Clinical laboratory employees have agreed to pay their share of a $7.2 million whistleblower case over two years of lab testing for recovery centers and homeless shelters, according to the U.S. Attorney's Office in the Eastern District of Kentucky.
The civil healthcare fraud case arose from a "complex patchwork of schemes" between December 2016 and September 2018, involving Medicare, Kentucky Medicaid, and TRICARE claims, according to a September 27 Department of Justice (DOJ) news release.
Implicated were the hospital Physicians' Medical Center (PMC) in New Albany, IN, its clinical laboratory that was managed by the now defunct United States Medical Scientific Indiana, Bluewater Toxicology in Mount Washington, KY, various laboratory employees from manager to sales rep, the referring physician, and others.
In total, they will pay various amounts to resolve allegations that they defrauded federal healthcare programs in connection with laboratory tests that were not medically necessary or were tainted by violations of the federal Anti-Kickback Statute (AKS).
"Nonmedical entities only used the test results to monitor clients’ compliance with the conditions of their programs and with court orders," the DOJ said. The United States alleged that PMC submitted nearly $3 million in false claims for urine drug tests referred by these nonmedical entities that included peer-to-peer recovery centers and homeless shelters.
Two lab employees entered settlement agreements to resolve their False Claims Act liability, for causing PMC’s submission of false claims for lab tests from these nonmedical entities.
Bobby Sturgeon, a sales representative for PMC’s laboratory, allegedly knew the entities did not provide medical services, but nonetheless pursued and worked with them as clients, according to the DOJ. Sturgeon also financially benefited from the sales practices because his salary was based in part on the amount insurers paid PMC for his clients’ tests, including those from the nonmedical entities.
Similarly, the U.S. alleged that Derrick Arthur, one of the peer-to-peer recovery center’s directors, worked as a specimen collector for PMC’s lab and helped arrange for a volunteer doctor to order urine drug testing, despite knowing that the doctor did not provide medical treatment to the center’s clients, the DOJ said. By doing so, Arthur facilitated the improper billing of laboratory tests to federal healthcare programs.
In a related scheme, Steve Moore, a laboratory sales representative for PMC and Bluewater Toxicology, allegedly paid a physician, Dr. Pablo Merced, and his wife and office manager, Theresa Merced, to induce referrals of laboratory tests to PMC and Bluewater Toxicology.
PMC’s settlement agreement also resolved its False Claims Act liability for claims for lab tests referred by medical providers at Prescribe Recovery, a medical practice in Paris, KY.
For their roles in the scheme as the laboratories submitting the false claims, PMC agreed to pay $5,219,000 and Bluewater Toxicology agreed to pay $895,952.
Sturgeon and Moore, agreed to pay $713,466 and $40,000, respectively, to resolve their liability. Arthur agreed to pay $5,500 to resolve his liability; and Dr. and Mrs. Merced collectively agreed to pay $450,000 to resolve their liability, under the False Claims Act and Dr. Merced’s liability for separate conduct under the Controlled Substances Act. The value of Moore’s, Arthur’s, and the Merceds’ settlements included factoring in their inability to pay, based on financial disclosures.
Collectively, the settlements return more than $7.2 million to the U.S. and are a result of a qui tam complaint from a private citizen.
