Pathology Lab Company to Pay $63.5 Million to Settle FCA Case

February 5, 2019 | Christopher J. Kutner | Electronic Health Records | False Claims Act | Fraud and Abuse | Litigation | Medicare and Medicaid

Inform Diagnostics, a Texas-based pathology laboratory company, will pay the federal government $63.5 million to resolve allegations that the company violated the False Claims Act (FCA). The U.S. Department of Justice announced the settlement on January 30.

Inform Diagnostics was alleged to have engaged in improper financial relationships with physicians, including providing them with subsidies for electronic health records (EHR) and with free or discounted technology consulting services as quid pro quos for referrals to the lab. In essence, the lab provided things of value expecting a return of value (i.e., referrals for pathology and other lab services). Because the financial relationships did not comply with the FCA, each claim submitted by the lab for payment under a federal healthcare program was a violation of the FCA. The improper financial relationships tainted the arrangements and called into question the necessity of the lab services referred by the physicians.

The U.S. Department of Health and Human Services (HHS) in 2006 adopted regulations that included provisions permitting laboratories to provide EHR donations to physicians under certain specific conditions. The government, however, alleged that Inform Diagnostics (formerly known as Miraca Life Sciences Inc.) did not comply with those conditions. HHS withdrew these exemptions for laboratories in 2013.

The improper conduct came to light through allegations detailed in three lawsuits filed under the qui tam (whistleblower) provisions of the FCA. The FCA includes provisions permitting private citizens to bring an action on behalf of the U.S. for false claims submitted for payment under Medicare and other federal healthcare programs. The private citizens, called “relators,” are incentivized to bring such claims because they share in any recovery. The relators’ share of the settlement has not yet been determined. The allegations also included violations of the Stark Law, but the Stark Law does not provide for recovery by relators.

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