Kentucky Physicians, Lab to Pay $15.75 Million To Settle FCA Charges

Owners of 12 opiate addiction treatment centers and a clinical laboratory in Kentucky will repay the government $15.75 million to resolve False Claims Act allegations.

Drs. Bryan Wood and Robin Peavler—who own SelfRefind, a chain of addiction recovery clinics, and PremierTox LLC, a clinical laboratory that performs urine testing—agreed to settle civil allegations that they fraudulently billed federal health care programs for medically unnecessary and excessive tests, the Department of Justice (DOJ) said Feb. 10.

Wood and Peavler were accused of violating the False Claims Act by submitting claims to Medicare and Kentucky’s Medicaid program for urine tests that were medically unnecessary and more expensive than the actual tests performed, the DOJ said, adding that under federal law, health care programs reimburse health care providers only for services deemed medically necessary.

The government alleged that after Wood and Peavler became owners of PremierTox, they began automatically referring all drug screens completed at SelfRefind clinics to the lab for additional comprehensive urine drug screening tests that were frequently unnecessary and often more expensive than suitable alternative tests.

In addition to violating the False Claims Act, the doctors were accused of violating the Stark law, the DOJ said, which forbids a laboratory from billing Medicare and Medicaid for certain services referred by physicians who have a financial relationship with that laboratory.

Prior to becoming part owners of PremierTox, SelfRefind didn’t automatically refer urine samples for additional confirmation testing to outside laboratories, the government said, adding the clinic started to require all patients to submit to regular urine drug screening, as often as every two weeks.

The government alleged PremierTox submitted false claims that misidentified the class of drug that was tested for and received a higher financial reimbursement than necessary.

According to the settlement agreement, when the doctors referred urine samples to PremierTox in December 2010, the lab didn’t have the equipment necessary to test the large volume of samples sent to it by SelfRefind.

The lab put the samples into frozen storage for several months before performing the prescribed tests, which by that time were medically unnecessary for the treatment of the patients.

Nevertheless, the government said, PremierTox submitted claims seeking reimbursement for the tests.

Corporate Integrity Agreement

Under the settlement, PremierTox has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General.

The agreement obligates PremierTox to undertake substantial internal compliance reforms and commit to a third-party review of its claims to federal health care programs for the next five years.

Kentucky is also a party to the agreement and will receive about $2.74 million, the state’s share of the government’s recovery of Medicaid funds.

Takeaway: Two physicians and a clinical laboratory are settling charges they referred and performed unnecessary urine testing in violation of the False Claims Act.

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