Court Reverses itself (in Part) in Laboratory Testing Case

A federal court judge in the District of Columbia has reversed his previous ruling that found Boston Heart Diagnostics Corp. was legally obligated to ensure the medical necessity of tests when submitting claims to Medicare.

However, U.S. District Judge Reggie B. Walton did not go so far as to toss the lawsuit entirely, stating that the case against the Farmington, Mass.-based clinical lab could still go forward on allegations that it engaged in a scheme to encourage non-cardiology physicians to order medically unnecessary tests through a false marketing campaign and pre-printed test requisition forms.

The ruling grew out of a motion to dismiss, filed by Boston Heart, which provides diagnostic testing for cardiovascular health. The lab is the subject of a qui tam action filed by Dr. Tina D. Groat, the former National Medical Director of Women’s Health and Genetics at United Healthcare.

Groat alleged that the various tests conducted by the lab were not medically necessary for patients with certain diagnostic codes and that when such tests were performed they were used solely for screening purposes on adults who do not exhibit signs, symptoms, complaints or personal history of heart disease, and therefore should not be covered by Medicare or other government healthcare programs.

Groat argued that Boston Heart’s claims were false because the standard claim form the laboratory was required to submit for reimbursement includes a certification that the tests performed were medically necessary. She also argued that Boston Heart engaged in a scheme to encourage non-cardiology physicians to order medically unnecessary tests through a false marketing campaign and pre-printed test requisition forms.

In its motion to dismiss, Boston Heart argued that a patient’s doctor, and not the laboratory, should be the one to determine whether a test is medically necessary and it could not possibly do so because it did not have access to each patient’s medical records, nor does the lab interact with patients on the same level as physicians.

In June, Judge Walton, agreed with Groat that because labs certify in the CMS Form 1500 that all services are medically necessary, the burden is on the labs, not the doctors who ordered the tests, to confirm that the tests are medically necessary. In that opinion, Judge Walton relied on Garcia v. Sibelius, a California case that involved laboratory tests billed by a doctor, not by an independent laboratory.

The judge, in reversing his original ruling, noted that the case “does not speak directly to the issue of whether a laboratory must independently determine medical necessity or is permitted to rely on the ordering physician’s determination in its certification to HHS.”

Had the ruling been allowed to stand, laboratories would have been required to obtain each patient’s medical records and review them to ensure the tests were medically necessary. This would have placed an undue burden on labs and likely would have resulted in delays, denials or added costs.

In reversing his ruling, the judge, after reviewing OIG guidance, concluded that he overstated a laboratory’s obligation to establish that the tests for which it seeks government reimbursement are medically necessary.

“The Court is now convinced that a laboratory cannot and is not required to determine medical necessity, but rather is permitted to rely on the ordering physician’s determination that the laboratory tests billed to Medicare are medically necessary,†Judge Walton wrote. He added: 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.â€

Finally, Judge Walton noted that even though he now agreed that the lab was not required to independently verify the medical necessity of the tests, he “remained convinced†that “the relator has sufficiently alleged facts that satisfy the falsity and knowledge elements of her federal and state presentment and false statements claims,†and declined to dismiss the case based on those claims.