Genetic testing: the next big arena for fraud?

When technology or insurance coverage determinations evolve, so do the opportunities for mischief. That’s what my colleagues and I have been seeing in the genetic testing space.

Genetic testing, whether it’s for ancestral research or assessing disease risk, is an extraordinary tool made possible by advances in science, computing capacity, and the sequencing of the human genome. What was inconceivable 25 years ago can now be accomplished with a saliva sample, some mostly automated laboratory tools, focused computing power, and specialized expertise in the identification of the genetic mutations. The cost of genetic testing for disease assessment can be as high as $10,000.

With that kind of money in play, opportunists see an opening.

Genetic testing labs are sprouting up all over the country, in part because some health insurers now pay for genetic testing in certain circumstances. The Centers for Medicare and Medicaid Services, for example, now pays for what’s called next-generation sequencing for individuals with advanced cancer or a family history of certain types of cancer if the test is medically necessary and is ordered by a treating physician.

It didn’t take long for creative and devious minds to find ways to have CMS issue large reimbursement checks for fraudulent genetic testing schemes.

Just this week, the Office of Inspector General of the Department of Health and Human Services (OIG) updated a fraud alert warning Americans to watch out for scammers:

“Scammers are offering Medicare beneficiaries cheek swabs for genetic testing to obtain their Medicare information for identity theft or fraudulent billing purposes. Fraudsters are targeting beneficiaries through telemarketing calls, booths at public events, health fairs, and door-to-door visits…If a beneficiary agrees to genetic testing or verifies personal or Medicare information, a testing kit is sent even if it is not ordered by a physician or medically necessary.”

What’s going on here is the same pattern of activity that has occurred throughout the health care system: a great majority of law-abiding actors and a few that seek out opportunities to game the system of government reimbursement. If you can get a saliva swab and a Medicare number from an unsuspecting senior and falsify a doctor’s order (or find a shady doctor to write one), there’s an easy four-figure sum to be had. And if you’re willing to repeat that dodge a few hundred or a few thousand times — you get the idea.

All a scammer must do is find a laboratory willing to split the profit from the testing once the DNA samples are in hand. With more and more labs opening, there are plenty of doors upon which to knock.

A typical scheme might go something like this: A scammer offers free ice cream sundaes, gift cards, or even casino chips at a retirement community or “Medicare expo” for anyone who would like to hear about the exciting new technology of genetic testing and what it might reveal about “your family’s risk of cancer” or some other come-on. The scammer describes this sophisticated technology and downplays or ignores the medical necessity criteria and the need for a doctor’s order. He or she persuades some attendees to provide saliva samples and gets identifying information, such as the senior’s name, date of birth, and Medicare number.

The scammer then approaches a testing lab, saying, “I can find you a lot more business and get you a lot more patients — if you share the proceeds with me.” This, of course, violates the federal anti-bribery law known as the Anti-Kickback Act.  But the lure of high-volume profits can be strong enough for some to ignore that roadblock.

An ethical lab would detect that something is amiss with such a request. An alert lab might question how an individual who is not a doctor has gotten so many saliva samples and personal information from so many “patients.” Other labs may simply play the game without asking enough questions or worse, knowing that the tests are not medically necessary, as required by the rules. The promise of easy money can be just too alluring.

Early successes with this opportunistic and illegal behavior are being followed by civil lawsuits and criminal indictments. In February of this year, GenomeDxBiosciences Corp. settled civil claims connected to genetic testing for nearly $2 million. In March, a Cambridge, Mass., company, The Center for Human Genetics, Inc., paid $500,000 to settle the attorney general’s allegations that the company had overbilled MassHealth for genetic tests. And three weeks ago, a New Jersey man was sentenced to 50 months in prison for the kind of scam I described earlier, using inducements and scare tactics to lure seniors into providing saliva samples and then passing along the samples to his employer, a testing lab, without meeting the medical necessity criteria.

More such stories are sure to follow. The fact that OIG has updated its fraud alert indicates that the problem is ongoing and expanding. I expect to see many more such lawsuits and indictments in the coming months — until the scammers and the complicit labs get the message that this opportunity isn’t so easy anymore.

Bob Thomas, a former assistant U.S. attorney, is the co-founder of The Whistleblower Law Collaborative LLC.