June 5, 2023

By: Marc Stephen Raspanti , Pamela Coyle Brecht , Ashley Kenny

Nearly every American has received some type of laboratory testing, many regularly. Lab tests are at the base of the healthcare pyramid. That fact, as well as how easily new tests are brought to consumers, may explain why laboratory fraud persists. Blood testing almost always requires a healthcare provider’s order. The interdependence between the healthcare provider, the testing, and the laboratory has often caused criminal, civil, and compliance problems. This article will discuss the pervasiveness of fraud in the behemoth laboratory industry from the 1990s to the present, as well as the False Claims Act (FCA) jurisprudence developed through the joint efforts of the government and whistleblowers to rein in new and old lab fraud schemes.

Due to a series of innovative whistleblower cases, “Operation LabScam” was launched in the 1990s. The U.S. Department of Justice (DOJ) and multiple U.S. Attorney’s Offices throughout the country settled some of the largest laboratory fraud cases at the time. For example, the DOJ entered into settlements with Laboratory Corporation of America Inc. (Labcorp), for $187 million, Damon Clinical Laboratories Inc. for $119 million, and National Health Laboratories for $111 million. One of the largest FCA recoveries in a lab case at the time was United States ex rel. Robert J. Merena v. SmithKline Beecham Corporation resulted in a then-ground-breaking recovery of $325 million.^[1] In Operation LabScam, the FCA served as an effective tool for exposing overbilling lab schemes.

In the wake of these sizeable recoveries, the U.S. Department of Health & Human Services Office of Inspector General (OIG) issued robust guidance on how labs should interact with healthcare providers in a position to refer patients for testing in 1997 and 1998.^[2] Additionally, the industry also published articles and held seminars providing compliance guidance. OIG, the lab industry, and other industry stakeholders believed this well-published compliance framework would curb future laboratory fraud. Regrettably, all believed wrongly.

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Copyright 2023 Compliance Today, a publication of the Health Care Compliance Association (HCCA).