Federal law enforcement agencies — led by the DOJ Strike Force, HHS-OIG, and the FBI — are actively and aggressively auditing, investigating, and prosecuting COVID-19 testing fraud. Physicians, laboratories, and pharmacies that filed high volumes of claims for federal healthcare benefit programs have ample reason to be concerned, and to seek experienced legal counsel before investigators come knocking.
Two Types of COVID Tests Under Investigation
There are two types of COVID-19 tests currently under federal investigation. The first is the PCR test, administered at the site of service. Federal authorities are focusing on whether these tests were medically necessary, rendered as billed, and whether kickbacks were involved in the referral or ordering process.
The second is the rapid antigen over-the-counter (OTC) test that was mailed to Medicare beneficiaries. This program became a significant target for fraud due to the volume of tests distributed and the relative ease of obtaining Medicare beneficiary identification numbers to submit claims.
Laboratory and Pharmacy Operators in the Crosshairs
Agents and prosecutors from HHS-OIG, DOJ, and the FBI are cracking down on laboratory and pharmacy operators for alleged fraudulent billing related to COVID-19 OTC testing and other laboratory billing schemes. Recent federal prosecutions have involved laboratory owners charged in connection with a $36 million scheme involving health care fraud, wire fraud, and money laundering related to fraudulent COVID-19 testing claims submitted to Medicare and other government-funded healthcare programs.
Other recent prosecutions have targeted laboratory owners accused of using illegally obtained Medicare beneficiary identification numbers to bill Medicare for OTC COVID-19 test kits — claims submitted for beneficiaries who never requested, and in many cases never received, the test kits at all.
Marketing Companies and Third-Party Liability
In addition to laboratory operators, recent DOJ prosecutions have targeted "marketing companies" contracted to generate leads for laboratory providers and, in many cases, to fulfill beneficiary requests for OTC COVID-19 test kits. DOJ investigations have focused on third-party marketers hired by laboratory providers who subsequently billed for unrelated, unnecessary, and more-costly testing than ordered; failed to gather the required informed consent; failed to document evidence of delivery; or simply failed to provide test kits altogether.
Critical exposure for lab providers: In many instances, laboratory operators may have relied on contracted marketers in good faith — entirely unaware of the civil and criminal liability their marketers were creating. Even where laboratory providers are themselves unaware of these schemes, they may nonetheless be legally responsible for their marketers' conduct and subject to civil or criminal prosecution, recoupments, or both.
HHS-OIG Referrals and CMS Coordination
Labs identified by HHS-OIG as having high volumes of claims or payments for COVID-19 testing with add-on tests — including individual respiratory tests, respiratory pathogen panels, genetic tests, and allergy tests — are being referred to CMS under suspicion of fraud, waste, and abuse. CMS is coordinating with criminal prosecutors to recoup funds paid and to hold providers criminally responsible not just for their own errors, but also for those of their contractors where evidence of fraud exists.
Laboratory providers are under the microscope. Given the significant uptick in criminal and civil cases related to COVID-19 testing, laboratories and related providers need to be especially aware of the importance of addressing audits quickly and effectively — and of retaining experienced defense counsel before any government contact occurs.
Under Audit or Investigation for COVID Testing Fraud?
Whether you are a laboratory operator, pharmacy, or physician facing an audit, subpoena, or federal investigation related to COVID-19 testing, the time to act is before charges are filed. As a former federal prosecutor, Justo Mendez knows how these cases are built — and how to defend them.