Magnolia Diagnostics and its owners allegedly billed Medicare for unnecessary respiratory panels performed on seniors during the pandemic, according to the US Justice Dept.
RT’s Three Key Takeaways:
- Unnecessary Testing Mandates: Magnolia Diagnostics and its owners allegedly required senior living communities to accept expensive respiratory pathogen panels alongside COVID-19 tests to generate significant revenue.
- Falsified Authorizations: The laboratory reportedly used pre-populated requisition forms and altered provider signatures to perform respiratory testing without individualized clinical assessments or proper authorization.
- Delayed Diagnostic Results: Thousands of specimens were allegedly frozen for weeks or months before processing, producing results too late to inform isolation or infection-control decisions for vulnerable seniors.
Magnolia Diagnostics, a Dallas-based clinical laboratory, and its owners, John Bains and Kelly Bains, have agreed to pay the US $19.2 million to resolve allegations that they violated the False Claims Act, according to the Department of Justice (DOJ).
The settlement addresses claims that the laboratory billed Medicare for medically unnecessary respiratory pathogen panel (RPP) testing performed on seniors receiving COVID-19 tests. Magnolia investors will pay an additional $4.8 million to resolve common law claims for unjust enrichment, payment by mistake, and claims under the Federal Debt Collection Procedures Act, according to the DOJ news release.
“The Justice Department is committed to protecting taxpayer-funded programs and holding accountable those who exploit them,” said Brett A Shumate, assistant attorney general of the Justice Department’s Civil Division, in a news release. “We will pursue not only companies that submit false claims and the owners who direct the misconduct, but also investors who receive and retain its financial benefits — especially when vulnerable Americans are exploited for profit.”
The US alleged that beginning in April 2020, the lab owners devised a strategy to generate revenue by requiring senior living communities to obtain expensive RPPs alongside COVID-19 tests. Magnolia allegedly used prepopulated requisition forms that selected the panels and diagnosis codes before any individualized clinical assessment occurred.
According to the DOJ, Magnolia treated provider signatures on those forms as blanket orders for all seniors across entire communities. The government also alleged that the lab continued performing RPPs after providers demanded COVID-19-only testing or questioned the medical necessity of the panels. In some instances, John Bains allegedly threatened to withhold COVID-19 testing from communities that declined the RPPs.
“Protecting seniors and safeguarding Medicare are core to our mission,” said Scott J Lampert, acting deputy inspector general for investigations of the US Department of Health and Human Services (HHS) Office of Inspector General (OIG), in a news release. “As alleged, Magnolia Diagnostics showed reckless disregard for medical necessity, beneficiary well-being, and the law — all to boost its profits during a national public health emergency.”
The investigation further revealed that Magnolia allegedly froze and stored thousands of respiratory specimens for weeks or months before testing them. This practice resulted in RPP results that were produced too late to inform timely treatment, isolation, or infection-control decisions.
“Too many of our healthcare dollars are lost to fraud, waste, and abuse, but civil settlements like this one help recover valuable healthcare dollars for the American taxpayer,” said Ryan Raybould, US attorney for the Northern District of Texas, in a news release.
The claims resolved by the settlements are allegations only, and there has been no determination of liability.
