This is an excerpt from a 1,400-word article in the Sept. 18, 2017 issue of THE DARK REPORT. The complete article is available for a limited time to all readers, and available at all times to paid members of the Dark Intelligence Group.
CEO SUMMARY: Is this a sign that the rampant fraud and abuse in the toxicology lab testing sector may finally be seeing justice from federal prosecutors, the media, and private payers? THE DARK REPORT sheds light on the struggles of two such companies, Proove Biosciences and Medicus Laboratories, that have been accused of massive fraud and are fighting to stay in business.
TWO LABORATORY COMPANIES responded quite differently after recent medical fraud charges. In one case, charges came in a series of news articles that appear to have led to a bankruptcy filing. In the other case, fraud charges stemmed from lawsuits by the government and from one of the nation’s largest health insurers.
Proove Biosciences, a genetic testing laboratory firm in Irvine, Calif., was ordered into receivership for restructuring and asset sale, according to Stat News.
And Medicus Laboratories of Dallas (and its majority owner Next Health) on Aug. 18 sought a temporary restraining order in County Court of Law No. 3 in Dallas, seeking the injunction to stop the federal Department of Health and Human Services from suspending or revoking their federal laboratory licenses. Also named as defendants were Thomas Price, the DHHS Secretary, and Seema Verma, administrator of the federal Centers for Medicare and Medicaid Services.
Troubled Proove Biosciences Forced Into Receivership
In August, Proove Biosciences was ordered into receivership for restructuring and asset sale, according to Stat News. In a report by Stat’s West Coast Editor Charles Piller, the court supervising the case on Aug. 7 appointed Michael Thatcher of Glass Ratner Advisory & Capital Group of Atlanta as receiver.
Since last December, Piller has written several critical stories about Proove Biosciences, and in his article on Aug. 31, Piller reported that Proove founder Brian Meshkin blamed the company’s problems on Stat’s reporting, specifically articles published in December and February. “Those articles quoted experts who expressed deep doubts about the company’s scientific claims that it could predict a patient’s likelihood of becoming addicted to opioids,” Piller wrote. In his earlier reporting on Proove in December and February, Piller had written that one researcher said the company’s claims about its tests linking a patients’ genetic profile to addiction are simply “hogwash.”
“Stat’s investigations also described business practices—including coercing patients to take unnecessary genetic tests—that former Proove employees and outside experts described as unethical and possibly illegal,” Piller wrote.
FBI agents and representatives from the federal Department of Health and Human Services raided Proove Biosciences’ offices in June, collecting documents in a criminal probe, Piller wrote. “According to legal experts, Proove and many of its affiliated doctors operated in ways that could violate federal and state anti-kickback statutes, which are meant to prevent unneeded testing,” he added.
In defending his company, Meshkin called the reporting on the company’s practices to be “erroneous and damaging” and said they were based on false allegations from disgruntled employees.
Medicus Laboratory’s ‘Pervasive Problems’
The Dallas Morning News reported earlier this month that, in 2014, Medicus paid $5 million to settle a federal civil complaint that it defrauded Medicare over urine testing services. In its request for a restraining order, Next Health and Medicus charged that state and federal officials intend to shut down the lab.
In addition, the newspaper reported, “A team of state and federal inspectors arrived at Medicus’ laboratory in April for a five-day inspection, reportedly in response to an anonymous complaint, the lawsuit said. The team also inspected five other labs owned in part by Next Health, the lawsuit said.”
In a letter from CMS dated May 10 to officials at Next Health and Medicus, CMS said of Medicus, “Your laboratory demonstrated systemic and pervasive problems throughout the laboratory which has led to the findings of immediate jeopardy,” the newspaper reported. Such a finding means that CMS can suspend, limit, or revoke a laboratory’s license to operate and do so without a hearing or a chance to challenge the allegations, the article added.
The Dallas newspaper also reported on the alleged, so-called “Whataburger scheme,” saying that a former marketing contractor for Next Health was named in an unrelated criminal case involving alleged kickbacks for lab tests. In that case, prosecutors reported that a company called the ADAR Group gave out $50 gift cards to people in exchange for having them urinate in cups in restrooms at Whataburger restaurants, the newspaper reported, saying the tests were part of a wellness study.
In addition to the problems Next Health and Medicus face with CMS, Becker’s Hospital Review reported Sept. 6 that two executives of Next Health, Andrew Hillman and Semyo Narosov, were facing federal kickback charges in connection with their relationship to Forest Park Medical Center (FPMC) in Dallas. Hillman, Narosov, and 19 others allegedly paid or received $40 million in bribes and kickbacks to physicians and other providers for overpriced and unnecessary drug and genetic tests, the website reported.
On Dec. 1, U.S. Attorney John Parker of the Northern District of Texas announced that FPMC’s founders, investors, physicians, surgeons, and other executives were charged with various felony offenses stemming from their payment or receipt of approximately $40 million in bribes and kickbacks for referring certain patients to FPMC.
Next Health faces more legal trouble as a result of a lawsuit from one of the nation’s largest health insurers, UnitedHealthcare (UHC). In January, UHC named Next Health and other affiliated labs in a lawsuit filed in U.S. District Court for the Northern District of Texas. In addition to Next Health, UHC named United Toxicology, Medicus Laboratories, US Toxicology, American Laboratories Group, Erik Bugen, and Kirk Zajac as defendants. The labs perform drug and genetic laboratory tests and Next Health describes itself as a leading ancillary service company, the lawsuit says.
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