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Catch of the Week: Laboratory and Two Founders Will Pay up to $16M Over Fraudulent Billing for Urine Drug Testing

Posted  October 22, 2021

Clinical laboratory MD Labs Inc., and co-founders and owners, Denis Grizelj and Matthew Rutledge, settled charges the lab falsely billed Medicare, Medicaid, and other federal payors for pricey and unnecessary urine drug tests. Over a four-year period, the lab regularly ran two different drug tests at once and then sent results from both tests to the ordering healthcare physician simultaneously, according to the settlement agreement. Many of the tests were either unjustified or useless.

The two tests, known as presumptive and confirmatory urine drug testing, are typically not run together. Presumptive testing is used for fast, qualitative results, meaning positive or negative, and is relatively inexpensive. Confirmatory testing is more expensive and used to verify the presumptive test quantitatively, providing drug concentration levels. Defendants knew that running the tests together meant some tests had no medical basis and others were useless to the physician, according to the settlement agreement. The pricier confirmatory tests were often premature and baseless because, absent a presumptive result, there was often nothing to confirm. And the presumptive results were frequently useless and redundant because the doctors received the more detailed confirmatory results at the same time.

Whistleblower’s Suit Will Return up to $17 Million in Improper Payments

A whistleblower exposed the scheme in a December 2018 lawsuit and will receive a share of the government’s recovery as a reward for helping to recoup millions in taxpayer dollars. As part of the settlement, MD Labs will pay up to $16 million, and $11.6 million at a minimum, depending on its revenues over the next several years. In addition, a Reno-based medical practice implicated in the fraud, Nevada Advanced Pain Specialists, previously agreed to pay $1 million. The whistleblower also received an award from the provider group’s settlement.

Laboratory Fraud Wastes Resources and Drives Up Healthcare Costs

Laboratory fraud and improper billing, including urine drug testing, is pervasive and under government scrutiny. Drug testing fraud can take many forms and dramatically increase healthcare spending, as illustrated by the eye-popping $256 million settlement Millennium Health agreed to pay in 2015 to resolve several whistleblower-initiated suits.

In a press release announcing the MD Labs settlement, the government pledged continued diligence to combat similar schemes that divert crucial resources and drive up healthcare spending. “Unethical laboratories who line their pockets by over-billing for useless medical tests not only drain critical funds from Medicare and other federally funded health care programs, but they increase medical costs for all of us,” said FBI Special Agent in Charge Joseph R. Bonavolonta. “The FBI and our partners will do everything in our power to hold those who fraudulently bill the government accountable, as demonstrated by today’s settlement.”

If you have information about similar misconduct or another form of fraud in healthcare, you could have a whistleblower case under the False Claims Act and you could be entitled to a reward for revealing the fraud. Contact our whistleblower lawyer team to learn more.

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Tagged in: Catch of the Week, Healthcare Fraud, Laboratory and IDTF, Lack of Medical Necessity, Medicaid, Medical Billing Fraud, Medicare, Provider Fraud, Whistleblower Case,