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Catch of the Week: EEG Testing Company and Private-Investment Company to Pay $15.3M for Kickback and False-Billing Allegations

Posted  July 23, 2021

Whistleblowers came forward with six False Claims Act actions against a national EEG testing company and an investment company for allegedly paying kickbacks and falsely billing government healthcare programs.  Texas-based provider Alliance Family of Companies (now Stratus) and private investor Ancor Holdings together will pay $15.3 million to resolve the cases.

For their actions in coming forward, two whistleblowers will be awarded $2.96 million.

Free Interpretations of Test Reports Are Kickbacks

The DOJ alleged that Alliance, a national provider of ambulatory electroencephalography (EEG) testing services, gave kickbacks to referring physicians in the form of free interpretation of the test reports.  Free interpretations are items of value, particularly for physicians who are not neurologists and unable to interpret the EEG tests.  Providing the free interpretations allowed the physicians falsely to bill government healthcare programs as if they had interpreted them.

Alliance also allegedly used the wrong billing code for certain tests to get higher reimbursements from government healthcare programs and charged for a specialized digital analysis it did not perform.  The kickbacks and false billings resulted in false claims for payment submitted to Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program.  As part of the settlement, Alliance entered into a five-year Corporate Integrity Agreement with HHS-OIG.

Why Must the Private-Investment Company Also Pay?

Private-investment company Ancor allegedly was not just a passive investor.  Ancor discovered the kickbacks in due diligence before investing in Alliance.  Then, Ancor entered into a management agreement with Alliance and allowed the misconduct to continue.  These actions gave rise to allegations that Ancor “caused” Alliance’s false claims.  Ancor will pay $1.78 million of the total settlement.

The settlement of claims against private investors in healthcare enterprises is part of a growing trendPrivate equity investors in particular tend to take an active role in the management of the companies.  This active involvement can lead to knowledge of false claims and affirmative conduct by the investment firm that enables the fraud.  Private investment entities might also have personnel on the boards or in leadership positions of companies in which they invest, further exposing the firms to liability for fraud by the business.

Here, the power and influence of Ancor over Alliance is evident in that, as a result of the lawsuits, Ancor announced that it had initiated remedial measures at Alliance, including reconstituting the company’s leadership, creating and staffing executive roles, and implementing a medical advisory board.

Under the False Claims Act’s qui tam provisions, a private person known as a “relator” may bring allegations of fraud against persons and companies on behalf of the federal government.  If the matter results in a settlement, the relator may receive a share, as two whistleblowers did here.  If you have information about possible fraud or kickbacks by a healthcare provider, or potential responsibility on the part of a private investment company, please contact us.

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Tagged in: Anti-Kickback and Stark, Catch of the Week, FCA Federal, Healthcare Fraud, Improper Medical Personnel, Medical Billing Fraud, Whistleblower Case, Whistleblower Rewards,