Calloway Laboratories to Pay $4.7M to Settle Fraud Allegations

Calloway Laboratories will pay nearly $4.7 million to settle allegations that it fraudulently billed West Virginia Medicaid and the federal Medicare program. Booth Goodwin, U.S. attorney for the Southern District of West Virginia, announced the settlement May 21, calling it “the largest-ever recovery in a health care fraud case” for his office. The laboratory, based in Woburn, Mass., provided clinical laboratory services, including urine testing, for Medicare and West Virginia Medicaid, Goodwin said. But from March 2009 through April 2013, it routinely billed both using a code designated for pathology services, in addition to the code for urine drug testing, he said. An investigation by the West Virginia Medicaid Fraud Control Unit and the Department of Health and Human Services Office of Inspector General established that treating health care providers didn’t deem pathology services necessary and didn’t knowingly order the service. Goodwin said investigators determined Calloway didn’t provide pathology services, as billed, but performed a type of medical review with every urine drug screen. Medical review isn’t covered by Medicare or West Virginia Medicaid, he said. The two programs paid the medical review claims, Goodwin said, because Calloway submitted them under a code reserved for covered pathology. In a statement released May 21, Calloway said it reached the agreement—without an admission of liability—“to conclude a government inquiry into a legacy issue dating back to the company’s previous management and involving a disagreement about services ordered and performed, but not covered.” By resolving the allegations, the company said it has eliminated the financial uncertainty associated with litigation. Change in Management Team Goodwin said the fraudulent billing practices were initiated under Calloway’s former management team, which was replaced in late 2012. Upon learning of the investigation, he said Calloway’s current management team voluntarily suspended the problematic billing practices nationwide. Calloway Labs and two of its top executives were indicted in Massachusetts in 2010 on charges involving kickbacks and bribes to managers of group homes for recovering drug addicts, Goodwin said; in 2012, Calloway agreed to pay a $20 million penalty to resolve the charges against the corporation. Two of the company’s executives later pleaded guilty, he said. On its Web site, Calloway refers to itself as one of the fastest-growing clinical toxicology laboratories in the nation, specializing in tests that ensure patients aren’t abusing pain medications. Takeaway: Calloway Laboratories, a toxicology lab based in Woburn, Mass., has agreed to settle allegations that it routinely billed using a code designated for pathology services, in addition to the code for urine drug testing.