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HHS Expects Drop-off in Genetic Testing Fraud Following Recent Crackdown

NEW YORK — Since announcing in September 2019 that it would target genetic testing fraud, the Department of Health and Human Services Office of Inspector General has charged dozens of defendants in schemes it said have racked up fraudulent testing bills totaling more than $2 billion.

The OIG expects to see a drop-off in this activity following these prosecutions, said Michael Cohen, operations officer in the office of investigations at OIG. However, he added that the agency expects to see new forms of genetic testing fraud emerge, including schemes involving participants more closely associated with physician practices.

Cohen said OIG's decision to focus last fall on genetic testing based on several factors including alerts from the Centers for Medicare and Medicaid Services that they were seeing billing anomalies around genetic testing, a "tremendous spike" in billing for genetic testing in late 2017 and early 2018, and a large increase in the number of complaints from Medicare beneficiaries regarding genetic testing.

"We got kind of a tsunami of information [indicating] that there was a problem here," he said.

In late September, HHS and the Justice Department announced that they had indicted 35 people involved in a variety of different fraud schemes that billed Medicare for genetic tests totaling $2.1 billion. In November, DOJ charged Ravitej Reddy, owner of two testing laboratories in the Pittsburgh area, with participating in three fraudulent genetic testing arrangements that billed Medicare for more than $127 million.

This month, Reddy plead guilty to his role in the schemes and agreed to pay restitution of more than $77 million to CMS.

These schemes, Cohen said, typically involved recruiters approaching Medicare-eligible patients either by phone or in person to obtain samples that they could then send in for testing.

"What we're seeing is that this is all driven by marketers and recruiters," he said. "What they will do is go out and swab the patients first, and then they will find a use for the test."

For instance, a recruiter might buy a list of Medicare beneficiaries who they would then call and try to convince to submit samples for genetic testing.

"They would scare the Medicare beneficiaries, saying, you know, you could die of cancer if we don't check," Cohen said.

Once a patient submitted to testing, the recruiter would verify their Medicare status and then either order the test through the patient's doctor or through a tele-doctor set up to sign off on the orders.

Recruitment was done in person, as well, with recruiters or individuals hired by them frequenting places like churches and assisted living facilities — "anywhere they can aggregate a large volume of Medicare beneficiaries," Cohen said.

He noted that often sample swabs were taken or stored or labeled improperly, calling into question the validity of the results. Additionally, what results were provided were often done without any professional counseling or interpretation. Many patients, he said, "never even received the test results."

In some cases, Cohen said, tests were ordered for conditions a patient couldn't possibly have, such as "cranial facial dysplasia, which," he noted, "is a birth defect that you would know five seconds after birth if you had it."

Elizabeth Sullivan, co-chair of the national healthcare practice group at law firm McDonald Hopkins, said that she received an inquiry from a client several months ago regarding what appeared to be a questionable arrangement around genetic testing.

The client had been approached by a party that was proposing to set up health fairs targeting Medicare beneficiaries.

It was presented that the party offering the health fairs "would interview individuals that attended this health fair, and if they determined that those individuals had the prerequisites for testing then they would go through the process of signing them up, filling out the requisition, and then all of that would be run through a physician somewhere who would sign off on it," Sullivan said.

"We were concerned that it wasn't going to be legitimate," she said, noting that for Medicare to pay for lab testing, "the expectation is that the physician who is ordering the testing is someone who is actually participating in the care of the beneficiary, including managing care. If it's a doctor who is remote or hasn't otherwise seen the patient who is signing the order, then the testing may not be considered reasonable and necessary."

Cohen said that OIG anticipates that future genetic testing fraud schemes may try to address this issue by linking themselves in physician practices.

"If the individual is a tele-doc, he has no relationship with the patient and that is a fraudulent claim" he said, echoing Sullivan. "So, in order to steer away from that, now they are trying to embed themselves in physician practices where they have a panel of patients that they can test in-house."

"Most legitimate physicians aren't going to let them do that, but we'll have to see how successful they are," he said.

Sullivan said that since OIG announced its focus on genetic testing fraud in September, she has received very few inquiries from clients about potentially questionable genetic testing arrangements, suggesting, she said, that the government's crackdown had deterred many actors or that the alert and increased awareness around the issue had enabled her clients to spot and avoid such issues on their own.

Jason Mehta, a partner at Bradley Arant Boult Cummings, said, however, that he has seen a "dramatic uptick" in questions around genetic testing, both retrospectively from clients who are responding to indictments or subpoenas from DOJ and prospectively from clients trying to evaluate proposed arrangements.

"I think in some part that reflects the reality that the use of cancer and genetic testing tools is increasing, and so with more testing there is going to be more scrutiny and more questions," he said.

Mehta, who said he is currently involved in the defense of several clients charged with genetic testing fraud, is also familiar with the view from the government's side as until 2017 he was an assistant US attorney, a role in which he handled a number of healthcare fraud cases.

Mehta said that based on the genetic testing indictments that have been made public thus far, "there's a real focus on alleged illicit marketing arrangements, and the government not liking the fact that marketers were getting a commission on the tests that they brought in."

That is a pretty standard application of the anti-kickback statute, he said. "Those cases, I think, are pretty standard fare, and I'm not surprised that DOJ has brought those cases, even when the defendants might have some defense."

More generally, Mehta said that as healthcare marketing becomes more direct, both the government and marketers are working to arrive at new understandings of what is and is not acceptable.

"The government is adjusting to what they think is permissible or not, and I think marketers, particularly the ones that want to get it right are adjusting, as well," he said. "So, I do think we are going to get more evolving and sophisticated arrangements, some of which will be problematic and some of which probably will pass muster under current laws."

Mehta said that one element factoring into the government's ability to identify and prosecute fraud was the advance in data analytics, noting that during his time as an assistant US attorney, these capabilities evolved dramatically.

"When I started at the Justice Department in 2012, I could see high-level spending data, like, here is how much doctors' billing contributed to healthcare spending, but it was hard to get more granular than that," he said. "When I left the Justice Department, the level of sophistication had increased to where I was able to query almost any doctor in the country and look at what their prescription habits were, what their diagnostic testing habits were, and I could do the same by beneficiary."

"By the time I left, I could build almost an entire case solely on data analytics," he said.

Another change Mehta said he noted during his time in government was a growing level of coordination between DOJ and other agencies, which he suggested could be relevant to genetic testing given the skepticism the US Food and Drug Administration has expressed around the utility of some cancer and pharmacogenomic testing.

"I would certainly expect as we get further downstream with more tranches of indictments, and I do think more are coming, I would expect DOJ to go after more subtle forms of alleged fraud schemes, and I would expect them to be coordinating more with FDA and other government partners," he said.

Cohen said that when tackling an emerging area of medical fraud, OIG typically starts with the most blatant actors and then works its way down to more borderline cases.

"At some point you're going to start getting into some gray areas," he said. "Right now, we are still working on the really egregious stuff [in genetic testing], and we'll carve our way down until we start to see legitimacy, because we never want to impact legitimate medical care."

"We just actually went through this with the opioid crisis," he said. "When we first respond to a big uptick like we did with opioids, we take the cream off the top — these people are just like drug dealing, basically. Then we start carving down … and we repeat the data metrics and we look to see where we might start impacting legitimate care."

Cohen said that while OIG anticipated "a big drop off" in genetic testing fraud following the recent indictments, it will have a better sense of their impact once new claims data arrives in the coming months.

"What residual problem remains we're not sure," he said.