Similar to other types of healthcare entities, clinical laboratories have been facing enhanced scrutiny from federal authorities over the past couple of years. While this is due in part to fraud concerns related to COVID-19 testing, authorities such as the U.S. Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) are scrutinizing all aspects of clinical laboratories’ operations and laboratory services, and they are pursuing both civil and criminal charges when warranted.
When facing federal health care fraud investigations, clinical laboratory owners and executives must make informed and strategic decisions, and they must take a proactive approach to avoid civil or criminal charges. While these investigations can be extremely high-risk, it is also possible to achieve favorable outcomes and avoid prosecution in many cases. With that said, there are no guarantees, and laboratory owners and executives must be prepared to protect their businesses (and themselves) by all means available.
“Clinical laboratories are under the microscope, and investigations targeting labs, their owners, and their executives are increasingly leading to criminal charges. When targeted by the DOJ, FBI, or any other federal agency, lab owners and executives need to act immediately, and they need to make informed and strategic decisions based on the advice of experienced healthcare fraud defense counsel.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
With all of this in mind, if your clinical laboratory is under investigation (or if you are concerned about the possible outcome of a federal investigation), there is a lot you need to know. Here are 10 key facts about building and executing a strategic defense:
1. You Need to Know Why Your Clinical Laboratory is Under Investigation
When facing an investigation, one of the first things you need to figure out is why the federal government is targeting your laboratory. Clinical laboratory investigations can involve a multitude of allegations. This includes, but is by no means limited to) allegations such as:
- Laboratory testing fraud (including fraudulent laboratory test for COVID-19)
- Toxicology fraud
- CGX and PGX fraud
- Medicare, Medicaid, and Tricare billing fraud
- Private health insurance and patient billing fraud
- Anti-Kickback Statute violations
- Medically unnecessary testing and improper reliance on standing orders
All of these are very different allegations that entail different facts and require different defense strategies. As a result, until you know why the DOJ, FBI, or another federal agency is targeting your laboratory, you won’t be able to defend your lab (or yourself) effectively.
2. You Need to Know Your Lab’s Risks (and Your Personal Risks) in the Investigation
Once you identify the specific allegations at issue, then you can assess your lab’s risks (and your personal risks) in the investigation. While many clinical laboratory investigations are civil in nature, as noted above, criminal charges are also possible—and the DOJ has shown an increasing willingness to pursue criminal charges against healthcare entities in recent years. This is especially true in cases involving COVID-19 fraud, fraud affecting patients, and fraud affecting government healthcare benefit programs.
3. By the Time Lab Owners or Executives Become Aware of an Investigation, It Is Already Well Underway
Federal agents conduct investigations strategically. They gather information from multiple sources, and they wait as long as possible before tipping off-targets in most cases. This means that by the time you learn your clinical laboratory is under investigation, the investigation could already be well underway.
This is important for several reasons. Most importantly, it means that you must act immediately to begin building your defense. It also means that you must make strategic decisions about the extent to which you choose to cooperate in the investigation. If the government has already built a substantial case, then cooperating may be the most viable option for many laboratories. On the other hand, if investigators are still trying to piece together the evidence needed to substantiate charges, then sharing too much information could increase your risk of civil or criminal prosecution.
4. You Need to Know What the Investigators Are Going to Find
Regardless of the current status of the government’s investigation, you need to know what investigators are going to find. This will further inform your defense strategy, and it will help you avoid costly mistakes that you and your clinical lab investigation lawyer cannot undo.
Determining what evidence is available involves conducting an attorney-client privileged internal audit. To ensure that the audit is as efficient and effective as possible, it should focus on the specific issue (or issues) underlying the government’s investigation. Since investigators may eventually issue a civil investigative demand or seek a subpoena as well (if they haven’t already) this step will also serve the secondary purpose of preparing for any compulsory document production.
5. You Need to Know What Documents You Can Use in Your Defense
Your clinical laboratory’s internal audit should also focus on identifying all documents and data that you can use in your defense. For example, if you're accused of fraud for clinical laboratory tests, this may involve collecting all available documentation of your lab’s medical necessity determinations. Or, if investigators are targeting Anti-Kickback Statute violations, then your defense counsel will want to obtain and review the relevant agreements and communications to determine whether any exceptions or safe harbors apply.
Here, too, expedience is paramount. The sooner your defense counsel can gain a comprehensive picture of the facts at hand, the sooner your defense counsel can build a defense strategy and begin steering the investigation toward a favorable result. Your clinical lab investigation attorney must have access to all relevant documents and information—both favorable and unfavorable—as presenting only part of the picture can raise red flags.
6. Investigators Are Also Relying on Evidence from Third-Party Sources
In this regard, it is also important to keep in mind that investigators are also relying on evidence from third-party sources. If you attempt to hide or misrepresent information that investigators have already obtained from a third party (i.e., a patient, former employee, or referring physician), this could have significant negative ramifications for your defense.
With that said, clinical laboratory owners and executives should not assume that investigators already have access to the entire universe of relevant information, and they should still make informed decisions about not only what they disclose, but also how and when they disclose it. Lab owners and executives need to be careful to preserve their privileges as well, as even inadvertent waivers are irrevocable in most cases.
7. Clinical Labs (and Their Owners and Executives) Can Face Multiple Charges Carrying Steep Penalties
Even when federal investigators are targeting one specific type of fraud, a clinical laboratory investigation can lead to multiple counts of multiple charges. This includes charges for healthcare-specific offenses such as Medicare billing fraud and soliciting or receiving kickbacks, as well as charges for general offenses such as wire fraud, mail fraud, and conspiracy to defraud the United States. Collectively, these charges can put lab owners and executives at risk for decades of federal imprisonment and millions of dollars in fines.
8. There are Defenses to All Federal Healthcare Fraud Offenses
No matter what allegations federal authorities are targeting, clinical laboratories and their owners and executives have defenses available. The burden of proof rests squarely on the government, and investigators must be able to gather sufficient evidence for prosecutors to prove each element of each alleged offense. By examining all of the relevant facts, an experienced clinical lab investigation attorney will be able to determine what defenses are available, and then will be able to assemble and execute a cohesive defense strategy while systematically targeting a specific desired outcome.
9. In Many (But Not All) Cases, It Will Be Advantageous To Resolve the Inquiry at the Investigative Stage
What constitutes a desirable outcome during a clinical laboratory investigation depends on the circumstances involved. In many cases, lab owners and executives will have opportunities to resolve their investigations without any civil or criminal liability. However, there are also circumstances in which the most prudent approach will be to work with the government to reach a mutually agreeable resolution.
Broadly speaking, targeting a pre-charge resolution will be preferable in most cases. This avoids the inherent uncertainty of facing an indictment and minimizes the risk of negative publicity. With that said, clinical lab owners and executives should not be willing to accept unfavorable deals simply for purposes of avoiding trial, and this is another area where having experienced counsel can have a substantial impact on the outcome of an investigation.
10. Engaging an Experienced Clinical Lab Investigation Lawyer is the First Step Toward a Favorable Outcome
In light of the considerations discussed above, engaging an experienced defense counsel is the first step clinical lab owners and executives should take when facing a federal investigation. By working with experienced defense counsel, clinical lab owners and executives can ensure that they are making the right decisions at the right times, and they can feel confident knowing that the government is not moving forward unchecked in its effort to substantiate civil or criminal charges.
