Genetic testing billed to Medicare, especially where telemedicine is used to generate the lab orders, has been a hot area of investigation by the U.S. Justice Department. A recent case illustrates the type of cases that are being targeted.
On November 26, 2019, Ravitej Reddy, the alleged owner of two testing laboratories—Personalized Genetics, LLC, d/b/a Personalized Genomics (PGL) and Med Health Services Management, LP (MHS) in Pennsylvania, was charged in federal court by criminal Information with 2 counts of conspiracy to pay and receive kickbacks, 1 count of conspiracy to pay kickbacks, and 1 count of offering and paying kickbacks. A criminal Information is not evidence and a defendant is presumed innocent.
According to the Information's allegations, Mr. Reddy's companies billed Medicare for 2 types of genetic testing: cancer genomic testing (CGx) and pharmacogenetic testing (PGx). CGx testing used DNA sequencing to detect mutations in genes that could indicate a higher risk of developing certain types of cancers in the future. CGx testing, however, was not a method of diagnosing whether an individual presently had cancer. PGx testing detected specific genetic variations in genes that impacted the metabolism of certain medications. In other words, PGx testing helped determine, among other things, whether certain medications would be effective if used by a particular patient.
The Information alleges that from approximately May 2018 to April 2019, Mr. Reddy and a group of business consultants, marketers, operator of a telemedicine entity and others acquired thousands of testing samples from Medicare beneficiaries located throughout the United States, as well as the corresponding prescriptions that PGL and MHS needed to bill Medicare for CGx and PGx testing.
It is alleged that the marketers used targeted campaigns to induce Medicare beneficiaries to submit CGx and PGx specimens by means of cheek swabs sent to their homes or provided to them at "health fairs" held throughout the United States. Marketers, in turn, were allegedly paid percentage-based kickbacks depending upon the Medicare reimbursements for beneficiaries whose samples they had obtained and submitted to PGL or MHS.
It is also alleged that the operator of a Florida-based telemedicine entity was paid kickbacks in connection with obtaining CGx and PGx prescriptions from physicians who were contracted by his company to review the beneficiaries’ personal and familial medical histories. It is alleged that these contract physicians authorized testing for greater than 95% of beneficiaries despite the fact that the doctors did not conduct a proper telemedicine visit, were not treating the Medicare beneficiaries for cancer or symptoms of cancer, did not use the test results in the treatment of the beneficiaries, and generally were not qualified to understand and interpret the test results.
According to the Information, Mr. Reddy and the others in the group (his alleged co-conspirators) took advantage of PGL’s and MHS’s physical locations within the Medicare coverage area that offered the highest reimbursement rates in the United States. As alleged, the co-conspirators used PGL and MHS as the billing laboratory despite the fact that the labs did not possess properly validated equipment to conduct any CGx testing on-site and, as such, were forced to send samples for proper testing by a so-called reference laboratory that was located outside of the lucrative coverage area.
The Information alleges three separate conspiracies involving similar conduct related to the acquisition of CGx and PGx specimens. The first conspiracy, however, allegedly involved billings only through PGL, while the second and third conspiracies involved billings through MHS. According to the Information, Mr. Reddy engaged in the second and third conspiracies with some, but not all, of the same co-conspirators as the first conspiracy, and he pursued these alleged side deals, in part, as a way to increase his share of the profits relative to the PGL-based conspiracy.
Finally, the Information charges one substantive kickback count, alleging that Mr. Reddy paid percentage-based kickbacks to another unrelated marketing entity in connection with the acquisition of PGx and other testing samples between October 2017 and April 2019.
According to the Information, Mr. Reddy caused PGL and MHS to submit Medicare claims for CGx and PGx testing that regularly exceeded $12,000 per beneficiary. In total, between May 2018 and April 12, 2019, Mr. Reddy’s laboratories allegedly billed Medicare more than $127 million for CGx and PGx testing, with reimbursements of approximately $60 million.
Attorney Notes: The physicians who work for these telemedicine companies could face exposure as well. If they are deemed to have written medically unnecessary prescriptions, they can be liable for the billing amounts. When I see health care businesses that bill government and private insurance base their business model on telemedicine prescriptions, I let them know that this is a red flag for compliance issues. Telemedicine can be done properly but when physicians are used who have no relationship with the patient, that is a second red flag. Just because Medicare pays for a year or two does not mean that the practice is compliant.
