Sleep Lab and Two Executives Settle Kickback and Medical Necessity Qui Tam Claims

Takeaway: Recent qui tam settlement highlights the DOJ’s continued focus on fraud and abuse in the diagnostics industry and robust enforcement of the Anti-Kickback Statute.

Earlier this month, Snap Diagnostics LLC and two of its executives entered into a nearly $4 million settlement with the United States to settle two qui tam lawsuits. Snap agreed to pay the government $3.5 million with the two executives, Gil Raviv and Stephen Burton, agreeing to pay $300,000 and $125,000, respectively. The settlement amounts were based on the defendants’ ability-to-pay, suggesting that the defendants’ potential exposure may have been far more significant.

The settlement addressed alleged fraud within Snap Diagnostics, an Illinois-based sleep lab. The government alleged that Snap routinely submitted claims for medically unnecessary tests and engaged in three different kickback schemes.

The kickback allegations are familiar territory in the diagnostics space. First, for commercial-insured patients, Snap allegedly offered to interpret certain sleep tests for referring physicians and then provided an unsigned report to the physician. This would allow the referring physician to sign off and then obtain reimbursement for the professional component of the test. In other words, without doing any substantial work to justify the professional component, referring physicians were given a “blank check” to obtain the professional component payment from payors. And so, something of manifest value would be provided to induce or reward referrals.

Second, Snap allegedly used an independent contractor salesforce but paid the salesforce volume-based commissions, even for federally insured patients.  For years, the Department of Justice has sought to hold wrongdoers both civilly and criminally liable for remarkably similar commission-based schemes. Third, Snap purportedly offered free or discounted sleep tests (e.g., waived copays) to providers, their family members, and their staff. Improper discounts on diagnostic tests, pharmaceuticals, and other services have become a major area of government enforcement in recent years.

The Snap case is a reminder of the Department of Justice’s perennial focus on diagnostic testing companies. Yet it is also emblematic of the government’s robust enforcement of the Anti-Kickback Statute and the fact that fraudsters do not need to reinvent the proverbial wheel. The same kickback schemes, with only minor variations, bubble up across the entire healthcare sector.

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