May 2024 Labs in Court

Doctor Indicted for Involvement in $20.7 Million Healthcare Fraud and Illegal Kickback Schemes

Case: On February 22, Alexander Baldonado, a medical doctor from New York, was indicted by a federal grand jury for submitting over $20.7 million in fraudulent claims to Medicare for laboratory tests. According to the indictment, Baldonado received kickbacks from a laboratory representative in exchange for approving tests that were billed to Medicare. Baldonado also allegedly authorized COVID-19 tests at testing events and added on expensive, medically unnecessary cancer genetic tests that patients did not request or need. In addition, he allegedly billed Medicare for extensive office visits that never occurred and received kickbacks from a durable medical equipment (DME) company for ordering medically unnecessary orthotic braces. If convicted, Baldonado faces significant penalties.¹

Significance: This case presents one example of the government aggressively pursuing physicians—not just the labs—for accepting kickbacks from labs (and DME providers) that lead to medically unnecessary testing. In December 2022, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a report summarizing its investigation of fraudulent schemes involving laboratories with questionably high billing for add-on tests (e.g. respiratory pathogen panels, genetic tests, and allergy tests) with COVID-19 tests. The OIG identified an increase in problematic claims for certain diagnostic tests ordered in conjunction with COVID-19 tests.² Although add-on tests can be routine in many instances, unnecessary or excessive billing of add-on tests can indicate fraud or waste.

New York Man Solicits Kickbacks for COVID-19 Tests from Metpath Laboratories

Case: On February 26, 2024, David Weathers pleaded guilty to soliciting kickbacks from Metpath Laboratories (Metpath), a clinical laboratory in New Jersey.³ According to the indictment, Weathers and other co-conspirators provided COVID-19 test samples to Metpath, which billed Medicare and the Health Resources and Services Administration’s (HRSA’s) COVID-19 Uninsured Program for the tests and paid Weathers a $30 per test kickback. The indictment alleges other similar kickback arrangements with other defendants. This amounted to a $3.5 million loss to federal programs.⁴ Weathers will be sentenced on July 10, 2024.

Significance: This case demonstrates the government’s ongoing enforcement focus on investigating and prosecuting kickback arrangements related to the submission of claims for COVID-19 testing. During the COVID-19 pandemic, HRSA provided additional COVID-19 testing coverage for uninsured individuals through its COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured Program funded through a series of COVID-19 related bills. Interestingly, the indictment reflects that the government considered Medicare and the HRSA COVID-19 Uninsured Program to be federal healthcare programs for purposes of the federal Anti-Kickback Statute and “healthcare benefit programs” under the Eliminating Kickbacks in Recovery Act.⁴

Class Action Filed Against Labcorp for Disclosure of Patients’ Health Information to Google

Case: On February 13, a federal class action was filed against Laboratory Corporation of America Holdings (Labcorp), alleging that Labcorp violated federal and state privacy laws by sharing its patients’ protected health information (PHI) with Google Inc. for commercial and advertising purposes.⁵ According to the complaint, Labcorp used Google’s tracking technology on its website to collect and use the information of patients who visited the site. The Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule prohibits healthcare providers from disclosing PHI to third parties except for treatment, payment, and operations purposes, or with patient consent.⁶

Significance: As the complaint asserts, “Google is not any patient’s intended recipient of individually-identifiable health information they communicate on Labcorp’s website, nor is it an active or disclosed participant in these communications.”⁶ This case underscores the importance of complying with HIPAA to maintain confidentiality of patients’ PHI, which should only be disclosed to third parties acting as vendors of covered entity labs with a compliant business associate agreement (BAA) in place or pursuant to an authorization. Laboratories should ensure that any tracking tools used on their websites, portals, or apps are structured to comply with HIPAA (including entering into BAAs with any third party receiving such data to provide them with analytics) and should review their compliance policies and security risk analysis regularly.

Physician and Staffing Company Settle Allegations of Fraudulent Telemedicine and Lab Billing Scheme

Case: On March 15, William Salko, DO, and Jackson & Coker LocumTenens, LLC (JCLT) agreed to pay $700,000 to resolve allegations regarding a kickback scheme to bill Medicare for unnecessary diagnostic laboratory testing and durable medical equipment (DME). JCLT, a staffing company, hired Salko to provide telemedicine services for Nationwide Health Advocates (Nationwide). Nationwide allegedly employed telemarking companies to target and contact Medicare beneficiaries regarding free DME and laboratory testing. To receive Medicare payment for laboratory tests, the test must be ordered by a physician as necessary for treatment. Allegedly, Nationwide would submit the order for the laboratory test, then Salko would sign off without treating or speaking to the beneficiaries. Notably, the former owner of Nationwide pleaded guilty to related felony healthcare fraud charges in September 2023.⁷

Significance: The U.S. Department of Justice (DOJ) emphasizes that fraudulent telemedicine schemes violate the trust of Medicare beneficiaries and waste taxpayer dollars. This enforcement action demonstrates that physicians must have a treating relationship with patients for whom they issue orders for testing and other services. Laboratories should be vigilant about working with telemedicine providers and healthcare entities to ensure that they are engaged with the patients in a treatment relationship and are referring legitimate, medically necessary tests. Notably, JCLT cooperated with the investigation and was recognized for “taking responsibility, and taking steps to prevent occurrences like these in the future”—demonstrating that staffing companies have an obligation to vet contract physician opportunities for compliance issues.⁷

Former Georgia Insurance Commissioner Pleads Guilty to Orchestrating Fraudulent Lab Billing Scheme

Case: On March 22, John Oxendine, Georgia’s former insurance commissioner, pleaded guilty to a kickback conspiracy in which he and a physician co-conspirator referred medically unnecessary tests to Next Health, a lab company in Texas. According to the U.S. Attorney and charges, Next Health agreed to pay Oxendine and a physician 50 percent of net profits, and the scheme resulted in Next Health submitting $2,500,000 in claims to private insurance companies for these unnecessary lab tests, of which Next Health received nearly $700,000. In the press release, the DOJ highlights that Oxendine’s position as the former state-wide insurance commissioner placed him in a position of power from which he knew the importance of honest dealings. Oxendine’s sentencing hearing is scheduled for July 12, 2024.⁸

Significance: In contrast to the cooperation credit received by JCLT above, this case demonstrates that the DOJ is going to take a hard stance against individuals in a position of power who violate public trust; particularly, those who—as the DOJ asserts here—took steps to try to cover up the fraud. Beyond that, it is simply another example of the DOJ’s commitment to uncovering egregious wastes of taxpayer money. Notably, despite the focus on private insurance related fraud, the activities all pre-date EKRA and, as a result, it is not referenced as a basis of liability.

References:

1. 1. U.S. Department of Justice Office of Public Affairs, “Medical Doctor Charged for $20.7M Health Care Fraud and Illegal Kickback Schemes.” https://www.justice.gov/opa/pr/medical-doctor-charged-207m-health-care-fraud-and-illegal-kickback-schemes
   2. U.S Department of Health and Human Services Office of Inspector General, “Labs With Questionably High Billing for Additional Tests Alongside COVID-19 Tests Warrant Further Scrutiny. https://oig.hhs.gov/oei/reports/OEI-09-20-00510.pdf
   3. U.S. Department of Justice United States Attorney’s Office, District of New Jersey, “Bronx, New York, Man Admits Soliciting Kickbacks in Multimillion-Dollar COVID-19 Testing Kickback Conspiracy.” https://www.justice.gov/usao-nj/pr/bronx-new-york-man-admits-soliciting-kickbacks-multimillion-dollar-covid-19-testing
   4. United States District Court for the District of New Jersey, United States of America v. Syed et al. dl (justice.gov). https://www.justice.gov/usao-nj/media/1339901/dl?inline
   5. McCroskey, Kelsey, “Labcorp.com Users’ Private Data Is Secretly Shared with Google, Class Action Claims.” ClassAction.org https://www.classaction.org/news/labcorp.com-users-private-data-is-secretly-shared-with-google-class-action-claims
   6. United States District Court for the Eastern District of Pennsylvania. Wiggins et al vs. Laboratory Corporation of America Holdings. https://www.classaction.org/media/wiggins-et-al-v-laboratory-corporation-of-america-holdings.pdf
   7. U.S. Department of Justice United States Attorney’s Office, Eastern District of Washington, “Richland Physician, Health Care Staffing Company Agree to Pay $700,000 to Resolve False Claims Act Liability Arising from Telemedicine Scheme.” https://www.justice.gov/usao-edwa/pr/richland-physician-health-care-staffing-company-agree-pay-700000-resolve-false-claims
   8. U.S. Department of Justice United States Attorney’s Office, Northern District of Georgia, “Former Georgia Insurance Commissioner John Oxendine Pleads Guilty in Health Care Fraud Scheme.” https://www.justice.gov/usao-ndga/pr/former-georgia-insurance-commissioner-john-oxendine-pleads-guilty-health-care-fraud