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Recent Settlement Highlights Perils of Outsourcing Diagnostic Work to Overseas Vendors

Until recently, federal healthcare regulations required that nonphysician personnel who performed diagnostic tests for an independent diagnostic testing facility (“IDTF”) must have a state license or certification to do such work. 42 C.F.R. § 410.33(c) (2021). On December 20, 2022, the United States Attorney’s Office for the Eastern District of Pennsylvania announced that BioTelemetry, Inc., and its subsidiary CardioNet, LLC (collectively, “BioTelemetry”), agreed to pay almost $45 million to resolve allegations that they violated the False Claims Act by knowingly submitting claims to Federal healthcare programs for heart monitoring tests that were performed, in part, outside the United States, and in many cases by technicians who were not qualified to perform such tests.

According to the settlement agreement, BioTelemetry submitted claims for Holter monitoring, cardiac event monitoring, and mobile cardiovascular telemetry (“MCT”), but the government alleged that the personnel who performed those tests often worked for BioTelemetry vendors in India. The personnel at the vendors in India allegedly did not have licenses or certifications from states in the United States.

Notably, the settlement agreement makes clear that the government’s allegations pertain only to conduct governed by the regulations in place through end of 2021. Effective January 1, 2022, the government relaxed the regulation slightly for “services that do not require direct or in-person beneficiary interaction, treatment, or testing.” 86 Fed. Reg. 64996, 65332 (Nov. 19, 2021). Under the new regulation, personnel who perform off-site testing services do not need a certification and must comply with state licensure requirements only to the extent they exist. 42 C.F.R. § 410.33(c)(2) (2022).

Regardless, the BioTelemetry settlement shows that the government considers compliance with 42 C.F.R. § 410.33(c) to be a material condition of payment, even when the diagnostic service was otherwise adequate. If an IDTF outsources work to an overseas vendor and the personnel there have not complied with the applicable licensure requirements, then the IDTF may be violating the False Claims Act when it submits claims to Federal healthcare programs. Importantly, individuals who become aware of such illegal conduct may become whistleblowers who bring qui tam cases under the False Claims Act. The whistleblowers who initiated the case against BioTelemetry received an award of over $8 million.