January 30, 2018, Legal Intelligencer article by Lamb McErlane PC partner Vasilios (“Bill”) J. Kalogredis & associate Katherine E. LaDow*.

On December 11, 2017, the United States District Court for the District of Colombia held that medical labs do not have to independently verify the medical necessity of tests ordered by physicians and billed to government health care programs such as Medicare and Medicaid.  The Court issued this ruling in the case United States ex rel. Groat v. Bos. Heart Diagnostics Corp.

In the Groat action, the Plaintiff, Tina D. Groat, a medical doctor and the National Medical Director of Women’s Health and Genetics at United Healthcare, brought an action against Boston Hearth Diagnostics Corporation under the federal False Claims Act, 31 U.S.C. § 3729 and various analog State false claims statutes.  The Defendant, Boston Heart is a clinical laboratory located in Framingham, Massachusetts which provides diagnostic testing related to cardiovascular disease.  Plaintiff alleges that the various genetic and non-genetic tests performed by Boston Heart are not medically necessary for patients with the following diagnostic codes: (1) routine general medical examination at a health care facility; (2) essential hypertension (high blood pressure); (3) other and unspecified hyperlipidemia (high cholesterol); and (4) other malaise.  Plaintiff alleged that when Boston Heart ordered these tests for patients with any of the aforementioned diagnostic codes, the tests were used for screening purposes on adults who do not exhibit “signs, symptoms, complaints, or personal history of heart disease,” and thus are not covered by Medicare or other government health care programs.

On June 9, 2017, the Court issued a Memorandum Opinion on Boston Heart’s Motion to Dismiss Plaintiff’s Second Amended Complaint.  The Court declined to dismiss Plaintiff’s presentment claim under § 3729(a)(1)(A) and false statements claim under § 3729(a)(1)(B), as well as Plaintiff’s analog presentment and false statement claims under State statutes.  However the Court dismissed Plaintiff’s reverse false claims action under § 3729(a)(1)(G) and the analog State statute.  Shortly after the Court’s June 9, 2017 Opinion, on June 23, 2017, Boston Health filed a Motion for Reconsideration asking the Court to reconsider its conclusion that Boston Heart has an obligation to establish that the tests for which it seeks government reimbursement are medically necessary (which underlies the Court’s ruling in declining to dismiss Plaintiff’s presentment and false statements claims).

The Court granted, in part, Boston Heart’s Motion for Reconsideration and found that the earlier Opinion was erroneous and contrary to both Medicare regulations and the guidance from the Department of Health and Human Services Office of the Inspector General (“OIG”).  The Court reasoned that a medical lab may rely on a physician’s determination that a test is medically necessary in the lab’s certification to the government when billing for the test.  The OIG’s long standing position related to medical labs is that laboratories do not and cannot treat patients or make medical necessity determinations.  The Court noted that laboratories have a duty to ensure that they are not submitting false or incorrect claims to the government, but a laboratory is permitted to rely on the ordering physician’s determination that the lab tests billed to Medicare/Medicaid are medically necessary.

The Court further reasoned that the record keeping regulation, 42 C.F.R. § 410.32(d)(2) and the related rulemaking made clear that labs are not required to independently verify medical necessity because labs do not have direct contact with the patient.  § 410.32(d)(2) further supports the conclusion that physicians, not laboratories, are responsible for establishing the medical necessity of patient tests.  This record keeping regulation was created to establish a uniform national coverage and administrative policy for clinical diagnostic lab services payable under Medicare Part B.  The negotiated rulemaking under this regulation specifically differentiated between the responsibilities of ordering physicians and the laboratory with respect to documentation and recordkeeping.

In conclusion, the Court determined that it overstated the obligations of laboratories in its previous June 9, 2017 Memorandum Opinion.  The Court reiterated that laboratories have a legal duty to ensure that they do not submit claims for medically unnecessary tests.  However, laboratories may rely on the ordering physician’s determination of medical necessity for certain tests.  The Court did not change its ruling on denying Boston Heart’s underlying Motion to Dismiss on Plaintiff’s claims for presentment and false statements.  The Court stated that Plaintiff sufficiently alleged, in her Second Amended Complaint, that Boston Heart submitted false claims by engaging in a scheme that encouraged non-cardiology physicians to order medically unnecessary tests, and then bill the government for those tests.  Boston Heart was ordered to file its answer to Plaintiff’s presentment and false statement claims on or before January 8, 2018.

To read the United States ex rel. Groat v. Bos. Heart Diagnostics Corp. December 11, 2017 opinion, visit: http://src.bna.com/uV1.

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Vasilios (“Bill”) J. Kalogredis, Esquire is Chairman of Lamb McErlane’s Health Law Department. Bill has been practicing health law for over 40 years, representing exclusively physicians, dentists, group practices, other health care professionals and health care-related entities.

*Katherine (“Katie”) E. LaDow, Esquire contributed to this article. Katie is an associate in the litigation department. She concentrates her practice in the areas of state civil litigation, family law and health law.