Labs Have Independent Duty to Certify Tests Billed to Medicare are Medically Necessary

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Original Publish Date: July 11, 2017

On June 9, 2017, the D.C. Circuit Court declined to dismiss a whistleblower lawsuit against Boston Heart Diagnostics. This does not decide the outcome of the case – it only decides whether the whistleblower plaintiff pled sufficient facts for the case to move forward. However, in making the decision not to dismiss the case, the court made a significant ruling on laboratories’ duties with regard to medical necessity. The court found that because labs certify in the CMS Form 1500 that all services are medically necessary, the burden is on the labs, not the doctors who ordered the tests, to confirm that the tests are medically necessary. Pursuant to this ruling, labs can no longer rely on doctors to confirm the medical necessity of tests. Labs must now make a determination if the lab tests for which they seek payment from the government are medically necessary.

In this particular case, United States ex rel Groat v. Boston Heart Diagnostics Corp., the plaintiff is a medical doctor who was the “National Medical Director of Women’s Health and Genetics at United Healthcare.” The complaint alleges that Boston Health is a clinical lab that provides diagnostic testing related to cardiovascular health. The plaintiff alleged that Boston Heart performed various genetic and non-genetic tests that are not medically necessary for patients with four specific diagnostic codes because those tests are used solely for screening purposes and as such are not covered by Medicare. Boston Health, in support of its position that the complaint should be dismissed, argued that labs are only required to maintain documents from ordering physicians and to ensure that the information submitted with the claim accurately reflects the information received from the ordering physician. Boston Health argued that accordingly, the certification on the CMS-1500 is merely the lab relying on the determination by the treating physician that the tests are medically necessary. The court rejected this argument stating that Boston Health’s reliance on Medicare’s record keeping requirements does not address the lab’s certification of medical necessity on the CMS-1500 form. The court found that the recordkeeping regulation had no bearing on the medical necessity certification on the CMS-1500 form. The court then cited numerous cases from around the country to find that the regulatory scheme puts the burden of establishing medical necessity of diagnostic tests on the entity submitting the claim.

As noted above, this case is in its early stages and we will continue to monitor it as it progresses to provide further updates.

Mr. Cooper provides legal representation to a broad range of hospitals, other healthcare facilities and physician groups across the United States. He has been listed in The Best Lawyers in America for health law for twenty-three consecutive years and selected for inclusion in Ohio Super Lawyers (2005-2015).

Visit the McDonald Hopkins LLC web site at www.mcdonaldhopkins.com.