Quest Diagnostics: Alleged Documentation Failures and Uncollected Second-Year Payments

In the Quest Diagnostics EHR donation settlement, Quest agreed to pay $1,151,053 to resolve allegations of documentation failures, uncollected second-year payments and out-of-scope phlebotomist services after disclosing the conduct itself. For an insider in contracting or accounts receivable, the EHR allegations are unusually concrete: what supported the donation, and whether the physician client paid what the agreement required.

The Department of Health and Human Services Office of Inspector General recorded the resolution on February 28, 2017. It concerned the Civil Monetary Penalties Law provisions covering physician self-referrals and kickbacks. The amount covered all three alleged practices.

The Documentation Behind the Donation

The inspector general alleged that Quest failed to meet documentation requirements supporting donations of valuable electronic health records software, information technology and services. The recipients were individuals or entities from which Quest received referrals of clinical laboratory business. That financial relationship is the reason the donation file matters.

There are two sides to the arrangement: technology goes to a practice, and laboratory business comes from a referral source. We would examine what the agreement promised, what software or services the recipient received, the cost support and the approvals behind the arrangement.

We see more than a paperwork problem in the allegation: the recipients sent laboratory business to the company paying for their technology.

The 2022 Vassar College senior thesis A Panacea or a Problem? Electronic Health Records and the Complicated Politics of Its Stakeholder Network describes a mismatch in early adoption: healthcare providers bore the cost of electronic health records, while much of the benefit went to buyers of care, such as insurers. Providers also had to train and support staff, beyond purchasing the technology.

Beyond the purchase price, federal disclosure rules identify recurring fees and maintenance, upgrade and support charges for certified technology. For a donation, we want to know which of those expenses the laboratory covered and which the practice still owed.

The Second Year Still Had a Bill

The inspector general separately alleged that Quest failed to collect timely second-year payments from physician clients as required by their electronic health record donation agreements.

A contract can put a contribution on paper. The collection record shows whether the contribution arrived. For a receivables employee, that is a familiar distinction with consequences beyond the overdue balance: the practice’s promised share of the expense is part of the financial arrangement.

We would connect the agreement’s payment terms to the invoice or receivable schedule, the due date and the payment record. If the account shows an exception, we would want to understand the decision behind it and who approved it. An implementation employee may know what the practice received, while someone in finance may know what it paid. Bringing those accounts together is how we would examine whether the financial terms were actually carried out.

A donation review confined to signing day can miss a later collection obligation. The software can be in use while the promised contribution remains unpaid.

What Law Prohibits Payments for Patient Referrals?

The Anti-Kickback Statute prohibits paying or offering something of value to induce referrals or orders for services covered by federal health care programs. Electronic health record donations have conditional protection under that law, commonly called a safe harbor.

HHS’s December 2013 rule removed laboratories from the protected donor class, effective March 27, 2014. The Office of Inspector General described complaints that laboratories were conditioning donations on referrals, setting referral quotas and threatening repayment when practices fell short. That is a pointed objection to using a technology subsidy as leverage over a practice’s laboratory business.

The donation rules retain the laboratory exclusion. For eligible donors, they require the recipient to pay 15 percent of the donor’s cost. For an initial donation or replacement system, that contribution must arrive before the technology does. The donor cannot finance or lend that money.

For Quest, the inspector general identified the second-year obligation in the physician-client agreements themselves.

The Separate Phlebotomist-Services Allegation

The resolution also covered the inspector general’s allegation that Quest-employed phlebotomists performed services outside the scope of their employment at multiple locations in Texas, Maryland, Ohio and New Jersey.

The combined resolution reached both the work done on site and the financial terms of the technology donations.

EHR Payments Owed by the Laboratory or the Practice

The inspector general alleged that a Tennessee laboratory owner sometimes withheld promised EHR donation payments until a practice supplied enough referrals, while Quest’s collection allegation concerned payments owed by physician clients.

What Evidence Is Needed to Report Fraud?

For a concern about EHR donation documentation or collections, we would assess the agreement, the support for what was donated and the payment history together. We would also examine the relationship with the referring practice and what the people responsible for the arrangement knew.

A contracting employee may understand why particular terms were included. A practice employee may know which services arrived. A finance or compliance employee may recognize a collection exception and the explanation given for it. Those different views can help us connect the written arrangement to the decisions made afterward. Your knowledge of why something happened can be as useful as recognizing the gap in the paperwork.

How Much Is a Whistleblower Claim Worth?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Quest disclosed the conduct to the inspector general itself, while whistleblower cases brought the Inform Diagnostics allegations forward. For someone with inside knowledge of a donation program, we assess how the agreements, benefits and payment decisions fit a potential whistleblower case.

You Know What Was Promised and What Was Paid

If you know why a physician client’s donation file was incomplete or a required payment went uncollected, speak to our whistleblower experts about the missing documentation or uncollected payments. We build the case with you and bring in healthcare fraud whistleblower lawyers who understand laboratory referrals and EHR donation agreements. You bring the view from inside the business, and we bring the judgment and stay beside you through the case.