Genova Diagnostics Inc., a clinical laboratory services company based in Asheville, North Carolina, has agreed to pay up to approximately $43 million to resolve allegations that it violated the False Claims Act, including claims that it billed for medically unnecessary lab tests . The settlement resolved allegations that the company: (a) improperly submitted claims to Medicare, TRICARE, and the federal employee health program for tests that were not medically necessary, (b) engaged in improper billing techniques, and (c) violated the Stark law, which prohibits physicians from referring patients for certain designated health services paid for by Medicare to any entity in which they have a financial relationship.
The alleged misconduct was brought to light by former Genova vice-president and chief medical officer Darryl Landis through the whistleblower provisions of the False Claims Act. Landis was represented by the law firm of Womble Bond Dickenson of Winston-Salem, North carolina. The suit was filed against Genova Diagnostics, Inc.; GNVA Holdings Inc,; Levine Leichtman Capital Partners V, L.P.; Lauren Leichtman, Aaron Perlmutter, and Chris Smith. The allegations included:
- Genova markets a variety of unconventional laboratory tests to the functional medicine market, including test panels that relate to hormones, food allergies, nutrition, and gastrointestinal bacterial targets.
- There is insufficient evidence that these are medically necessary and therefore eligible for Medicare or Medicaid payment.
- through Requisition Forms, the defendants knowingly forced physicians to order a large number of tests on each Panel which are not individualized for patients, which results in the ordering of and Genova’s billing of Medicare and Medicaid for tests that are medically unnecessary and not relevant to the diagnosis or treatment of patients.
- From July 1, 2015 through June 30, 2017, Genova, with the knowledge or and at the direction of its owners, managers, and board of directors, has fraudulently submitted claims for payment for and received over $21 million in reimbursements from Medicare for the Panels. During that time period, it also has submitted claims for payment for and received Medicaid reimbursements from the State of North Carolina for the Panels.
- Genova also made payments to three phlebotomy vendors that violated the Stark Law .
Under the settlement, Genova has agreed to pay approximately $17 million, through the surrender of claim funds held in suspension by Medicare and TRICARE, plus up to an additional $26 million if certain financial contingencies occur within the next five years, for a total potential payment of up to $43 million . Genova also entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General. Among other things, the CIA requires Genova to establish and maintain a compliance program and engage an independent review organization . Dr. Landis will receive roughly $6 million as part of the settlement.
The Tests at Issue
The lawsuit challenged three types of tests, which it described this way:
- GI Effects Comprehensive Panel. A panel of fecal stool tests that assesses 46 different biomarkers of gastrointestinal function, including 24 commensal bacterial targets found in the gastrointestinal system. In 2017, Genova’s Web site claimed that the test provided “immediate, actionable clinical information for the management of gut health” and individuals with “leaky gut symptoms”; celiac disease; inflammatory bowel disease (IBD); diabetes; obesity; cardiovascular disease; celiac and other malabsorption disorders; mood disorders; autism; and autoimmune disorders; and other conditions.
- IgG Food Antibody Panel. A food sensitivity test that “helps identify those with true IgE-mediated allergies as well as IgG-mediated food intolerances.” In 2017, Genova’s Web site claimed that the test was ideal for patients who may suffer from delayed reactions/sensitivities to specific foods. It may also provide insight on intolerances, or nonimmune responses, to certain foods.”
- NutrEval Panels. These test over 100 organic acids, amino acids, fatty acids, micronutrients, and other elements in an individual’s blood and urine. In 2017, Genova’s Web site promoted the NutrEval Test FMV (First Morning Void) test as “an advanced diagnostic tool to guide nutritional therapies, often augmenting and speeding recovery of complex chronic conditions” the site claimed that the NutrEval Plasma test, would “reveal nutritional imbalances or inadequacies.” The site recommended both NutrEval Panels for individuals who suffer from mood disorders, fatigue, digestive complaints, chronic pain, inflammatory conditions, cardiovascular risk, and weight issues.
The complaint also indicates that Dr. Landis was hired in 2012 to be its chief medical officer and tasked with developing medical necessity evidence for its tests. At that time, the company regarded him as an expert in medical policy, research, and evidence-based care. After he joined the company, he helped develop a strategy that would enable Genova to establish the medical necessity for various tests, and Genova budgeted $1 million for a clinical evidence study to be conducted. However, a change in ownership and management “focused its money and efforts on marketing and the increasing of profits, and shifted its focus away from the costly development of medical necessity evidence for Genova’s panel tests. Dr. Landis “repeatedly raised concerns about and warned . . . about the weak to non-existent clinical support for the medical necessity of Geneva’s panel tests . . . and the resulting impropriety of Genova’s Medicare and Medicaid billing of those tests.” When Dr. Landis warned that the company might be liable for fraud, he was gradually marginalized within the company and was ultimately fired.
No Admission of Liability
This Settlement Agreement states that it is neither an admission of liability by Genova nor a concession by the United States that its claims are not well founded. Further, Genova denied all the allegations and denied that it engaged in the alleged misconduct. After the agreement was announced, a company spokesperson released the following statement:
We were contacted by the government and responded to questions on federal program billing on certain of our tests. We conducted our own thorough investigation and are confident in the medical necessity of our tests and that Genova acted completely appropriately. 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. We could not be more excited for what the future holds as Genova Diagnostics has for more than 30 years meaningfully improved the lives and well-being of patients, particularly those with chronic conditions for whom other medical approaches have had poor and costly results. 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 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 
It is not unusual for defendants accused of health fraud to be permitted to agree to take corrective action without admitting that they did anything wrong. In this case, the prosecutors achieved their goal of stopping the false billing and recovering improperly billed money, and defendants were happy tto be able to say that they were not proven to have done anything wrong. The likely harm to consumers who underwent the challeneged tests was not relevant.
Dozens of laboratories in the United States provide unproven tests through offbeat practitioners . The Federal Trade Commission could investigate the truthfulness of claims made for such tests. The FDA and other laboratory regulators could investigate their clinical validity, State licensing boards could investigate whether practitioners who administer such tests provide adequate care to their patients. Unfortunately, few such investigations are conducted.
- Testing laboratory agrees to pay up to $43 million to resolve allegations of medically unnecessary tests. USDOJ press release, April 27, 2020.
- First amended complaint. USA and State of North Carolina ex rel. Darryl Landis, M.D., v. Genova Diagnostics, Inc and others. U.S. District Court for the Western District of North Carolina. Case No. 1:17-cv-341, filed May 8, 2018.
- Settlement agreement, filed April 27, 2020.
- Corporate integrity agreement between the Office of Inspector General and Genova Diagnostics, April, 2020.
- Asheville lab to pay up to $43 million to resolve unnecessary test claims. ABC News 13, April 27, 2020.
- Barrett S. Laboratories doing nonstandard laboratory tests. Quackwatch, March 12, 2019.