Meris Laboratories: Automatically Generated Tests, Separately Billed Claims

The Meris Laboratories fraud settlement required the company to pay $5.2 million over allegations that it billed Medicare and Medi-Cal for medically unnecessary laboratory tests physicians had not ordered. The government described a repeatable billing practice inside the laboratory: add tests to an automated panel, then bill for the additions. It also alleged that Meris billed for extra blood-count indices generated from results the machine had already produced. For someone who works with laboratory orders, results or claims, the case turns on a familiar distinction: what the equipment can produce and what the physician actually requested.

Meris was a clinical laboratory in San Jose, California. The Department of Justice announced the settlement on February 12, 1997, covering allegations involving Medicare and Medi-Cal, California’s Medicaid program. The alleged conduct began in 1992 and continued into the announcement year.

What the Meris Settlement Alleged

The government alleged that Meris routinely added HDL cholesterol and serum iron tests to panels run on automated machines, then billed the government health care programs separately for those tests. Physicians had not specifically ordered the additions, and the Department of Justice alleged that they were medically unnecessary.

The complete blood count allegations went a step further. Meris allegedly billed additional CBC indices that physicians had not ordered and that were not medically necessary. The government’s description explains why the machinery mattered:

The alleged practice put taxpayers on the hook for arithmetic the machine did for nothing.

A Machine Can Run a Test but Cannot Order One

An automated result does not supply the physician’s order or the patient’s medical need. Meris’s alleged billing practice crossed that boundary by treating additions generated inside the laboratory as services to charge to Medicare and Medi-Cal.

In an independent laboratory, the person making the clinical decision and the business submitting the claim occupy different parts of the transaction. The treating clinician knows the patient and holds the medical record explaining why a test is needed. The laboratory performs the work, reports the result and bills for the service. A result can therefore reach the billing department even though the patient’s clinical justification remains in the physician’s office.

The Department of Health and Human Services’ Office of Inspector General addressed that separation in its 1998 clinical laboratory compliance guidance. It said laboratories cannot treat patients or make medical-necessity determinations, and called for requisition forms designed to reflect an independent decision about each test the laboratory would bill.

The physician’s order describes the requested work. The laboratory result describes what the equipment produced. The claim describes what the laboratory asked the government to pay for. When additional tests enter between the order and the claim, the important decision may have happened inside the laboratory, before anyone in billing saw a result.

Why the Panel Matters

A panel brings several tests together, while the billing system determines how that work becomes a charge. Automation made that distinction financially important. In its 1998 report on hospital billing practices, the General Accounting Office explained that laboratories could run multiple clinical tests on a single blood sample simultaneously, reducing labor costs and contact with blood and medical waste.

The report described billing codes for automated test profiles that generally paid less than the same combination of tests billed individually. It warned that an overpayment could result when work performed as a profile was submitted as separate tests.

Meris’s alleged design involved adding tests and billing the additions. The government’s account tied those charges to tests that physicians had not specifically requested and that it said patients did not need.

The same specimen can generate another bill. A laboratory already has the specimen and an automated process. Its choice of what to add can affect what reaches the bill. If the same addition occurs routinely, that choice can repeat across specimens without a new clinical decision about each patient.

The person who understands the panel’s design may therefore understand something the claim alone never explains: how an extra test became part of the work in the first place. In Meris, the government’s allegations put that decision at the center of the case.

The Settlement, the Share and the Compliance Agreement

Two whistleblowers brought the Meris qui tam case in federal court in San Francisco. The announced joint award was about 15% of the government’s settlement. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Separately, Meris entered a Corporate Compliance Agreement with the Department of Health and Human Services’ Office of Inspector General. Meris agreed to undertake measures aimed at future compliance with applicable laws and Medicare rules.

A contemporary journal article shows how closely laboratory compliance efforts focused on the ordering and billing practices at issue here. Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in June 1997, described the Inspector General’s voluntary model plan for clinical laboratories. The plan drew on earlier government guidance to major laboratories and on investigations and civil settlements.

The article described standardized requisitions with space to document the medical necessity of each test. It also described annual notices to physicians explaining which tests an automated profile contained, which codes the laboratory used and how it would bill Medicare for that profile. The proposed controls reached the point where a clinician chose a panel and the point where the laboratory turned it into charges.

The Pattern in the Laboratory Cases

The First Circuit’s account of the criminal case described Damon Clinical Laboratories bundling ferritin into its LabScan panel, offering it free to physicians and direct-paying patients while billing Medicare separately.

The Justice Department’s February 1997 announcement described SmithKline Beecham Clinical Laboratories‘ civil settlement of allegations that it billed for tests that were unnecessary, unordered or unperformed.

Meris gives the reader a particularly specific version of the order-and-bill problem: HDL cholesterol, serum iron and additional CBC indices. Across these cases, the useful question is where the laboratory’s own decisions changed what the government was asked to buy.

What Evidence Is Needed to Prove Fraud?

For an allegation like Meris’s, the useful evidence connects the physician’s order and the patient’s medical need to the results produced and the claims submitted. Panel descriptions and communications with ordering physicians can explain how an additional test entered that chain.

A laboratory insider may know how a profile was configured. Someone in a physician’s office may know what the clinician requested and what the laboratory said the profile contained. Someone handling claims may see the additional service billed separately. Those perspectives meet at the same specimen, but explain different decisions.

You Know How the Extra Test Reached the Bill

If you recognize tests appearing on claims that the physician never requested, speak with our whistleblower experts. We build the case around your knowledge of the laboratory’s ordering and billing decisions and bring in laboratory fraud whistleblower lawyers who understand those systems. We stay beside you throughout the process to build your strongest laboratory fraud whistleblower case.