Labs In Court: A roundup of recent cases and enforcement actions involving the diagnostics industry

Alabama Hospital and Lab Subsidiary Agree to $4.25 Million Kickback Settlement
Case: Aperian Laboratory Solutions and its parent East Alabama Medical Center will fork over $4.25 million + legal costs to settle charges of paying kickbacks for referrals and then falsely billing Medicare for the ill-gotten tests. The case contends that Aperian paid percentage commissions kickbacks to a pair of nationwide marketing companies in exchange for arranging doctors to refer toxicology tests to the lab. The companies, Summit Diagnostics and Compass Laboratory Solutions, entered into separate settlements of nearly $2 million.

Significance: The case began when a former Aperian employee told his supervisors about the scheme and asked them to stop it. When those calls fell on deaf ears, he brought a qui tam whistleblower lawsuit and now stands to collect between 15% to 25% of the total recovery.

Florida MD Practices Shell Out $58.3K for Accepting Millennium Test Cup Freebies
Case: The round up of physicians that accepted free point of care test (POCT) cups from Millennium Laboratories continues with a pediatrician and internist and their respective Jacksonville practices the latest to get roped in. The now bankrupt lab used the freebies as a form of remuneration paid to physicians in exchange for referrals of custom profile panels and other tests to carry out what the feds claim is the largest ever kickback scandal involving lab services.

Significance: After collecting $256 million from Millennium, the feds have spent the past 12 months targeting the physicians on the receiving end of the POCT cup scandal. (For more on the physician crackdown, see, GCA, June 18, 2018). The $58,300 the Jacksonville defendants agreed to pay in this case is the second lowest of the settlements so far.

Millennium Free POCT Cup Physicians Settlement Scorecard
Date Provider(s) Settlement Amount Individual Physicians Also Charged?
Sept. 6, 2018 Doctor’s Inlet Pediatrics and Primary Care, P.A., and Avenues Pediatrics and Internal Medicine (Florida) $58,370 YES
May 24, 2018 Recovery Pathways, LLC (Michigan) $64,555 NO
April 5, 2018 Affordable Medical Care f/k/a Andalusia Medical Center (Alabama) $40,500 YES
Feb. 28, 2018 The Pain Institute, Inc. d/b/a Space Coast Pain Institute (Florida) $95,302 YES
Dec. 5, 2017 Addiction Medical Care of Norwalk, Practice Management Associates Norwalk, LLC, Addiction Medical Care of Columbus, and Practice Management Associates, LLC (collectively, “AMC”) (Ohio) $79,880 NO
Sept. 27, 2017 Advanced Pain Management (Arizona) $186,210 NO
Sept. 18, 2017 Parallax Center, Inc. (New York) $64,203 NO

Opko Health, CEO Named in Pump-and-Dump Stock Fraud Scheme
Case: The U.S. Securities Exchange Commission charged billionaire drug entrepreneur Phillip Frost and his company, Opko Health, for participating in a market manipulation scheme allegedly organized by investor Donald Honig. According to the SEC complaint, Honig and his associates planted puff pieces about three companies they controlled and then dumped their shares leaving investors the who ponied up $27 million to purchase them with grossly overvalued stock. Opko denies the charges and plans to fight it out in court.

Significance: As surely as day follows night, SEC stock fraud charges lead to private shareholder litigation. Accordingly, as many as 10 law firms are lining up to file class action lawsuits against Opko for failing to disclose the firm and Frost’s role in the scheme. The market reaction to the SEC announcement forced Nasdaq to suspend trading in Opko stock for a week.

Massachusetts Lab Fined $1.374 Million for Free Test Supplies Kickback Scam
Case: A federal court ordered Calloway Laboratories, Inc. to pay $1,374,058 to settle claims of falsely billing Medicare and TRICARE for urine drug tests over a six-month period in 2014. As part of the settlement, the now defunct Woburn-Mass.-based lab admitted to offering free testing supplies to physicians in exchange for testing referrals. What would have been simply a kickback offense became a False Claims Act when Calloway subsequently billed Medicare and TRICARE for those tests.

Significance: The Medicare and TRICARE civil judgment is the latest chapter for a lab involved in what the Massachuesetts Attorney General described as “one of the most egregious Medicaid abuses our offices has handled.” In 2013-14, Calloway’s chief operating officer and three other individuals were convicted of using straw companies to funnel money bribes to employees of sober houses to generate urine drug testing referrals for patients covered by the MassHealth Medicaid program.

Jail for Urine Drug Testing Kickback Co-Conspirators
Case: Urine samples produced by patients of a Maryland-based pain clinic were a billables gold mine for a Jersey City testing lab, well worth the $1.37 million in kickbacks it ultimately paid to secure them. The lab CEO was sentenced to a year and a day in jail, ordered to forfeit $241,600 and fined $5,000. His marketing consultant and co-conspirator got three months’ supervised release in home detention, a $23,400 forfeit order and a $4,000 fine.

Significance: The defendants seem to have gotten a pretty good plea deal considering the scheme. According to the court documents, the parties agreed to split the profits 50/50, with the marketer getting a 5% cut for putting the deal together. Among the three clinic defendants, one was just sentenced to eight years in jail (the extra sentence reflecting the extra crimes of tax evasion and fraudulent billing of anesthesia), one died and the other is a fugitive.


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