Feds Take Down $2.1 Billion Medicare Genetic Test Fraud Scheme

You know that a branch of lab testing has gone from fad to mainstream when it becomes the subject of a major federal enforcement takedown. Accordingly, the newly announced breakup of a $2.1 billion genetic billing fraud scam, one of the largest Medicare frauds ever undertaken, signifies that genetic testing has officially arrived.

Operation Double Helix

Known as Operation Double Helix, this landmark investigation and prosecution was a joint HHS, DOJ and FBI crackdown carried out in five federal districts against 35 defendants associated with genetic testing labs (CGx) and telemedicine companies, including doctors, CFOs and CEOs that allegedly “capitalized on the fears of elderly Americans to induce them to sign up for unnecessary or non-existent cancer screening tests,” according to one of the U.S. Attorneys involved.

Old Wine in New Bottles

While the alleged kickback scheme follows a familiar pattern of paying doctors for referrals of Medicare patients for lab tests, it feels model and emblematic of the times to the extent it brings together:

• DNA cancer screening;
• Telemedicine; and
• Identity theft.

The way the scam worked: “Recruiters” contacted Medicare beneficiaries either online, on the phone or face-to-face at health fairs, senior centers, low-income housing areas or religious institutions like churches and synagogues and made the following pitch: We’ll provide you free genetic testing to determine your cancer risks and how well you’d respond to certain drugs; all we need from you is a swab from your cheek, your Medicare information and a copy of your driver’s license.

A decade ago, this pitch would have drawn a blank stare. But in this era of consumer awareness of the benefits of genetic testing, it was not only familiar but also highly appealing. “It never crossed my mind that there was anything wrong with this,” noted one of the beneficiaries who took the bait. Recruiters also used scare tactics to get beneficiaries to enlist. “You don’t want to end up suffering from some horrible disease, do you,” they threatened.

The next phase of the scam: Get the beneficiaries’ doctor to order the tests in return for a cut of the Medicare payment. If the doctor refused, the recruiters would go to plan B: having one of their assembled cadre of doctors write a prescription for the tests, even those doctors didn’t know or examine the beneficiary.

In stage three, CGx labs in on the scam performed the prescribed tests and billed them to Medicare to the tune of $1.7 billion in total. When Medicare paid the bill, typically in the $10,000 to $18,000 range, the testing lab, ordering doctor and telemarketing firm that recruited the beneficiary split the money.

In most of the cases, the test results were useless to the beneficiary’s doctor; in many cases, those results weren’t provided at all. But what beneficiaries did get was a big fat charge to their Medicare account that ate into their deductible and reduced their financial coverage for genetic tests that they may actually need in the future. The other harm, of course, was in turning over their sensitive personal information to scammers.

Conclusion: Operation Double Helix is the latest and most obvious indication that genetic testing fraud has become a central focus of federal enforcement. On June 3, 2019, the OIG issued a genetic testing fraud alert warning beneficiaries of exactly the kinds of scams perpetrated in Double Helix.   There has also been a series of individual and non-coordinated enforcement actions against labs for genetic testing fraud. 

SCORECARD: Lab Defendants Charged in Operation Double Helix Genetic Testing Takedown