Millennium Settles Allegations of Unnecessary Drug Tests for $256M

Wednesday, October 21, 2015 | 1

As research organizations are sounding the alarm about the rising cost of urine drug testing in California's workers' compensation system, the U.S. Department of Justice announced one of the largest drug-testing labs in the country has agreed to pay a quarter of a billion dollars to settle allegations that it charged for unnecessary services and paid kickbacks to providers.

Millennium Health LLC, formerly known as Millennium Laboratories, agreed to pay $256 million to settle allegations in eight whistleblower complaints accusing it of violating the False Claims Act by billing Medicare and Medicaid programs in 28 states for unnecessary confirmation tests. The settlement also resolves allegations that the company's practice of giving providers free point-of-care urine-testing cups on the condition the doctors use Millennium for all confirmation tests violates federal anti-kickback statutes.

The federal government did not allege any of its workers' compensation programs were victims. Thomas M. Greene of Greene LLP in Boston, said the complaint his firm filed on behalf of whistleblower Mark McGuire alleged only that Millennium defrauded federal and state health care programs. But, he also said, "Private payers have been potentially harmed too, because of the business model."

Greene said he didn't want to comment further about the case.

According to the government's complaint, filed with the U.S. District Court for Massachusetts in March, Millennium "used a variety of schemes to cause physicians, including many of its biggest referrers, to routinely order excessive amounts of UDT for all patients (including Medicare and Medicaid patients), regardless of individual patient assessment or need." The lab allegedly induced doctors to order tests for drugs patients were not suspected of taking and to confirm the results of in-office screenings when confirmation wasn't necessary.

For example, the government says Medicare paid more than $15 million to Millennium for laboratory confirmation or urine drug tests for phencyclidine, also known as PCP or angel dust. In the population of Medicare patients, abuse of PCP is "virtually non-existent," according to the complaint.

Furthermore, the PCP confirmation testing was performed on specimens from in-office screenings that tested negative for PCP. 

The lab also paid illegal kickbacks to physicians in the form of free drug test cups to induce the providers to make referrals, according to the government's complaint. The test cups cost $5 or $6 each, and Millennium gave physicians more than one million in exchange for referrals. The test cups generated more than 200,000 referrals for Medicare patients, resulting in Millennium receiving more than $90 million in "tainted Medicare reimbursements."

The federal government also alleged Millennium trained sales staff to emphasize physicians need to test all patients, and to tell doctors taking a patient-specific approach to drug testing is comparable to "profiling" and "doesn't sit well" with the U.S. Drug Enforcement Agency.

Millennium suggested to physicians that they could face regulatory action for not confirming the results of every sample. The company also promoted the idea of confirming all point-of-care test results by making "false and misleading statements" about the false negatives rate for in-office screening.

Millennium's sales team in Florida allegedly told doctors that up to 50% of the time, point-of-care tests for cocaine generate false negatives. And they used scare tactics, such as telling doctors, "You may not have many high-risk patients, but it only takes one overdose to put your practice on the line."

But the government says Millennium used a different definition for what constitutes a "false negative." 

"Instead of using the proper definition of 'false negatives' – negative test results that should have been positive – Millennium calculated and marketed a different, misleading statistic (the percentage of positive samples missed on POC tests) and called it the 'false negative' rate," according to the complaint. "Millennium did this to create an inflated sense of uncertainty surrounding POC drug tests, undermine physician confidence in POC tests, and promote the routine use of quantitative UDT for drugs that patients were not suspected of taking."

While Millennium billed Medicare for more than 900,000 lab tests for PCP, the lab's own data shows only 24 false negatives out of 174,960 in-office tests that were performed in one quarter of 2012 – a false-negative rate of 0.01%.

According to the complaint filed by whistleblower Mark McGuire in March 2012, the two-step approach to drug testing is a common practice throughout the industry. In-office tests offer immediate results, but can only determine whether or not a drug or drug metabolite is present.

But the standard practice is to order the more expensive laboratory confirmation only for positive screenings. Performing confirmation tests on all patients is "medically unnecessary and fiscally irresponsible," according to McGuire's complaint.

McGuire alleges when Millennium started operating in 2007, it sold point-of-care testing cups to doctors for about $5 each. But the company told providers they could bill Medicare separately for each of the 11 or 12 drugs that the cups could detect, up to $240. This marketing "scheme succeeded in making Millennium a major competitor in the UDT market almost overnight, and allowed it to capture the UDT business of numerous physicians' offices who followed its reimbursement advice."

McGuire, who was the administrative director of laboratory services at MetroWest Medical Center in Framingham, Massachusetts, says he was contacted by at least three sales reps for Millennium who wanted the hospital's urine drug-testing business. The facility performed about 5,200 drug screens a year, according to the complaint.

Sales representatives reportedly said MetroWest could increase revenue by more than $300,000 by signing up with Millennium for confirmation testing.

"Millennium's sales representatives have represented that if MetroWest's confirmatory testing is sent to Millennium, they will only bill MetroWest 85% of what Medicare will reimburse MetroWest for the testing," the complaint says. "By routinely performing at least 13 tests on each specimen submitted, no matter what testing is medically necessary, MetroWest will bill approximately $1.5 million more for drug testing and will keep over $230,000 after paying 85% of those reimbursements to Millennium."

An additional $80,000 could be generated by buying 6,000 point-of-care cups for $5.25 and collecting Medicare's reimbursement of $20.47.

McGuire said Millennium representatives said there was no limit on the number of confirmation tests Medicare will reimburse.

MetroWest did not sign a contract with Millennium because the lab's "standard practices" amounted to billing Medicare, Medicaid and insurance companies for medically unnecessary tests. The hospital was also concerned that billing Millennium for a fraction of what Medicare reimburses is an illegal kickback, according to the complaint.

Millennium on Friday said in a statement the settlement ensures its employees and customers will see no disruptions in business operations and "can move forward in confidence together now that Millennium's position as a partner to federal and state health care programs is secure."

The company says it "may debate some of the merits" of the Department of Justice allegations, but respects the government's role in health care oversight and enforcement. 

Nicole Beckstrand, a spokeswoman for Millennium, said during a telephone interview Tuesday the company is limiting comments about the settlement to what was said in the official statement.

Beckstrand said she can "understand the concerns" of payers about increased use of drug testing and the associated costs. She said Millennium wants to be "part of the solution" and would like to bring together everyone in the drug-testing industry to work on drafting guidelines for appropriate drug testing.

Beckstrand wouldn't answer a question about what the settlement means for the image of Millennium or the drug-testing industry, which has been hit with millions of dollars in fines in recent years.

In April 2012, Massachusetts prosecutors announced Calloway Laboratories agreed to pay $20 million to settle charges that it defrauded the state's Medicaid program with a kickback scheme and excessive testing.

In February 2012, the U.S. Attorney's Office in Michigan announced three labs in the state agreed to pay $6 million for improperly billing for medical tests that physicians never ordered.

And in May 2011, Quest Diagnostics paid $241 million to settle a whistleblower complaint filed in California accusing it of unfair billing practices and paying illegal kickbacks. The California Attorney General's Office says the Quest settlement is the largest recovery in the history of the California False Claims Act.

The California Workers' Compensation Institute earlier this month said urine drug tests have grown from 10.2% of work comp lab services in 2002 to 59.1% of lab services in 2014. The average number of tests per employee for each date of service increased from 4.5 in 2007 to 14.9 in 2014, according to CWCI. And the average amount paid per date of service increased 220% to $307 in 2014 from $96 in 2007.

Stacey L. Jones, CWCI senior research associate and author of the report, notes that urine drug testing has been added to various medical treatment guidelines as part of the effort to better monitor opioids used to treat chronic pain. But she said there is no consensus on the frequency or type of tests that are best.

Berkeley Research Group and Rand Corp., which are conducting separate studies of medical treatment in California's comp system, told members of the Commission on Health and Safety and Workers' Compensation last week that drug testing is a rapidly increasing expense that should be monitored.

As part of the process of creating standalone opioid treatment guidelines, the California Division of Workers' Compensation is proposing language that would recommend performing one drug test four weeks after opioids are started to treat an acute injury. The proposed rules posted to the division's online forum for comments recommends patients on chronic opioid therapy be tested two to four times a year.

The guidelines would also say the frequency of urine drug tests could be adjusted based on a risk assessment of the patient.

The formal rulemaking process is currently underway to adopt the new opioid guidelines. The DWC held a public hearing on the proposed rules Sept. 1.

CORRECTION: An earlier version of this story incorrectly reported on the status of new opioid guidelines proposed by the DWC.