Genova Diagnostics settles billing fraud claims for up to $43M

Asheville’s biggest recent controversy around medical testing doesn’t have anything to do with COVID-19. On April 27, the office of Andrew Murray, U.S. attorney for the Western District of North Carolina, announced that Asheville-based Genova Diagnostics had agreed to pay up to $43 million to settle allegations that it had fraudulently billed the federal government for unnecessary lab services.

According to a complaint filed with the federal court in May 2018, Genova allegedly sought and received payment for fecal, blood and urine tests that have not been scientifically proven to diagnose any medical condition. The company also allegedly classified some of those tests under false billing codes to defraud Medicare and Medicaid.

“Labs are expected to bill taxpayer-supported federal health programs for medically necessary services, not pad their bottom lines as alleged by the government in this case,” said Derrick L. Jackson, an investigator with the U.S. Department of Health and Human Services. “We will continue working with our law enforcement partners to safeguard these vital programs.”

Genova leaders referred an Xpress request for comment on the settlement to Mark Semer, a partner with New York-based communications firm Kekst CNC. According to Kekst’s website, the firm specializes in “reputational challenges” and crisis management.

“We conducted our own thorough investigation and are confident in the medical necessity of our tests and that Genova acted completely appropriately,” Semer said on the company’s behalf. “While we believed that Genova would have prevailed, we are pleased to avoid considerable distraction and expense by resolving this matter without any admission of guilt or wrongdoing.”

Raising the flag

Murray’s office notes that it first learned about Genova’s alleged behavior from Dr. Darryl Landis, who served as the company’s chief medical officer from 2012 through 2017. According to the complaint, Landis had shared concerns about the company’s practices internally as early as July 2015, when Blue Cross Blue Shield said it would exclude Genova’s stool tests from its coverage as medically unnecessary.

In response to his diligence, Landis alleges, Genova’s then-CEO Chris Smith disregarded his concerns as “overly conservative,” cut his department’s budget and repeatedly excluded him from meetings with company leadership. The complaint claims that Genova then falsely accused Landis of “employment related misconduct” and fired him.

Landis did not respond to a request for comment submitted through the website of Mustard Seed Venture Partners, the Greensboro-based medical investment firm for which he currently serves as a managing partner. Due to the doctor’s whistleblower role, Murray’s office notes that he will receive 15% of the settlement money — potentially almost $6.5 million.

“The value of our diagnostic tests has been demonstrated and recognized time and time again by a growing body of medical research and by a global customer base including more than 10,000 annual prescribing primary care and specialty physicians, as well as some of the most prestigious medical institutions in the world,” Semer said when asked about the clinical utility of Genova’s products. He did not respond to a request for further clarification about specific research or medical institutions that supported those claims.

Xpress asked Dr. William McCann, who practices with Allergy Partners of Western North Carolina and was not involved in the case, about one Genova blood test cited in the complaint that had been advertised as useful for detecting food intolerances. He said that the specific IgG antibodies measured by the test are also produced by the immune systems of healthy people after eating and aren’t thought to indicate any abnormality.

“As allergists, we don’t put great stock into that type of testing to indicate any form of allergy or ‘leaky gut,’ for which the science has always been a bit controversial,” McCann explained. He added that IgG testing was No. 1 on a list of tests of which consumers should be wary that was compiled by the American Academy of Allergy, Asthma & Immunology, his specialty’s leading professional organization.

The bottom line

As the most immediate consequence of the settlement, Genova will forfeit over $17 million in payments from Medicare and TRICARE, the civilian health benefit system for the U.S. military. The company will then enter a five-year “corporate integrity agreement” involving an outside review organization and additional federal compliance requirements.

Also over the next five years, Genova will pay the government 13% of any net annual revenue above $100 million and 20% of any asset sales over $1 million. Those payments will be capped at $26 million, creating a total potential liability of $43 million.

Semer did not address questions about what impact the settlement payments would have on Genova’s revenue or its ability to retain Asheville-based staff. As a privately held company, Genova’s finances are not publicly available, but the most current estimate from business analytics firm Owler places its annual revenue around $110 million.

“Government health care programs are designed to provide beneficiaries with care that is medically reasonable and necessary,” said Assistant Attorney General Jody Hunt of the U.S. Department of Justice’s Civil Division. “Providers of taxpayer-funded federal health care services will be held accountable when they knowingly cause false claims to be submitted for services that do not meet this standard of care.”