Exagen: Blood-Draw Payments to the Doctors Ordering the Tests

Exagen agreed to a $653,143 civil settlement over specimen processing fees that the government alleged induced physicians to order its laboratory tests. The company admitted paying referring physicians for patient blood draws under written agreements, then billing Medicare for tests those physicians ordered. If you worked with the agreements, the physician accounts or the payments, the connection between them is the heart of this case.

Exagen is a life sciences company based in Vista, California, making proprietary diagnostic tests for autoimmune conditions. The Department of Justice announced the settlement on October 17, 2023. A whistleblower brought the allegations through a qui tam case under the False Claims Act.

What Exagen Admitted About Specimen Processing Fees

Exagen admitted that it paid certain referring physicians to complete blood draws under specimen processing agreements from June 25, 2014 through June 21, 2021. Physicians and physician groups ordered its tests to help diagnose autoimmune conditions.

The company’s settlement agreement puts Medicare billing inside the factual admissions:

That sentence connects the payment to the physician, the physician’s order and the laboratory’s claim. An accounts-payable entry would show money leaving Exagen. The ordering and billing records would show the testing business coming back. Read together, they describe the relationship that a processing agreement alone can make look like an isolated service purchase.

Exagen accepted responsibility for paying for blood draws and billing Medicare for the physicians’ orders. The government’s allegation concerned what those payments were intended to buy: the physicians’ use of Exagen’s tests.

Exagen also stated in the agreement that it had terminated the physician referral arrangements by the end of the covered period and no longer had such agreements with referring physicians.

Why the OIG Alert Matters

The Justice Department said Exagen paid the fees and billed federal health care programs after becoming aware of the June 25, 2014 Special Fraud Alert from the Department of Health and Human Services’ Office of Inspector General.

The alert, Laboratory Payments to Referring Physicians, addressed specimen-processing arrangements. Exagen’s agreement expressly acknowledged the alert’s warning that these arrangements could present a substantial risk of fraud and abuse. The subject was the same relationship that later appeared in Exagen’s admissions: a laboratory paying physicians who referred testing to it.

A person who saw how the agreements were discussed or kept in place may understand a decision that the payment ledger cannot explain on its own.

The alert also addressed arrangements limited to specimens from patients outside federal health care programs. OIG warned that payments described as compensation for that business could disguise payments for federal-program referrals.

What the Exagen Settlement Resolved

The civil settlement covered the specified physician-payment arrangements and the resulting Medicare billing. The agreement identifies those arrangements in a redacted schedule organized by medical office, provider, payment start date and payment end date.

The agreement also addressed what would happen to the covered bills. Exagen agreed not to resubmit previously denied claims related to the covered conduct or seek payment for the covered healthcare billings from patients or other payers. The resolution reached beyond a payment to the government to what the company could do with those bills afterward.

For a billing employee, those terms connect the referral arrangement to decisions about unpaid claims and patient balances. The processing fee may sit in one part of the company’s books while the consequences appear in another.

Do Doctors Get Kickbacks for Ordering Tests?

Some laboratories have been accused of paying doctors kickbacks for ordering tests, including payments called processing and handling fees. Exagen’s case is one example involving autoimmune testing. An earlier example involved cardiovascular testing at Health Diagnostic Laboratory and Singulex.

In its April 9, 2015 announcement of those settlements, the Justice Department described allegations that the laboratories paid physicians between $10 and $17 per referral as processing and handling fees. The fee bought a place in the physician’s ordering decision, according to the allegations. The alleged bargain put a laboratory payment inside a decision that should serve the patient.

The processing label puts the emphasis on handling a specimen. The referral allegation puts it on who gets the testing business. Exagen admitted billing Medicare for the tests, putting taxpayer money behind orders from physicians the laboratory had paid.

What the Processing Agreement Means Inside a Laboratory

The laboratory’s commercial relationship runs through the ordering physician. The physician generally chooses where the specimen goes, while the laboratory performs the test and submits the claim. A blood draw can therefore sit at the point where a medical practice’s work meets the laboratory’s source of revenue.

That division is familiar in the industry. Large laboratory companies place phlebotomists in physician offices and collect specimens by courier. Collection and laboratory testing happen in different places, with different people handling the specimen. Exagen’s admitted arrangement paid referring physicians under contracts for the collection work. The government’s allegation was that the payment influenced where the testing went.

For a processing-fee case, we examine the connection between the agreement, the payments and the physician’s orders. The agreement describes the service being purchased. The payment history shows who received the money and when. Matching those relationships to the orders and billing is how we assess what the arrangement meant for the laboratory’s business.

Someone who administered physician accounts may know why a practice received a processing agreement. Someone in the practice may know what work the fee actually covered. Their knowledge can give meaning to the same transaction viewed from opposite sides. That is the kind of account our whistleblower experts work through with you.

The Exagen Whistleblower Reward

The Justice Department announced that the whistleblower would receive 16% of the recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Practice Was Paid

If you know how a laboratory’s processing payments connected to physician orders, speak to one of our Whistleblower Experts about those payments. We build your strongest laboratory kickback whistleblower case around your knowledge of the agreements and the business they generated. We bring in laboratory fraud whistleblower lawyers who understand referral-payment cases and stay beside you throughout the case.