Genomic Health Inc. Agrees to Pay $32.5 Million to Resolve Allegations Relating to the Submission of False Claims for Genetic Cancer Screening Tests

 

Genomic Health, Inc. (GHI), a Delaware corporation headquartered in Redwood City, California, has agreed to pay $32.5 million to resolve allegations that it violated the False Claims Act by engaging in a nationwide scheme to improperly bill Medicare for certain laboratory tests used to diagnose and treat cancer patients. GHI is a wholly owned subsidiary of Exact Sciences Corporation, which acquired GHI in November 2019.

GHI provides genomic-based clinical diagnostic tests. Its principal test, Oncotype DX®, is used for patients diagnosed with breast, colon and prostate cancer. The United States alleged that GHI perpetrated a scheme to evade Medicare’s 14-Day Rule, which governs the billing of genomic laboratory tests like Oncotype DX®.

During some or all of the time period covered by the settlement, Medicare’s 14-Day Rule prohibited laboratories from separately billing Medicare for covered tests if a physician ordered the test within 14 days of the patient’s discharge from a hospital stay in an inpatient or outpatient setting. For inpatient beneficiaries, such tests were covered under a lump-sum payment hospitals receive from the Medicare Program called the Diagnosis-Related Group (DRG) payment. For outpatient beneficiaries, Medicare’s 14-day Rule required (for most of the relevant time) tests ordered within 14 days of the patient’s discharge to be billed to the hospital but the hospital could then seek reimbursement from Medicare. However, if the test was performed more than 14 days after discharge from a hospital stay either in an inpatient or outpatient setting, then Medicare’s 14-Day Rule permitted laboratories to bill Medicare directly for the test. The United States contends that GHI improperly manipulated the 14-Day Rule in four ways:

• GHI sought direct reimbursement from the Medicare Program for claims on behalf of Medicare beneficiaries, when Oncotype DX® tests were ordered and submitted for testing within 14 days after an inpatient discharge. By submitting separate claims for these tests, GHI received direct payment for tests that should have been covered as part of the DRG payment to the hospital.
• GHI sought direct reimbursement from the Medicare Program for Oncotype DX® tests ordered within 14 days of a beneficiary’s outpatient procedure. By submitting separate claims for these tests, GHI received direct payment from Medicare for tests that should have been billed to the hospital.
• GHI conspired with and encouraged hospitals and physicians to cancel and reorder Oncotype DX® tests and failed to discourage providers who ordered tests within 14 days from canceling and reordering the tests after the 14-day time period had elapsed.
• GHI failed to send timely invoices to hospitals for laboratory services that fell under the 14 Day Rule and instead wrote off the unpaid fees for laboratory services, thereby violating the Anti-Kickback Statute.

“Participants in federal health care programs must comply with applicable rules when providing and billing for their services,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department will use the tools at its disposal to prevent companies from manipulating these programs for their own monetary benefit.”

“This settlement rightly requires the payment of double damages caused by delayed tests for cancer patients for no reason other than to circumvent a Medicare requirement and allow improper payment to GHI,” said U.S. Attorney Breon Peace for the Eastern District of New York. “We will continue to enforce Medicare rules to protect the program and its vital role in our health care system, especially for those suffering from the ravages of cancer.”

“Health care providers that unnecessarily delay services to evade Medicare requirements put their own profits over the well-being of vulnerable patients,” said Special Agent in Charge Naomi D. Gruchacz of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “With our law enforcement partners, HHS-OIG is committed to investigating potentially fraudulent billing that can compromise patient well-being and the integrity of our federal health care programs.”

The civil settlement includes the resolution of allegations brought in two separate actions filed against GHI under the qui tam or whistleblower provisions of the False Claims Act. Under those provisions, private parties can file an action on behalf of the United States and receive a portion of any recovery. The relator’s share from the proceeds of the settlement in this case will be $5,687,500. The qui tam cases are captioned United States ex rel. Caughron v. Genomic Health, Inc., Civil Action No. 16-CV-4038 (EDNY) and United States ex rel. Doe v. Genomic Health, Inc., et al., Civil Action No. 17-CV-4460 (EDNY).

The investigation and resolution of this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

The cases were handled by former Assistant U.S. Attorney Deborah B. Zwany and Assistant U.S. Attorney Anjna Kapoor for the Eastern District of New York and monitored by Senior Trial Counsel Sanjay M. Bhambhani of the Civil Division’s Commercial Litigation Branch. The HHS-OIG and the FBI assisted in the investigation of these cases.

The claims resolved by the settlement are allegations only and there has been no determination of liability.