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Court Clarifies Medical Necessity Ruling in Groat v. Boston Heart Diagnostics

NEW YORK (360Dx) - A federal court in Washington, DC has modified a ruling about whether labs can be held legally responsible for determining the medical necessity of lab tests ordered by physicians.

Last June, US District Court Judge Reggie Walton raised alarm in the lab industry when the wording of his denial of a motion to dismiss a False Claims Act lawsuit suggested that labs have "an obligation" to determine the medical necessity of tests. The lawsuit, Groat v. Boston Heart Diagnostics, was brought by former UnitedHeathcare Medical Director Tina Groat.

Judge Walton concluded last month that the court's earlier opinion "overstated" a laboratory's obligation to establish the medical necessity of lab tests.

"The Court is now convinced that a laboratory cannot and is not required to determine that the laboratory tests billed to Medicare are medically necessary. The OIG Guidance makes clear that 'laboratories do not and cannot treat patients or make medical necessity determinations,' but 'should be able to produce or obtain from the treating physician ... the documentation to support the medical necessity of the service the laboratory has provided,'" Walton wrote in his latest opinion.

While clarifying the court's ruling on the role of labs in determining medical necessity, Walton's ruling has not ended the case. Walton's ruling affirmed that Boston Heart's motion to dismiss the case has been denied. In the suit, Groat alleges that Boston Heart provided physicians with preprinted order forms that encouraged physicians to order screening tests that were not medically necessary.

The clarification, however, is likely to alleviate some of the concerns of the earlier ruling. The wording of the earlier ruling had prompted the American Clinical Lab Association to weigh in, filing its own amicus curiae brief asking the court to consider the impact on the lab industry of requiring labs to determine medical necessity.

ACLA had argued that holding labs responsible for verifying medical necessity could adversely affect patient care. In many cases, labs don't even come into contact with patients, and forcing labs to take the time to evaluate whether there was a basis for determining medical necessity could slow down the diagnostic process, the association argued.

In an interview in October, Peter Kazon, senior counsel with Alston & Bird, ACLA's outside legal counsel, noted that the association was exclusively concerned with the potential impact of the judge's ruling on the lab industry, and was not taking a position on the legal dispute between the two parties.

"Our point is you should reconsider this, and at a minimum revise that part of the decision that basically says laboratories have this independent obligation," Kazon said.