Fast-growing laboratory cuts ties with contractor amid federal investigation

Amid a high-profile federal fraud investigation related to potential kickback violations, a Virginia cardiac biomarker laboratory has ended its partnership with BlueWave Healthcare Consultants Inc., pinning the wrongdoing on the sales-and-marketing contractor, according to the Wall Street Journal.

Health Diagnostic Laboratory Inc. (HDL) originally came under fire in September for an alleged scheme in which the company paid doctors $20 for each blood sample that it sent, FierceHealthPayer: AntiFraud previously reported.

HDL claims it stopped that practice following a fraud alert in July warning that laboratory payments to physicians could be considered kickbacks. That month, the Department of Health and Human Services Office of Inspector General released a report on questionable Medicare claims for clinical laboratory services. Former federal prosecutor with the Medicare Fraud Strike Force, Kirk Ogrosky, told the Journal that these payments incentivize physicians to run unnecessary tests, but HDL previously justified the fee as compensation for processing and labor costs.

According to the newspaper, HDL began as a startup in 2008 but saw profits rapidly skyrocket within just a few years. By 2013, the laboratory had collected $383 million in revenue, 41 percent of which came from Medicare. In 2012 and 2013, the lab collected $296 million in Medicare funds.

Since the investigation began in September, HDL's CEO has resigned and the company has entered settlement discussions with the Department of Justice, sources close to the investigation told the Journal. Sources also say HDL has deferred blame to BlueWave during these discussions, but now the sales contractor is suing HDL, seeking the $204.8 million the company claims it is contractually owed. In October, HDL was sued by Cigna for illegally waiving consumer fees and billing the insurer instead.

Meanwhile, the owner of an Atlanta laboratory was sentenced to nearly four years in prison and ordered to pay more than $246,000 in restitution for his role in a Medicare fraud scheme, according to a release by the United States Attorney's Office. Rahsaan Jackson Garth directed lab technicians to fake allergy test reports in order to avoid paying for the allergen reagent, and then submitted a bill to the patient's insurance provider for services that weren't provided. Some of the reports included positive results for allergies as a way of avoiding scrutiny. 

For more:
- read The Wall Street Journal article
- see the special fraud alert (.pdf)
- here's the U.S. Attorney's Office release

Relatd Articles:
Cigna sues lab for billing $84M in 'phantom rates'
Labs on the hot seat for referral payments
Lab services, pay arrangements draw OIG's eye

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