A triple fraudulent billing scheme, involving the misrepresentation of laboratory testing stations to Medicare, Medicaid, and private healthcare insurers, amassed at least $3.8 million in false claims before the perpetrators were arrested, according to a Missouri court. One of the former owners of a St. Louis County healthcare company pleaded guilty to multiple felony charges of conspiracy and healthcare fraud on February 9, 2024.
The former owner admitted that he and his business partner had obtained accreditation from the CDC’s Clinical Laboratory Improvement Amendments (CLIA) for two laboratories, ostensibly to use as human tissue analysis and testing stations. The scheme began in 2014 when the two laboratories started operating as separate entities, concealing in their CLIA accreditation applications that the two labs were located in the same building, shared the same part-time employee, and used the same equipment.
The owners also misrepresented their operations in their CLIA applications by altering one of the lab’s testing hours to appear as if the two labs didn’t overlap. They also maintained separate logs, despite all tests being conducted at the same facility. They concealed their co-ownership and profit-sharing arrangement of the two labs from Medicare, Medicaid, and private healthcare insurers, and cross-referred certain tests, such as those for urine specimens, from one lab to the other.
Furthermore, the owners concealed the fact that their labs lacked the necessary equipment for many specialized analyses, such as accurate toxin level testing in urine samples. They outsourced these tests to external reference laboratories, fully knowing that Medicare, Medicaid, and many private insurers prohibit “pass-through billing,” or billing for tests performed by others.
When health insurers began to scrutinize their claims and refused payment, the owners incorporated a third laboratory company solely for billing purposes. This third lab existed only in name, without any effort being made to secure CLIA certification, premises, or lab equipment. Billing was conducted using a CLIA number assigned to one of the other labs.
In several cases, each lab submitted a claim for testing the same specimen from the same individual on the same day, a practice known as “split-billing.” Through this method, the owners generated $1.4 million from pass-through billing and $2.4 million from split billing from Medicare, Medicaid, and private healthcare insurers.
One owner had previously pleaded guilty in November 2022, resulting in an order to pay restitution and forfeit $3.1 million in assets. The second owner was found guilty on February 9, 2024, and awaits sentencing on May 15. Conspiracy to defraud carries a maximum penalty of five years’ imprisonment per count and a fine of $250,000, or both. Healthcare fraud violations are punishable by up to 10 years’ imprisonment per count and a fine of $250,000, or both, with restitution to the victims being mandatory.
Compliance Perspective
Issue
Healthcare fraud can be committed by medical providers, company owners, patients, and others who intentionally deceive the healthcare system to receive unlawful benefits or payments. It is illegal to submit claims for payment to Medicare or Medicaid that you know or should know are false or fraudulent. Filing false claims may result in fines of up to three times the programs’ loss plus $11,000 per claim filed. Under the civil False Claims Act, each instance of an item or a service billed to Medicare or Medicaid counts as a claim, so fines can add up quickly. The OIG strongly encourages nursing facilities to have comprehensive procedures in place to ensure that services are of an appropriate quality and level and are in fact delivered to nursing facility residents as ordered and as reported in claims for reimbursement. Moreover, accurate documentation at the time of service is critical to ensuring that billing is fully supported. Facility staff should be knowledgeable in how to report suspicious billing practices. A nonretaliatory environment for reporting suspicious billing practices is mandatory for all facilities.
Discussion Points
- Review policies and procedures for preventing and reporting false claims and suspicious billing practices. Update your policies and procedures as needed.
- Train all staff on what can be considered a false claim. Include information on how to report concerns and suspected violations, and that prompt reporting is mandatory. Document that these trainings occurred, and file the signed documents in each employee’s education file.
- Periodically perform audits to ensure all staff are aware of their responsibility to identify compliance and ethics concerns and to promptly report violations to their supervisor, the compliance and ethics officer, or via the anonymous hotline. Perform Triple Checks for all Medicare Part A claims prior to submission to ensure that medical necessity is supported by appropriate documentation, and that services meet skilled care requirements.
*This news alert has been prepared by Med-Net Concepts, LLC for informational purposes only and is not intended to provide legal advice.*
