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Posted  May 28, 2024

This week’s Department of Justice (DOJ) Catch of the Week goes to Florida medical lab owner Daniel Hurt and his companies Fountain Health Services, Verify Health, Landmark Diagnostics, First Choice Laboratory, and Sonoran Desert Pathology Associates.  Last Friday (May 24), DOJ announced their agreement to pay roughly $27 million to settle charges they violated the False Claims Act and Anti-Kickback Statute by billing Medicare for cancer genomic (CGx) tests that were not medically necessary and procured through illegal kickbacks. The payout would have been even higher but for Hurt’s inability to pay more.

This settlement, announced just under the wire before the long Memorial Holiday Weekend, follows an extremely busy week of DOJ False Claims Act enforcement activity with the agency resolving multiple matters covering a wide range of fraud and misconduct.  These included both civil and criminal matters involving healthcare fraud, government contracting fraud, and COVID-19 related fraud. These are all areas that remain a high priority for DOJ fraud enforcement.

In the area of healthcare fraud, going after illegal kickbacks is one of the government’s highest priorities because of the significant risk it poses to medical decision making. The Anti-Kickback Statute prohibits healthcare providers from paying or receiving any kind of financial consideration in exchange for medical-related referrals ultimately paid by Medicare, Medicaid, or any of the other government healthcare programs. While they may take a variety of forms and schemes, some of the most common types of illegal kickback arrangements include:

  • Hospitals, nursing homes, labs, dialysis centers, drug companies, medical equipment companies, or other healthcare providers paying doctors for patient referrals.
  • Healthcare providers paying patients (or waiving their fees or copays) to use their services or purchase their equipment.
  • Drug companies paying pharmacies to switch patient prescriptions.
  • Hospitals paying their employed physicians salaries or bonuses tied to the number of x-rays, lab tests, or other procedures they order at the hospital.
  • Hospitals, dialysis companies, or other healthcare providers buying physician practices for inflated prices and requiring the physician to continue working and referring business to the provider.
  • Healthcare providers offering physicians the opportunity to buy into surgical centers, distributorships, joint ventures, or other investment opportunities on favorable financial terms in exchange for referrals.

With respect to Hurt and his companies, the government claimed that Hurt conspired with a host of actors in the medical distribution chain to use financial inducements to steer patients to his labs for unnecessary CGx tests, largely targeting elderly patients. This included paying telemarketing agents to solicit Medicare beneficiaries for “free” CGx tests; telemedicine providers to “prescribe” CGx tests that were not medically necessary; reference laboratories to conduct the CGx tests; and billing laboratories and a hospital to bill Medicare and Medicaid for these unnecessary tests.

In announcing the settlement, the government highlighted its steadfast commitment to going after this kind of healthcare fraud. DOJ Civil Chief Brian Boynton stressed the government “will not tolerate those who prey on older Americans to defraud Medicare” and how DOJ “will use our available resources to protect federal health care programs and the beneficiaries they serve.”  U.S. Attorney Roger Handberg added how much “unnecessary medical services . . . threaten patients and our public health programs.” And U.S. Attorney Philip Sellinger noted how “especially egregious” these types of schemes are that “seek to siphon money from these programs with unnecessary medical tests.”

Like most False Claims Act cases, the settlement here originated with a whistleblower lawsuit filed under the statute’s qui tam provisions, which allow private parties to bring lawsuits on behalf of the government against those committing fraud against the government. This whistleblower action was filed by Robert Gerstein, a minority owner of Sonoran Desert Pathology, where he ran the billing operations for CGx tests. He will receive a whistleblower award of roughly $4.7 million, which amounts to about 17% of the government’s recovery.

If you would like more information on what it means to be a whistleblower or think you may have information relating to healthcare fraud or other fraud against the government, please feel free to contact us so we can connect you with a member of the Constantine Cannon whistleblower lawyer team for a free and confidential consultation.