Effective Compliance Program Could Have Thwarted Rogue Employees
The plea agreement accepted by Vic Wadhwa of Frederick, Maryland on Dec. 15, 2014, will end court proceedings for Wadhwa in a federal antikickback case that involved multiple pain management clinics, millions of dollars and thousands of urine samples. Wadhwa, the former Chief Financial Officer of a group of pain management clinics, pleaded guilty to […]
The plea agreement accepted by Vic Wadhwa of Frederick, Maryland on Dec. 15, 2014, will end court proceedings for Wadhwa in a federal antikickback case that involved multiple pain management clinics, millions of dollars and thousands of urine samples. Wadhwa, the former Chief Financial Officer of a group of pain management clinics, pleaded guilty to soliciting and accepting $459,245 in kickbacks from a New Jersey drug testing laboratory in exchange for referring urine samples to it for drug testing. However, the scheme described in the plea agreement, while serious in its own right, is just part of the entire story. The relevance for laboratories is the need for oversight to ensure individuals don’t use their authority within the laboratory for personal benefit, putting the laboratory at risk of serious compliance violations. Details of Wadhwa’s Participation Wadhwa’s plea agreement describes the details of how the scheme developed and operated and what his role was. According to a Dec. 15, 2014, Department of Justice press release, Wadhwa worked for a physician group that operated pain management clinics in central Maryland known as Advanced Pain Management (APM). APM, like most other pain management clinics, required patients who were being prescribed narcotic pain medications to submit samples for testing to ensure they were taking the medications being prescribed and no others. APM generated hundreds of urine samples each month and referred them to an outside laboratory for testing. The physicians in the groups that made up APM were satisfied with the quality and service provided by their current laboratory provider. After learning of a laboratory in New Jersey that was willing to pay a kickback for each sample referred, Wadhwa and others at APM switched its referrals to the New Jersey lab, apparently without the knowledge of other members of APM, including the owners. According to a Department of Justice press release, Wadhwa negotiated the agreement with the laboratory which resulted in a kickback that consisted of an amount equal to half of the lab’s profits after covering expenses. APM changed laboratory providers in March 2011 and the kickback payments commenced in July 2011. The scheme lasted until July 2012 and during that time the laboratory had paid APM kickbacks in the amount of $1.38 million, of which Wadhwa received approximately $459, 245.92. The remainder was paid to others at the clinic, including the Chief Executive Officer who recruited Wadhwa and brought the New Jersey laboratory to his attention. For the laboratory’s part in the scheme, it received over $1 million in profit from billing for the urine drug tests. Wadhwa faces up to five years in prison and a $250,000 fine when sentenced on April 2. The case is ongoing, meaning that there will likely be more court cases or plea agreements as the government pursues others who may be involved in the scheme. APM Files a Civil Suit Against Employees On Dec. 5, 2012, APM filed a civil action against Wadhwa and CEO Muhammad Kahn, their spouses and the corporate entities under their control. APM is seeking damages and injunctive relief. The first amended complaint alleges Wadhwa and Kahn took specific actions to gain control over the operations and finances of APM including its computer systems, without the owner physicians’ knowledge or consent. The 54-page document provides a detailed description of the defendants’ alleged efforts to deceive APM’s owners. For example, the complaint alleges that problems with the new laboratory provider commenced from the very beginning and Wadhwa and Kahn promised to correct the problems but never did so. According to the complaint, the defendants created a company called Apex Diagnostic Services and APM started referring the urine drug tests to Apex. APM’s owners claim they were not aware that Apex was owned by Wadhwa and Kahn and that when one of the owners asked to meet Apex’s laboratory director, the request was simply ignored. An Effective Compliance Program Would Have Prevented These Rogue Actions While the actions in this case are extreme, they serve as a warning and an example of what can happen unless you have an effective compliance program that includes oversight of the laboratory’s operations and the individuals in charge of those operations. An effective compliance program should be able to prevent—or at least detect early on—efforts of executives such as Wadhwa and Kahn from gaining control of critical systems and taking actions that could create potentially devastating problems for the company. When compliance problems are rooted in upper level management, they are the most difficult to address but that makes an effective compliance program even more critical. The savings achieved by not spending money on developing and implementing and continually reviewing and updating a compliance program can be lost later in legal fees spent defending the laboratory against alleged compliance violations and rehabilitating the company’s reputation. Takeaway: An effective compliance program is like insurance or routine maintenance that quietly protects a physician group, laboratory or other provider from the potential bad acts of individuals within the entity.