Health Law Daily Wrap Up, FALSE CLAIMS ACT—SETTLEMENT AGREEMENTS: Genomic Health to pay $32.5 million to settle allegations relating to cancer screening tests, (Oct 13, 2023)

By Sherri M. Schroeder, J.D.

The U.S. alleges that the company violated the False Claims Act with a nationwide scheme to improperly bill Medicare for genetic cancer screening tests in violation of Medicare’s 14-Day Rule.

Genomic Health, Inc. has agreed to pay $32.5 million to resolve allegations that it violated the False Claims Act by improperly billing Medicare for genetic cancer screening tests. Genomic provides genomic-based clinical diagnostic tests; its principal test, Oncotype DX®, is used for patients diagnosed with breast, colon, and prostate cancer. The U.S. alleges that Genomic conducted a nationwide scheme to evade Medicare’s 14-Day Rule, which governs the billing of genomic laboratory tests like Oncotype DX®. This rule prohibits laboratories from billing Medicare separately for covered tests if a physician-ordered the test within 14 days of the patient’s discharge from an inpatient or outpatient hospital stay. The settlement includes resolution of allegations brought in two separate actions filed against Genomic under the qui tam provisions of the False Claims Act. (Settlement Agreement, September 12, 2023).

Genomic. Genomic is a Delaware corporation headquartered in Redwood City, California. Genomic was acquired by Exact Sciences Corp. on November 11, 2019, and is a wholly owned subsidiary of Exact.

14-Day Rule. During some or all of the time period covered by the settlement (January 1, 2007, through February 29, 2020, but varying by allegation), Medicare’s 14-Day Rule prohibited laboratories from separately billing Medicare for covered tests if a physician-ordered the test within 14 days of a patient’s discharge from a hospital stay in an inpatient or outpatient setting. For inpatient beneficiaries, a lump-sum payment hospitals receive from Medicare called the Diagnosis-Related Group payment covers such tests. For outpatient beneficiaries, the 14-Day Rule required 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, in either case, if the test was performed more than 14 days from discharge, then the 14-Day Rule allowed laboratories to bill Medicare directly for the test.

Allegations. The U.S. alleged that Genomic violated the 14-Day Rule in five ways. First, the U.S. alleged that Genomic violated Medicare’s Date of Service (DOS) Rule by cancelling, delaying, holding, or otherwise not processing orders for tests subject to the DOS Rule, wherein claims for payment for tests ordered with 14 days following a hospital in-patient’s discharge are required to be submitted by the hospital to Medicare. This resulted in claims submission with dates of service resulting in direct reimbursement to Genomic.

Second, the U.S. alleged that Genomic knowingly submitted or conspired to submit false claims for Medicare reimbursement by permitting, failing to discourage, and encouraging providers who initially ordered tests within 14 days following a hospital in-patient’s discharge from the hospital to cancel those orders and reorder the tests at least 14 days following discharge.

Third, the U.S. alleged that Genomic knowingly submitted false claims for reimbursement to Medicare for tests ordered within 14 days following a hospital out-patient’s discharge from the hospital. For tests initially ordered within 14 days following discharge, Genomic submitted claims directly to Medicare for reimbursement. This resulted in Medicare paying Genomic for claims that Genomic should not have submitted directly to Medicare.

Fourth, the U.S. alleged that Genomic knowingly submitted or conspired to submit false claims for reimbursement to Medicare on behalf of Medicare beneficiaries by permitting, failing to discourage, and encouraging providers who initially ordered tests within 14 days following out-patient discharge to cancel those orders and reorder the tests at least 14 days following out-patient discharge.

Finally, the U.S. alleged that Genomic knowingly and willfully paid remuneration to hospitals by deliberately failing to collect payments from those hospitals for tests performed by Genomic for the hospital’s in-patients and out-patients when the tests were ordered within 14 days following the patient’s discharge from the hospital. As a result, the U.S. alleged that Genomic violated the Anti-Kickback Statute and knowingly caused false claims to be submitted to Medicare.

By its terms, the settlement agreement is neither an admission of liability by Genomic nor a concession by the U.S. that is claims are not well founded.

Settlement. To settle these allegations against it, Genomic agreed to pay $32,500,000, plus interest. Of this amount, $16,250,000 is restitution. The whistleblower received $5,687,500. In exchange, the U.S. released its claims for the covered conduct under the False Claims Act, the Civil Monetary Penalties Law, the Program Fraud Civil Remedies Act, and the common law theories of payment by mistake, unjust enrichment, and fraud.

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