A hospital, a laboratory, three lab employees, a referring physician and his office manager agreed to collectively pay more than $7.2 million to resolve allegations they defrauded healthcare programs through unnecessary or tainted laboratory testing.
Five things to know:
1. New Albany, Ind.-based Physicians' Medical Center operated a clinical laboratory by the now-defunct United States Medical Scientific Indiana, according to a Sept. 27 Justice Department news release. The lab's manager allegedly billed Medicare, Kentucky Medicaid and Tricare for testing that was not used for medical diagnosis or treatment.
2. These tests were referred to by various entities, including a homeless shelter and peer-to-peer recovery centers, which used the test results to monitor clients' compliance with the conditions of their programs and court orders rather than medical diagnosis and treatment. The hospital then submitted nearly $3 million in false claims to government payers for the tests referred by these nonmedical entities.
3. Bobby Sturgeon, a sales representative for PMC's laboratory, allegedly knew that these nonmedical entities would not qualify for Medicare payment for the urine tests under federal guidelines, yet pursued them as clients. Mr. Sturgeon's salary was partly based on the amount that insurers reimbursed PMC for clients' testing, including the claims that were falsely submitted. Derrick Arthur, director for one of the peer-to-peer recovery centers and a specimen collector for PMC's lab, allegedly facilitated improper billing by arranging for a volunteer physician to order the urine testing despite knowing they would not be used for medical treatment. After the lab closed in 2018, Mr. Sturgeon became a sales representative for Bluewater Toxicology in Mount Washington, Ky., where he continued to submit false claims for nonmedical urine testing through July 2019. Through Bluewater, he allegedly submitted nearly $450,000 in false claims.
4. In a related scheme, Steve Moore, a laboratory sales representative for PMC and Bluewater, allegedly paid Pablo Merced, MD, and his wife and office manager, Theresa Merced, to induce referrals of laboratory tests to PMC and Bluewater. Mr. Moore allegedly paid Dr. Merced in cash to receive the large volume of referrals and paid additional salary to lab specimen collectors at the facilities. PMC and Bluewater then submitted millions of dollars of claims to federal healthcare programs that were inflated by their sales representatives' alleged kickbacks.
5. The settlement also resolves PMC's alleged False Claims Act liability for lab tests performed at Prescribe Recovery, a medical practice in Paris, Ky. USMSI, which owned Prescribe Recovery, directed referrals of lab tests to PMC labs and received 78% of the claim reimbursements made to PMC by the government. PMC's payments to USMSI induced the company to direct Prescribe Recovery's lab referrals to PMC, resulting in a violation of the anti-kickback statute.