Genomic Health Inc. to Pay $32.5 Million to Resolve Allegations Relating to the Submission of False Claims for Genomic Diagnostic Tests

Breon Peace, United States Attorney for the Eastern District of New York, and Naomi D. Gruchacz, Special Agent-in-Charge, U.S. Department of Health and Human Services, Office of the Inspector General, New York Region (HHS-OIG) announced that the United States has reached a settlement with Genomic Health, Inc. (GHI) to resolve allegations that it violated the False Claims Act in an alleged nationwide scheme to improperly bill Medicare for laboratory tests known as “Oncotype DX®.”  Under the terms of the settlement, GHI will pay $32.5 million for losses caused by GHI’s submission of false claims to the Medicare Program.

“This settlement rightly requires the payment of double damages caused by delayed tests for cancer patients for no reason other than to circumvent a Medicare requirement and allow improper payment to GHI,” stated United States Attorney Peace.  “We will continue to enforce Medicare rules to protect the program and its vital role in our health care system, especially for those suffering from the ravages of cancer.” 

Mr. Peace expressed his gratitude for the support of the United States Department of Health and Human Services for their assistance in investigating these important claims.

“Health care providers that unnecessarily delay services to evade Medicare requirements put their own profits over the well-being of vulnerable patients,” stated HHS-OIG Special Agent-in-Charge Gruchacz. “With our law enforcement partners, HHS-OIG is committed to investigating potentially fraudulent billing that can compromise patient well-being and the integrity of our federal health care programs.” 

GHI is a Delaware corporation headquartered in Redwood City, California.  GHI is a provider of genomic-based clinical diagnostic tests.  Its principal test, Oncotype DX®, has been used for patients diagnosed with breast, colon and prostate cancer.  GHI was acquired by Exact Sciences Corporation (“Exact”) in November 2019 and is a wholly-owned subsidiary of Exact.

The United States contends that GHI perpetrated a scheme to evade Medicare regulations when submitting claims to the Medicare Program for its test to circumvent Medicare’s 14-Day Rule (which establishes which entity may bill Medicare for certain laboratory services).  During the time period covered by the settlement, Medicare’s 14-Day Rule prohibited laboratories from separately billing Medicare for certain tests if a physician ordered the test within 14 days of the patient’s discharge from a hospital stay either in an outpatient or inpatient setting. Such claims were required to be submitted by the hospital.  However, if the test was performed more than 14 days after discharge, then Medicare’s 14-Day Rule permitted laboratories to bill Medicare directly for the test.  The United States contends that GHI perpetrated its scheme in four ways:

• GHI sought direct reimbursement from the Medicare Program for claims on behalf of Medicare beneficiaries, when Oncotype DX® tests were ordered and submitted for testing within 14 days after an inpatient discharge.  This caused the Medicare Program to incur additional costs beyond what it would have otherwise paid.
• GHI sought direct reimbursement from the Medicare Program for Oncotype DX® tests ordered within 14 days of a beneficiary’s out-patient procedure.
• GHI conspired with and encouraged hospitals and physicians to cancel and reorder Oncotype DX® tests and failed to discourage providers who ordered tests within 14 days from canceling and reordering the tests after the 14-day time period had elapsed.
• GHI failed to send timely invoices to hospitals for laboratory services that fell under the 14-Day Rule and instead wrote off the unpaid fees for laboratory services, thereby violating the Anti-Kickback Statute. 

The civil settlement includes the resolution of two actions brought under the qui tam or whistleblower provisions of the False Claims Act against GHI.  Under the qui tam provisions of the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the settlement if the government takes over the case and reaches a monetary agreement with the defendant.  The relator share from the proceeds of the federal settlement in this case will be $5,687,500.  The qui tam cases are captioned United States ex rel. Caughron v. Genomic Health, Inc., Civil Action No. 16-CV-4038 (E.D.N.Y) and United States ex rel. Doe v. Genomic Health, Inc., et al., Civil Action No. 17-CV-4460 (E.D.N.Y.). 

The claims resolved by the settlement are allegations only and there has been no determination of liability.

The government’s case was handled by former Assistant U.S. Attorney Deborah B. Zwany and Assistant U.S. Attorney Anjna Kapoor with assistance from Affirmative Civil Enforcement Auditor Michael Gambrell, Paralegal Specialist Loan Ngyuen, and Sanjay Bhambhani, Senior Trial Counsel, Fraud Section, Commercial Litigation Branch.  The Office of Inspector General at the Department of Health and Human Services assisted in the investigation of these cases.