A hospital, a laboratory, three lab employees, a referring physician and his office manager will collectively pay more than $7.2 million to settle allegations that they defrauded government healthcare programs through unnecessary or tainted laboratory testing.
Physicians' Medical Center, a hospital in New Albany, Ind., operated a clinical laboratory by the now-defunct United States Medical Scientific Indiana. The laboratory manager allegedly billed Medicare, Kentucky Medicaid and Tricare for laboratory testing that was not used for medical diagnosis or treatment, amounting to violations of the False Claims Act, according to a Sept. 27 release by the U.S. Department of Justice.
These tests were referred to by various entities, including a homeless shelter and peer-to-peer recovery centers, according to the release. These facilities used the test results to monitor clients compliance with the conditions of their programs and court orders rather than medical diagnosis and treatment. PMC then submitted false claims totaling $3 million for the urine tests.
Two employees were added to the settlement agreement for their submission of the false claims. 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, also named in the allegations, was a director for one of the peer-to-peer recovery centers and worked as a specimen collector for PMC's lab. According to the Department of Justice, he facilitated the improper billing by arranging for a volunteer physician to order the urine testing despite his knowledge that they would not be used for medical treatment.
After closing its laboratory in 2018, Mr. Sturgeon became a sales representative for Blue Water 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.
In a connected 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 prompt 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.
The settlement will also resolve PMC's alleged liability for claims 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. In total, the settlements will return over $7.2 million to Medicare, Kentucky Medicaid and Tricare programs.