Lab to Pay $63.5M to Settle Kickback Allegations

Inform Diagnostics, an Irving, Texas-based pathology laboratory company, has agreed to pay $63.5 million to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians.

The settlement stems from allegations that the company violated the Anti-Kickback Statute and the Stark Law by providing referring physicians with subsidies for electronic health records (EHR) systems and free or discounted technology consulting services. The Anti-Kickback Statute and the Stark Law restrict the financial relationships that health care providers, including laboratories, may have with doctors who refer patients to them.

In 2006, the Department of Health and Human Services (HHS) adopted regulations that included provisions allowing laboratories to provide EHR donations to physicians under certain conditions. The idea behind it was to help physician practices acquire EHR systems during the nascent days of the technology’s development.

However, HHS withdrew those so-called “safe harbors” for laboratories in 2013. At the time of the withdrawal, the Office of Inspector General indicated that it had concerns related to the potential for laboratories and other ancillary service providers to abuse its safe harbor, as it had received comments suggesting that abusive donations were being made under the electronic health records safe harbor.

“We believe this decision is consistent with and furthers our continued goal of promoting the adoption of interoperable electronic health records technology that benefits patient care while reducing the likelihood that the exception will be misused by donors to secure referrals,” CMS noted in its decision to exclude laboratories from the safe harbors. “We also believe that our decision will address situations identified by some of the commenters involving physician recipients conditioning referrals for laboratory services on the receipt of, or redirecting referrals for laboratory services following, donations from laboratory companies.  

The Department of Justice alleged in its lawsuit that Inform Diagnostics violated those safe harbors.

The allegations, which stem from three whistleblower lawsuits, claimed that from May 2008 to December 2013 Inform Diagnostics, (which until January 2018 was known as Miraca Life Sciences), provided ERH donations to physicians and other healthcare providers that did not comply with the requirements of the Anti-Kickback Statute and Stark Law because “the donation decisions took into account the volume or value of the referrals of laboratory tests or other business between ERH donation recipients and Miraca, or otherwise did not meet the requirements of the laws applicable to those donations.”

The government also alleged that the company knowingly submitted, or caused to be submitted, false claims to the Medicare, Medicaid and Tricare programs for services rendered to its patients that were ordered by healthcare providers who received the technology-related consulting services

In January 2018, Miraca Life Sciences announced that it has changed its name to Inform Diagnostics. The company was acquired by Avista Capital Partners from previous owner Miraca Holdings.

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