25-26, 2023, at the Hyatt Regency in New Orleans. A panel of attorneys with deep experience in lab law and compliance will discuss issues associated with EKRA, the Anti-Kickback Statutes, and the Stark self-referral law.
New healthcare fraud prevention partnership white paper outlines the most common abuses and the reasons clinical laboratories are susceptible to fraudulent practices
When it comes to questionable marketing and billing practices for lab testing, clinical laboratory companies can expect increased scrutiny and enforcement actions by federal healthcare authorities. That’s one message in a recently-issued white paper that was jointly authored by the Centers for Medicare and Medicaid Services (CMS) and the Healthcare Fraud Prevention Partnership (HFPP).
Systemic Challenges That Put Clinical Labs at Risk
High-volume, low-dollar nature of ordering, providing, and billing for clinical laboratory services; and,
Technical complexity and continuing evolution of clinical laboratory services.
While HFPP, a public-private partnership of healthcare payers and allied organizations, notes it is difficult to put a price on the cost of laboratory fraud and abuse, it concludes, “[Fraud] can negatively impact patient care and outcomes, cause financial harm to legitimate service providers and drive up the cost of care for all.”
The CMS/HFPP white paper points out that fraud within the clinical laboratory industry typically is related to abuse of billing standards, improper laboratory relationships, and medically unnecessary testing, such as:
As the spotlight intensifies on an industry ripe for potential abuse, criminal and civil penalties for fraudulent and/or improper billing for medical laboratory services skyrocket as well.
This means clinical laboratory managers and pathologists can no longer simply rely on written compliance programs. They must implement compliance procedures that can stand up to investigations and enforcement actions and keep pace with frequently changing laws and regulations.
Diagnostic laboratories that fail to comply with healthcare fraud and abuse regulations face increasing legal risk. The Bipartisan Budget Act of 2018 (BBA) doubled many healthcare fraud and abuse penalties. The maximum penalties under U.S. Code § 1320a–7a—the Civil Monetary Penalties Law (CMPL)—for knowingly filing an improper claim jumped to $20,000; $30,000; or $100,000, depending on the violation.
Similarly, the maximum financial penalty related to payments to induce the reduction or limitation of services increased from $2,000 to $5,000. Criminal penalties for felony convictions of the Anti-Kickback Statute (AKS) also were substantially increased. Previously, a provider who violated the AKS could be fined as much as $25,000 and receive a maximum five-year prison sentence. As of February 9, 2018, AKS violations now can result in a maximum fine of $100,000 and up to a 10-year prison term.
Since 2015, monetary penalties for non-compliance with CMPL and AKS regulations have included an annual inflation adjustment, making the recently enacted increases less dramatic than they first appeared. Nonetheless, the BBA has upped the ante for clinical laboratories.
Protecting Your Clinical Laboratory Against Compliance Violations
“The BBA contained key changes to federal healthcare fraud statutes that, on the whole, reflect ongoing Congressional efforts to heighten penalties for healthcare fraud infractions. The revisions to the AKS and CMPL will, in Congress’s view, raise the stakes companies and individuals face in healthcare fraud cases,” noted law firm Hogan Lovells of Washington, D.C.
Melissa Jampol (left) and Charles Dunham, IV (right), are with Epstein Becker and Green, P.C., a national law firm with decades of experience focusing on healthcare and life science regulatory and enforcement issues that impact clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. (Photo copyrights: Epstein Becker and Green.)
During this valuable webinar, you will hear from two legal experts—Charles Dunham, IV, (above right) and Melissa Jampol (above left)—both of Epstein Becker and Green, P.C. (EBG). They have extensive healthcare industry regulatory experience and understand the enforcement process. They will provide diagnostic laboratories with a critical understanding of:
Department of Justice operations, procedures and techniques for fraud enforcement, as well as laboratory actions that could be viewed as signs of potential fraud or abuse;
Non-governmental enforcement procedures and techniques used by private health insurers;
Tools for dealing with enforcement procedures or actions;
How to build a compliance program that becomes infused in the culture of a clinical laboratory’s operations; and,
Best practices designed to protect your lab from compliance violations or to mitigate potential problems, and more.
First to speak will be Charles Dunham, who is a partner at EBG. His national practice includes representation of healthcare providers and health-related entities. He has a particular focus on clinical and anatomic pathology laboratories, hospitals and health systems, and physician group practices and networks. His national clientele provides him with a wide view of the latest and most important developments in how laboratories, hospitals, and physicians need to comply with state and federal laws.
Clinical lab managers and pathologists participating in the webinar will get a unique, insider’s perspective from the co-presenter. Melissa Jampol is a former Assistant U.S. Attorney now at EBG. In this role, she has significant experience interacting with a range of federal and state law enforcement agencies on cases involving healthcare fraud and abuse. Her earlier experience includes more than six years as an Assistant District Attorney at the New York County District Attorney’s office.
To register for this crucial webinar and see essential details about discussion topics, use this link (or copy and paste this URL into your browser: https://pathologywebinars.com/current/the-new-cms-white-paper-on-healthcare-fraud-prevention-what-you-need-to-know-how-you-can-avoid-its-consequences-and-what-to-do-if-you-are-a-target-of-this-enforcement/).
While only a small percentage of labs engage in fraudulent business practices, all laboratory organizations today are subject to increased scrutiny and potential enforcement action. This essential webinar will provide in-depth information for laboratory managers and pathologists seeking practical advice on how to decrease non-compliance risks.
Don’t miss this unique opportunity to proactively protect your lab or pathology group from future problems, and learn how to respond if you are the subject of a payer audit, served with a Civil Investigative Demand letter, a subpoena, or other action. Register today!
