Clinical Lab to Pay Over $2M to Resolve False Claims Act Allegations Related to Urine Drug Testing

by Andrew Murray | December 17th, 2019

The Department of Justice announced the settlement by a Kentucky laboratory on November 19, 2019. The Press Release states:

LabTox, LLC, a clinical laboratory in Lexington, has agreed to pay $2,101,335 to resolve civil allegations that it violated the False Claims Act, a federal law that prohibits submitting false or fraudulent claims to the federal government.

The allegations relate to urine drug testing services LabTox provided to Medicare and Kentucky Medicaid beneficiaries.  According to the settlement agreement, from January 2014 to March 2015, LabTox billed Medicare and Kentucky Medicaid for qualitative urine drug screens completed by a high complexity method.  The United States alleged that these claims were false because LabTox misrepresented the complexity of its testing method:  the method was actually low complexity, not high complexity, as LabTox claimed.  By billing the screens as high complexity, LabTox secured higher reimbursements to which it was not entitled.

The United States further alleged that LabTox billed Medicare for specimen validity testing, a quality control process used to analyze a urine specimen to ensure that it has not been diluted or adulterated.  Since January 2014, Medicare’s guidance has been explicit that specimen validity testing should not be separately billed to Medicare.  The United States alleged that LabTox nonetheless submitted claims to Medicare for specimen validity testing during the period January 2014 to February 2016.

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In addition to agreeing to pay the $2,101,335 settlement amount, LabTox also entered into an Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General. The Integrity Agreement requires, among other things, that LabTox appoint a Chief Clinical Officer to oversee issues related to clinical decision-making, ensure that requisition forms provide clarity about medical reasonableness and necessity and programmatic payment amounts, and retain an Independent Review Organization to conduct quarterly claims reviews.

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The case apparently arose from a government investigation, rather than a whistleblower’s complaint.

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