Pittsburgh-area Lab Owner Charged with Paying Kickbacks in Connection with Medicare Claims for Genetic Testing Based on Telemedicine Visits

Genetic testing billed to Medicare, especially where telemedicine is used to generate the lab orders, has been a hot area of investigation by the U.S. Justice Department. A recent case illustrates the type of cases that are being targeted.

On November 26, 2019, Ravitej Reddy, the alleged owner of two testing laboratories—Personalized Genetics, LLC, d/b/a Personalized Genomics (PGL) and Med Health Services Management, LP (MHS) in Pennsylvania, was charged in federal court by criminal Information with 2 counts of conspiracy to pay and receive kickbacks, 1 count of conspiracy to pay kickbacks, and 1 count of offering and paying kickbacks. A criminal Information is not evidence and a defendant is presumed innocent.

According to the Information's allegations, Mr. Reddy's companies billed Medicare for 2 types of genetic testing: cancer genomic testing (CGx) and pharmacogenetic testing (PGx). CGx testing used DNA sequencing to detect mutations in genes that could indicate a higher risk of developing certain types of cancers in the future. CGx testing, however, was not a method of diagnosing whether an individual presently had cancer. PGx testing detected specific genetic variations in genes that impacted the metabolism of certain medications. In other words, PGx testing helped determine, among other things, whether certain medications would be effective if used by a particular patient. 

The Information alleges that from approximately May 2018 to April 2019, Mr. Reddy and a group of business consultants, marketers, operator of a telemedicine entity and others  acquired thousands of testing samples from Medicare beneficiaries located throughout the United States, as well as the corresponding prescriptions that PGL and MHS needed to bill Medicare for CGx and PGx testing. 

Unnecessary Genetic Testing on Medicare Skilled Nursing Facility Patients Alleged in Federal Qui Tam Case Involving California Based Laboratory

Genetic testing is currently the subject of numerous qui tam cases and investigations by the Office of Inspector General. This is in addition to any investigations by private insurance carriers. A recent federal qui tam case shows that the government is going after those involved in the ordering of such tests as well as the laboratories.

One issue that arises is where genetic tests are ordered by physicians who are not the regularly treating physicians of the Medicare patients. In order to be considered medically necessary and thus reimbursable under Medicare, the general rule is that the laboratory test must be ordered by the physician treating the resident. 

What happens when a laboratory test is ordered by a physician who is not the regular treating physician of the patient? For example, what if the physician is an outside physician whose only role is ordering a genetic test? In a recent case, a federal qui tam (false claims) lawsuit was filed as a result against skilled nursing facilities who gave a laboratory access to its patients. This lawsuit and settlement can serve as a teaching moment for those who order genetic testing. 

On April 10, 2017, a multi-state nursing home company Prestige Administrative Services, LLC d/b/a Prestige Healthcare (Prestige) based in Kentucky agreed to pay the United States $995,500 to resolve allegations that it violated the False Claims Act with regard to its role in an alleged scheme to falsely bill Medicare for unnecessary genetic testing on skilled nursing home patients in four facilities located in Wisconsin.

The United States alleged that in 2014, Prestige was approached by an entity known as Genomix, LLC, which claimed that it could perform genetic testing on Prestige’s Medicare residents in order to ascertain whether Prestige’s patients were properly metabolizing their medications. 

The United States alleged that in 2014 and 2015, Prestige provided Genomix with insurance and personal medical information, as well as access to Prestige patients in nursing homes in several states, including Wisconsin, for purposes of conducting the testing. Genomix conducted the testing by taking cheek swabs of each Prestige patient and then sending the cheek swab to a laboratory for analysis.

The United States alleged that Prestige failed to ensure that physician orders were obtained for the genetic testing prior to its being conducted, and that Prestige's physicians were not aware of and did not agree with the medical necessity of the testing. 

United States also alleged that Prestige failed to ensure that its patients (or, in some cases, their family members responsible for their medical decisions) were appropriately informed of the testing prior to its being conducted and provided with the opportunity to decline the testing. Finally, the United States alleged that the lack of physician orders and patient consent was discovered during a survey conducted by state regulators in late 2015.

While it is not unusual for skilled nursing facility (SNF) operators, such as Prestige, to coordinate in placing orders with clinical laboratories for medically necessary diagnostic laboratory tests for their residents, the treating physician must order the test. This is a basic tenet that in order to be considered medically necessary and thus reimbursable under Medicare, the laboratory test must be ordered by the physician treating the resident. 

The settlement announced resolved only Prestige’s civil liability and did not resolve any liability of any other individuals or entities, including that of Genomix, which is a separate entity headquartered in Southern California. As part of the settlement, Prestige agreed to cooperate in the United States’ ongoing investigation. 

Based on what we hear in the healthcare legal community, we can expect to see more investigations, lawsuits and even potential criminal prosecutions involving genetic testing. There are allegations in other cases indicating that physicians are being paid as experts or researchers by laboratories to order genetic tests on their patients and that in some cases, these fees are disguised kickbacks. Any physician in such an arrangement with a laboratory should ensure that it is compliant with federal and state law.  

Posted by Tracy Green, Esq.
Green and Associates, Attorneys at Law
Work: 213-233-2261
Email: tgreen@greenassoc.com

New York Doctor Charged With Taking Kickbacks In Test-Referral Arrangement With Clinical Lab. Huge Case With 27 Doctors Pleading Guilty.

Federal health care fraud cases involving payments for referrals are getting larger, involving more health care providers and get prosecuted in phases. One case in New York how these cases keep coming out of the same investigation. 

On December 20, 2016, Thomas V. Savino, M.D., a doctor practicing in Staten Island, New York, was charged with accepting payments (bribes) in exchange for test referrals as part of a long-running marketing arrangement operated by Biodiagnostic Laboratory Services LLC (BLS) of New Jersey. He is the 30th physician charged who referred cases to BLS. 

The cases arising out of BLS' operations is believed to be the largest number of medical professionals ever prosecuted in a kickback case. The investigation has thus far resulted in 41 guilty pleas – 27 of them from doctors – in connection with the marketing and kickback arrangements. Some of these were alleged sham lease, service and consulting agreements. On June 28, 2016, BLS, which is no longer operational, pleaded guilty and was required to forfeit all of its assets. The investigation has to date recovered more than $12 million through forfeiture. 

This case went to Indictment after Dr. Savino did not voluntarily plead guilty.  According to the indictment, from July 2012 through April 2013, Dr. Savino allegedly received cash payments totaling at least $25,000 from BLS employees and associates. Dr. Savino’s referrals allegedly generated approximately $375,000 in lab business for BLS. The government is charging that the inducements were for Medicare and private insurance.

The sales representatives for BLS often used other entities to make payments. The government also alleges in many of these cases that the patients were never informed that the cases were referred to a laboratory where the physician would receive a payment.

New Jersey Woman Pleads Guilty to Role In Medicare Fraud by Clinical Laboratory Billing for Genetic DNA Testing on Seniors Where Healthcare Providers Were Paid for Authorizations

Fraud prosecutions in clinical laboratories are on the rise. Marketing is usually at the heart of these cases. A recent case involving DNA testing shows marketing issues on the patient side and on the referring or authorizing physician side as well as issues of medical necessity. 

One of the reasons that paying outside marketers commissions creates issues is that the health care provider often does not know how the marketer finds the patients or accounts. This case shows how creative outside marketers can be in finding patients and health care providers to earn commissions. 

On December 1, 2016, Sheila Kahl of New Jersey pleaded guilty before U.S. District Judge Anne E. Thompson in Trenton federal court to an information charging her with one count of conspiring to commit health care fraud and one count of conspiring to wrongfully access individually identifiable health information and pay illegal remunerations to health care professionals. Sentencing for Ms. Kahl is scheduled for March 14, 2017.

Ms. Kahl's actions involved an entity known as The Good Samaritans of America which the government alleged was not a true not-for-profit and was a marketing company front to get elderly patients to submit to genetic testing so it could get commission payments from clinical laboratories. 

According to documents filed in the case and statements made in court, from July 2014 through December 2015, Seth Rehfuss, Ms. Kahl, and others used The Good Samaritans of America to gain access to low-income senior housing complexes. Mr. Rehfuss and others claimed that The Good Samaritans of America was a “trusted non-profit” that assisted senior citizens in navigating federal benefit programs. The government alleged that The Good Samaritans of America was a front to present information about genetic testing and they used advertisements for free ice cream to ensure attendance at the presentations.

Premiertox Pays U.S. and Tennessee $2.5 Million to Resolve False Claims Act Lawsuit for Urine Drug Screening Services. Allegations of Unlawful Kickbacks, Lack of Medical Necessity

Quantitative urine drug screening ordered by physicians or other health care providers (such as drug treatment centers) and toxicology laboratories or the treatment and monitoring of patients have come under increased scrutiny and audits the past three years. 

The increased requirement of urine monitoring for pain management and drug addiction treatment resulted in companies and providers being more aggressive about the ordering of urine screenings. A recent case shows that qui tam relators are also filing actions against toxicology labs and the doctors who order the screeenings. At the heart of the case is the business relationships between the labs and referring providers.

Referral arrangements between ordering physicians and the laboratories are an issue. I expect to see many more qui tam lawsuits, civil lawsuits by insurance carriers and even some criminal prosecutions.

Understand that the government views providing free point of care testing cups is proving to be an illegal inducement. It also views ownership of any referring provider in the laboratory or a related entity which received profits from the urine tox referrals is also an illegal inducement. Labs and its marketing companies are coming up with creative ways to get referring physicians and drug treatment clinics, but be careful since this could be your company 3 years from now. A company like PremierTox can afford to pay millions but individuals tend to get more aggressive treatment (criminal allegations).  

On February 10, 2016, PremierTox 2.0, Inc. paid $2.5 million to resolve alleged violations of the False Claims Act. PremierTox previously did business in Tennessee under the name Nexus and is a company that provides drug urine screening services.  The government alleged that PremierTox submitted false claims when billing Medicare, TennCare and Kentucky Medicaid for drug urine screening services. PremiereTox 2.0 had a settlement and corporate integrity agreement back in 2014 that was a substantial (payment of $15 million) and it seems the company is resolving its legal matters from its old ownership. 

Doctor Charged With Accepting Cash From Sales Representatives For Referrals To Lab Companies for Blood and DNA Testing

A New Jersey doctor with offices in Toms River, New Jersey, was indicted for accepting approximately $25,000 in cash bribes over a one year period from sales representatives in exchange for referring his patients to two lab companies that performed blood and DNA testing. It is contended that the laboratories did not know of or approve this arrangement.

On February 12, 2016, Dr. Vincent Destasio was indicted by a federal grand jury in Newark on one count of conspiracy to accept cash bribes and two substantive counts of accepting cash bribes. The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

According to the indictment and statements made in court, Dr. Destasio was paid cash kickbacks by two sales representatives (Daniel Gilman and Kenneth Robberson) who were partners operating PROMED, which was a marketing and sales company specializing in blood testing laboratories and DNA laboratory testing companies. 

Sales reps Gilman and Robberson have already both pleaded guilty to an information charging them with conspiracy to bribe a physician and are awaiting sentencing.  They admitted in their plea that from March 2014 through May 2015, Gilman and Robberson solicited Dr. Destasio by paying him cash bribes for referring patient lab work to two separate laboratories for which Gilman and Robberson provided marketing and sales. 

Former Doctor and Non-Doctor Owners of Kentucky Clinical Laboratory Indicted for Health Care Fraud Due to Urine Drug Testing

Drug toxicology was considered a lucrative field in health care. Urine drug testing is important for physicians to monitor patient use of drugs and compliance especially with pain medications or addiction treatment.

There are now a number of fraud cases arising involving drug toxicology. In California, it has been a hot area in workers' compensation fraud. There are also Medicare, Medicaid, workers' compensation insurance and private insurance fraud investigations around the country relating to drug testing. 

On December 1, 2015 arraignment was held after a federal grand jury in Kentucky returned a 100-count indictment charging five men, who owned a clinical laboratory, with billing health care third-party payors for urine drug tests that were medically unnecessary and not eligible for reimbursement.

New York Doctor Sentenced To 46 Months In Prison For Payments for Test-Referrals With New Jersey Clinical Lab. Payments Were Made to Doctors Under Lease, Consulting, Service or Management Agreements With Doctors Where Referrals Occured Were Called "Bribes" or "Kickbacks" and Agreements Were Called "Sham"

A doctor, Brett Halper MD, with a practice in Rockville Centre, New York, was sentenced November 18, 2015 to 46 months in prison for accepting payment in exchange for test referrals from by Biodiagnostic Laboratory Services LLC (BLS) in New Jersey billed to Medicare. Dr. Halper plead guilty in Newark federal court and did not go to trial.

This was part of a large investigation which resulted in 38 guilty pleas – 26 of them doctors – in connection with the lab kickback arrangement. The investigation has so far recovered more than $11.5 million to date through forfeiture.

The fact that 26 doctors were charged shows that simply because a large number of physicians enter into these arrangements does not mean that they are legal or will pass muster. The government contended that these were "sham" agreements even though attorneys had drafted them.

The lab BLS and four of its executives were also charged. The referral or "bribe" arrangements were the ones that were common in the clinical lab business: lease, service or consulting agreements.

Millennium Health Laboratories Agrees to Pay $256 Million to Resolve Qui Tam Allegations of Unnecessary Urine Drug and Genetic Testing and Illegal Kickbacks to Physicians

Millennium Health, formerly Millennium Laboratories, has agreed to pay $256 million to resolve alleged violations of the False Claims Act for billing Medicare, Medicaid and other federal health care programs for medically unnecessary urine drug and genetic testing and for providing free items to physicians who agreed to refer expensive laboratory testing business to Millennium. 

The United States alleged that Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which, instead of being tailored to individual patients, were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. 

The United States also alleged that Millennium’s provision of free point of care urine drug test cups to physicians—expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing — violated the Stark Law and the Anti-Kickback Statute.  The Stark Law and the Anti-Kickback Statute generally prohibit laboratories from giving physicians anything of value in exchange for referrals of tests.

Millennium, headquartered in San Diego, is one of the largest urine drug testing laboratories in the United States and conducts business nationwide.

Tracy Green Interviewed About "Blood-Testing Startup Theranos, Inc. Is Trading Blows With the Wall Street Journal"

Legal Broadcast Network recently interviewed Los Angeles attorney Tracy Green, and expert in health care regulatory issues, on the possible outcomes of the dispute between Theranos, a $9 billion valued private biotech company started by Elizabeth Holmes, and The Wall Street Journal.

Theranos is offering a new technology solution to an old problem.  In October, the Wall Street Journal published a report alleging that Theranos’s claims about its transformative diagnostic technology, including needle-free blood tests that yield faster results than industry standard tests, do not hold up. Theranos fired back with a denial, offering a rebuttal to statements in the article and suggesting that the reporter, John Carreyrou, had been trying to “take down” Theranos.

As to the possibility of a libel action against the Wall Street Journal, Green points out that “libel cases are hard to win.” Green is involved in a case involving reporting by John Carreyrou, and she says that he is meticulous in detailing what he does. Green says that an FDA report released this week will affect any decision to sue. The FDA report is a public record, so it would be important in any issue as to the truth of what the Journal printed.

Green also notes that Carreyrou apparently did a good job of cultivating sources—employees and former employees of Theranos. Whether Carreyrou acted in good faith and checked his facts would also be important. Green says that Theranos has been known to be “incredibly secretive.” The company worked in hidden buildings with no indication of what was going on there. Getting information from insiders will be an important consideration, especially if this information tracks with what the FDA reported.

Posted by Green and Associates

Office: 213-233-2260

California Reaches $49.5 Million Settlement With Labcorp (State's 2nd Largest Lab)

California recently announced a $49.5 million settlement with Laboratory Corporation of America, the state's second largest provider of medical laboratory testing, stemming from a qui tam lawsuit alleging illegal overcharges to the state's Medi-Cal program for the poor. In May, Attorney General Harris announced a settlement of $241 million with Quest Diagnostics for the same alleged practice. 


Our firm represented one of the smaller laboratories in this case which also settled for business reasons and, thus, we have followed the settlements in this case closely.  


The settlement with Labcorp is the result of a lawsuit filed under court seal in 2005 by a whistleblower and referred to the Attorney General's office. The lawsuit alleged that Labcorp and other medical laboratories systematically overcharged the state's Medi-Cal program for more than 15 years and gave illegal kickbacks in the form of discounted or free testing to doctors, hospitals and clinics that referred Medi-Cal patients and other business to the labs. 

According to the allegations in the lawsuit, Labcorp charged Medi-Cal over five times as much as it charged some other customers for certain tests. For example, Labcorp was accused of charging Medi-Cal $35.04 to test for total testosterone, while it allegedly charged another customer $7.36 for the same test. What the state did not realize was that in servicing certain low-income community clinics, the labs had to charge a lower price given that the State's reimbursement to the clinic was too low for the clinic to pay the lab the standard rate. 

This case was filed as a qui tam case. Under the state's False Claims Act, any person with previously undisclosed information about a fraud, overcharge, or other false claim can file a sealed lawsuit on behalf of California to recover the losses, and is entitled to a share of the recovery in some cases. Such individuals become plaintiffs and are known as "whistleblowers," "qui tam plaintiffs," or "relators." 


In this case, the whistleblowers were Chris Riedel and his company Hunter Laboratories. Hunter Laboratories allegedly found it could not compete in a significant segment of the marketplace where major medical laboratories such as Labcorp offered doctors, hospitals and clinics far lower rates than they were charging Medi-Cal.


Attorney Commentary: The State is making it more difficult for smaller and medium-sized laboratories to co-exist with large national laboratories. In this case, the State's real targets were the larger laboratories since they could obtain larger monetary settlements from them. Given the state of the economy and the lack of funding for Medi-Cal, we can expect more qui tam cases against larger health care providers.


Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

Any questions or comments  should be directed to Tracy Green, a very experienced California health care attorney, administrative attorney, and California Medical Board attorney at tgreen@greenassoc.com.