Magnolia Diagnostics (Dallas, TX) and its owners and investors have agreed to pay $24 million to resolve allegations that the lab billed Medicare for unnecessary respiratory tests for seniors during the pandemic.
The U.S. Department of Justice alleges that, beginning in April 2020, owners John Bains and Kelly Bains, acting through Magnolia, required senior living communities seeking Covid-19 testing to also obtain expensive respiratory pathogen panels (RPPs).
To implement this strategy, Magnolia used prepopulated requisition forms that selected RPP testing and associated diagnosis codes before any individualized clinical assessment occurred. Magnolia allegedly treated provider signatures on those forms as blanket or standing orders authorizing RPPs for all seniors across entire communities or chains of communities, and then used those purported authorizations to perform RPPs on specimens collected during community-wide Covid-19 testing. At times, John Bains allegedly threatened to withhold Covid-19 testing from communities that asked not to receive RPPs.
Furthermore, Magnolia allegedly froze and stored thousands of respiratory specimens, sometimes for weeks or months, before thawing and testing them. Magnolia thereby billed Medicare for useless test results, according to the DOJ.
During the three-year period from 2020-2022, Magnolia received Medicare Part B payments totaling more than $50 million. The Magnolia laboratory remains in business and now specializes in a wide variety of PCR testing. Ex-CEO John Bains now heads up a real estate development firm named Mountain Town Development.