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DOJ Aggressively Pursues and Settles False Claims Actions Against Doctors and Clinical Labs for Kickbacks and Medically Unnecessary Testing

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Over the past two years, the Department of Justice has announced several large settlements involving alleged violations by doctors and clinical laboratories of the False Claims Act and The Anti-Kickback Statute. Many clinical laboratories rely on referrals from physicians, hospitals, and other healthcare entities to obtain samples to examine –which is the crux of their business. However, as shown below, the relationships between clinical labs and physicians and other entities sometimes lead to unnecessary services, billing for more expensive services, and illegal kickback arrangements:

• In February 2013, Florida dermatologist Dr. Steven J. Wasserman, agreed to pay $26.1 million to resolve allegations that he violated the False Claims Act. The government alleged that Wasserman entered into an illegal kickback arrangement with a clinical laboratory and its owner, Dr. Jose Suarez Hoyos. Wasserman allegedly sent biopsy specimens for Medicare beneficiaries to the lab for testing and diagnosis; the lab then made it appear that Wasserman had performed diagnostic work. As part of the alleged kickback agreement, Wasserman substantially increased the number of skin biopsies he performed on Medicare patients, thus increasing referrals to the pathology lab.

• In August 2013, Bostwick Laboratories agreed to pay about $500,000 to resolve allegations it illegally paid physicians to induce them to enroll in a study sponsored by Bostwick. In October 2014, in a separate suit filed by a whistleblower against Bostwick, Bostwick agreed to pay $6.05 million to settle allegations that it made illegal payments to persuade physicians to use Bostwick’s services.

• In February 2014, the DOJ announced a $15.75 million settlement with Dr. Bryan Wood, Dr. Robin Peavler, PremierTox 2.0, LLC, and Addixxion Recovery of Kentucky, LLC d/b/a SelfRefind to resolve allegations that they submitted claims to Medicare and Kentucky’s Medicaid program for unnecessary tests. SelfRefind is a chain of 12 addiction treatment clinics in Kentucky. SelfRefind required its patients to submit to urine drug screening to ensure that the patients were not abusing drugs. When Wood and Peavler became part owners of PremierTox, SelfRefind began to automatically refer urine samples to outside laboratories for additional testing. PremierTox, to receive a higher reimbursement, also allegedly submitted false claims that misidentified the class of drugs being tested for.

• Most recently, in November 2014, the DOJ charged two Florida men with conspiracy to defraud Medicare and pay illegal kickbacks. David Lovelace and Dale DuBois were managing members of Healthcare Marketing Florida LLC, which paid cash kickbacks to clinics in Miami-Dade County in exchange for DNA test samples and patient information. Lovelace and DuBois then allegedly provided those samples and patient information to laboratory companies for submission to Medicare for reimbursement for clinical diagnostic lab services. On November 14, 2014, the DOJ arrested Lovelace and DuBois on criminal charges.

DOJ Assistant Attorney General for the Civil Division Stuart F. Delery said, “Billing Medicare and Medicaid for laboratory tests that are not necessary contributes to the soaring costs of health care.” Delery also said that providers would be “aggressively” investigated and held accountable for falsely billing federal health care programs.

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