October 3, 2022

Volume XII, Number 276


October 03, 2022

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3 Defense Strategies & 4 FAQs About Clinical Laboratory Investigation Cases

Clinical laboratory executives who learn that their company is under investigation are bound to have pressing questions about the process and how to defend themselves. 

4 Commonly Asked Questions About Clinical Laboratory Investigations

1. Who Conducts These Clinical Laboratory Investigations?

It depends on the nature of the investigation. Different types of clinical laboratory investigations can be conducted by law enforcement agencies, administrative agencies, or even private parties.

The most serious type of clinical laboratory investigation is a criminal investigation. Clinical laboratories are most likely to face one if there is evidence that they are committing healthcare fraud. In these cases, the clinical laboratory investigation will be conducted by any of the following federal law enforcement agencies:

In many cases, they work in tandem with one another.

Administrative investigations and audits are conducted by federal agencies that are concerned with the fraud, abuse, and waste of Medicare or Medicaid funds. These agencies include the OIG, the Centers for Medicare and Medicaid Services (CMS), as well as private contractors working for CMS, like a Medicare Administrative Contractor (MAC).

Finally, private insurance companies frequently conduct their audits and investigations to ensure they are not overpaying your lab for the services you are providing.

2. What Can Happen if the Investigation Finds Something?

The penalties also depend on the nature of the clinical laboratory investigation. 

If a government or law enforcement agency is conducting a clinical laboratory investigation and it uncovers evidence of a crime, you or your lab will likely be facing a criminal charge, often for healthcare fraud. If the investigation finds evidence of fraud but not the intent necessary to be a crime, they can still file a civil lawsuit against your lab to recoup losses and impose a penalty, often for treble damages.

If the clinical laboratory investigation is by a private insurer, they may demand restitution for the overpayments, as well. They can also penalize your lab in other ways, like by requiring a pre-approval review of all your claims against it or by terminating your agreement completely. 

3. Can My Lab Still Be Penalized for an Accident?

Yes, even accidental or unintentional conduct of clinical laboratory services can be penalized, though usually with only non-criminal sanctions.

A good example of this in action is a billing error against Medicare. If an associate at your lab deliberately upcodes a claim for reimbursement to overcharge the government program, that would be the crime of healthcare fraud. In this example, the penalties include a criminal fine and potentially even jail time. However, if the associate accidentally upcodes the claim, it can still lead to civil liability. The penalties can still include a civil fine for each upcode, reimbursement of wrongfully received funds, and a monetary penalty.

4. What are the Best Ways to Pass an Investigation?

At the time of the clinical laboratory investigation, there are only so many opportunities to increase your chances of passing it. You can monitor the auditor or investigator to ensure that he or she does not exceed the scope of the investigation or violate any of your lab’s legal or contractual rights, but most of the work that it takes to pass an investigation happens well before it happens.

As Dr. Nick Oberheiden, a clinical lab investigation lawyer at Oberheiden P.C., tells his clients, “The best way to pass an audit or investigation is to take compliance very seriously. By crafting an all-encompassing compliance protocol and then following it to the letter every day, you can reduce the odds of failing an inspection and can even prevent them from happening, at all.”

3 Defenses to Clinical Laboratory Investigations

Every investigation of a clinical laboratory is different. Different circumstances led to the investigation and a unique context in every case. Even your interests in a lab can be different. 

As a result, there is no “one-size-fits-all” defensive strategy. A clinical laboratory investigation attorney should examine the factors in play and determine which of the defensive strategies is going to be the best for your particular case and help you defend your client.

However, there are three general defense concepts to keep in mind.

1. Do Not Destroy Evidence

As much as you might want to, one of the worst things that you can do upon learning of an upcoming audit or investigation is to throw away potentially incriminating evidence. There are four important reasons not to:

  1. Most investigations – especially ones by law enforcement agencies – are not just getting information from your lab. They are also gathering information about your case from others. If you destroy a document or laboratory data, they may still get it from another source and now also have evidence that you destroyed it

  2. The evidence may not be incriminating or even relevant to the investigation

  3. Destroyed evidence creates the presumption that it was damning

  4. It is a crime

2. Do Rely Solely on a Lack of Intent Defense

Lots of clinical laboratory executives are aware that fraud is a specific intent crime. This leads to the thought that, if they did not have the intent to defraud, it is not a crime. This leads to the conclusion that all they have to do is argue that they had a lack of intent to commit fraud.

This overlooks two important things:

  1. Civil liability for fraud carries huge financial penalties in addition to disgorgement and does not require evidence of your intent

  2. It silently admits to the underlying conduct

Good clinical laboratory investigation lawyers know this and raise other defenses, first. Many only fall back on the lack of intent defense as a last resort to avoid criminal liability.

3. Preparation, Preparation, Preparation 

Preparation is likely the most important aspect of defending against a clinical laboratory investigation or passing an audit. This includes a good compliance protocol, strictly following that strategy every day, conducting internal audits to find problems with it, and creating a game plan for investigation day that closely monitors the inspectors and provides the information they are looking for in a good light, all while keeping your lab running smoothly.

Oberheiden P.C. © 2022 National Law Review, Volume XII, Number 195

About this Author

Nick Oberheiden Criminal Defense Attorney Oberheiden PC
Federal Criminal Defense Attorney

Dr. Nick Oberheiden focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation. He has defended clients in PPP Loan Fraud cases and COVID-19 investigations. Nick also directs internal corporate investigations and he leads defense teams in whistleblower actions, corporate defense cases, as well as cases involving national security and elected officials.

Clients from more than 45 U.S. states have hired Nick to seek effective protection against government...