Commercial Litigation Update

The U.S. Court of Appeals for the First Circuit recently provided important clarity—and welcome relief—for clinical laboratories facing False Claims Act (“FCA”) allegations based on a lack of medical necessity for processing tests ordered by a physician. In a case of first impression, United States ex rel. OMNI Healthcare, Inc. v. MD Spine Solutions LLC,[1] the First Circuit held that clinical laboratories may rely on an ordering physician’s determination that lab tests billed to Medicare are medically necessary. The First Circuit held that laboratories need not second-guess a physician’s certification absent red flags or suspected improper conduct. While the First Circuit’s decision does not relieve clinical laboratories of their existing obligation under the FCA to ensure they are not submitting a false claim to government payors, it provides much-needed clarity for clinical laboratories across the country on what constitutes the knowing submission of false claims to the government and highlights several practical takeaways for managing compliance risk.