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DOJ Aims Scrutiny at Lab Testing Space During COVID-19 | Bradley Arant Boult Cummings LLP | #coronavirus | #scams | #covid19

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The Department of Justice is stepping up its scrutiny of health-care fraud, especially in testing laboratories, during the Covid-19 pandemic. Former federal prosecutor Jason Mehta, a partner with Bradley, says now is not the time to tout profits over patient care and offers insights on compliance.


In the midst of a global pandemic, much attention and praise is rightfully being showered on health-care providers. But government prosecutors are also watching—albeit for a different reason—and increasingly focusing their energies and sights on unscrupulous health-care actors seeking to take advantage of the pandemic.

A prime target of the Department of Justice’s enforcement efforts has been laboratory testing companies and allegations of kickbacks. Those in the health-care industry should be aware of the practical effects of this scrutiny and institute compliance plans, review requirements of the Anti-Kickback Statute, and be mindful of rules for federal monies taken under the CARES Act and federal health-care programs, among other things.

DOJ Touting Health-Care Fraud Enforcement

As even casual observers have learned, the government has dramatically increased its efforts to tackle perceived health-care fraud during the pandemic. This intensity of focus is not unique to Covid-19, but, the scrutiny involving alleged health-care fraud has intensified.

In recent weeks, the Department of Justice has sent out daily press releases announcing its focus on perceived Covid-19 fraud. These press releases note that “scammers…are attempting to prey upon fears” and are engaging in a variety of scams—from selling fake at-home test kits to selling fake cures to creating fraudulent or defective surgical masks and medical supplies.

The most notable health-care fraud case in the lab testing space to date stemmed from New Jersey. The government charged an Atlanta-based marketer for allegedly causing the submission of fraudulent respiratory testing claims related to Covid-19 tests.

The government charged the marketer, Erik Santos, with a variety of crimes related to violations of the Anti-Kickback Statute, alleging he sought to allegedly defraud the Medicare program by soliciting and receiving kickback payments from companies involved in clinical and diagnostic testing in exchange for steering potential Covid-19 patients to those companies.

The efforts in New Jersey related to this case are notable, in part, because the government’s scrutiny was so intense that it actually recorded phone calls with the defendant—and then proudly boasted about these phone call transcripts in its press releases.

In these calls, according to the government, the marketer went to lengths to describe how he viewed the pandemic as a money-making opportunity. The government’s theory of the case alleges that the marketer said, among other things, “while there are people going through what they are going through, you can either go bankrupt, or you can prosper,” and further, that his other work was on hold because “everybody has been chasing the COVID dollar bird.”

Effects of Government Scrutiny—and What to Do About It

Government scrutiny in the health-care field is often a question of “when,” not “if.” Given this, there are at least five practical effects likely to be felt by those in the pharmaceutical space who even tangentially touch the Covid-19 pandemic.

First, the government likely will be maintaining a very watchful eye of where its health-care infusion capital is spent and how it is spent—and this will likely continue for several years. The government can look back up to six years in investigating potential fraud. Now is a good time to remember that, if you accept federal money through the CARES Act or the federal health-care programs, you would be well-served by being extra vigilant and mindful of prosecutors’ scrutiny.

Secondwhile many health-care rules and regulations have been relaxed in recent weeks to allow for additional flexibility (for example, relaxing requirements for telemedicine visits), the government will still insist on strict compliance with certain provisions—most notably, the Anti-Kickback Statute. As the case in New Jersey demonstrates, prosecutors often hang their hats on the Anti-Kickback Statute, given its far reach. As such, laboratory owners need to carefully re-review its strict mandates.

Thirdthe government will likely cast a very skeptical eye on any practitioner or provider who seeks to profit from the Covid-19 pandemic. Seeking profits is not a crime, but the government has made clear that this as not being the time for practitioners to explicitly highlight profits over patient care and treatment.

Fourthwhile the government is rightfully devoting many resources to even experimental treatments, providers and pharmaceutical companies should be careful not to rush to market with unproven—and potentially ineffective—diagnostic testing tools. While this is axiomatic for a number of reasons, it is especially important now.

Fifth, and finally, the government is increasingly expecting anyone in the health-care space to have a robust compliance program to ferret out and address potential fraud, waste or abuse. The government now seemingly expects anyone in the health-care industry to have a compliance program as a prerequisite for participation in the federal health-care programs. A helpful starting point is to review the Justice Department’s April 2019 guidance on effective compliance measures.

It is unfortunate that at a time of peril, laboratory owners would need to be mindful of the government’s intense scrutiny and focus. Nonetheless, in the world of highly regulated health care, this focus is likely to remain for the foreseeable future. Those laboratory owners that are most adept at avoiding the government’s crosshairs are the ones that will recognize this enforcement paradigm as an opportunity rather than as an obstacle. Indeed, as the adage goes, an ounce of prevention is worth a pound of cure.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Republished with permission. The article, “INSIGHT: DOJ Aims Scrutiny at Lab Testing Space During Covid-19,” was first published by Bloomberg Law on August 27, 2020.

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