In Massachusetts, AG Targets Drug Testing Labs

Inducements and kickbacks are associated with urine drug screens offered by some labs

CEO SUMMARY: Since taking office in 2007, Massachusetts Attorney General Martha Coakley has aggressively pursued civil charges against drug testing labs. Last month, Coakley announced a criminal arrest in one ongoing investigation after a grand jury indicted a physician in a kickback scheme involving lab testing. In four years, Coakley has reached settlements with four independent clinical lab companies and each of these labs has agreed to make repayments and establish compliance programs.

IN MASSACHUSETTS, ATTORNEY GENERAL Martha Coakley has aggressively pursued civil charges against drug testing laboratories since taking office in 2007. Last month, Coakley announced a criminal arrest in one ongoing investigation after a grand jury indicted a physician in a kickback scheme that involved lab testing services.

On September 30, Coakley announced that a grand jury in Suffolk County Superior Court returned indictments against Punyamurtula Kishore, M.D., of Brookline, Massachusetts, and three other defendants. Kishore owns and manages Preventive Medicine Associates, Inc. (PMA), and allegedly runs a kickback scheme and has fraudulently billed MassHealth (the state Medicaid program) nearly $3.8 million, Coakley said.

PMA has 29 medical branches in the state and some include physician office laboratories (POLs), the AG’s office said. Kishore allegedly used bribes or kickbacks to induce owners of sober houses for alcoholics and drug abusers to require their residents to submit to urine drug screens performed by PMA’s POLs at least three times a week, the office said. Kishore and PMA were charged with eight counts related to receiving kickbacks and eight counts related to filing false claims.

Medicaid Fraud Cases

This and similar cases in Massachusetts since 2007 may prove interesting to lab administrators and pathologists for two reasons. First, in recent years, Coakley has brought Medicaid fraud charges against at least five other clinical laboratory companies alleging Medicaid fraud associated with claims submitted for urine drug screens. Thus, the current prosecution of Kishore is the Attorney General’s latest warning shot for labs serving the urine drug testing market in Massachusetts.

Second, Coakley’s prosecution of Kishore could shed light on a sector of lab testing that some consider a gray area. Questions have been raised about the clinical appropriateness of urine screens offered to physicians by laboratories; or urine screens performed by physicians in clinics; in tandem with the aggressive coding, billing, and reimbursement practices associated with this testing.

Physicians who prescribe pain medications often use urine screens provided by outside laboratories or perform this testing on-site. Recognizing that some pain-management drugs can be addictive and that some patients will obtain prescriptions for these drugs so they can resell them on the street, prescribing physicians have legitimate reasons to monitor patients’ use of these drugs.

To do so, these physicians use appropriate lab tests to monitor patient care and to help manage liability by having lab test results that show each patient was taking the pain medications as prescribed.

Kickbacks to Induce Testing

The cases Coakley has brought since 2007 against different laboratory companies involve kickbacks to induce test ordering and tests that were not ordered by an authorized prescriber.

In the PMA case, Kishore was arrested September 20 at his home in Brookline. In court, he pleaded not guilty to one count related to Medicaid kickbacks. When announcing Kishore’s arrest, Coakley said that Kishore allegedly manipulated PMA’s business relationships to bill MassHealth for tens of thousands of urine drug screen tests of Medicaid-eligible residents.

In connection with this case, the grand jury also returned indictments against three men who run sober houses. Each was charged with one count of receiving Medicaid kickbacks. Kishore’s arrest is a criminal complaint and Coakley has negotiated settlement agreements with four state diagnostic laboratories since 2007. Here are the details of the other cases.

On August 19 of this year, Coakley announced that Diagnostic Laboratory Medicine, Inc., (DLM) in Bedford paid $153,780 to settle Medicaid fraud charges. The settlement resolved allegations that, from 2005 until this year, DLM billed Medicaid for urine drug tests that were not properly ordered by a doctor or other authorized prescriber, that DLM over- charged MassHealth for urine tests by failing to give the program its best price, and that it failed to comply with record keeping requirements, Coakley said. As a result, Medicaid made significant over-payments to DLM.

Resolving Allegations

In September 2010, Clinical Science Laboratory, Inc., of Mansfield, agreed to pay $525,000 to resolve allegations it billed Medicaid for urine drug tests which were not properly ordered by a doctor or other provider and were ordered for purposes not covered by Medicaid, the office said. Between 2004 and 2009, Clinical Science billed Medicaid for unauthorized urine drug tests, the AG said.

In February 2010, Coakley reached a settlement with System Coordinated Services, Inc., doing business as Life Laboratories, a clinical laboratory in Springfield. Under the settlement, the laboratory has agreed to reimburse $450,000 to MassHealth.

Between 2004 and 2009, Life Laboratories and an unspecified number of other labs billed MassHealth for urine drug and alcohol tests that were not properly ordered by a doctor or authorized prescriber, and were inappropriately ordered for non-medical purposes, such as residential sobriety monitoring, the AG’s office said. Also, Life Laboratories over-charged MassHealth for the urine drug and alcohol tests by failing to give it the best price, the office said.

False Claims Violations

In July 2009, Coakley reached an agreement with Boston Clinical Laboratories, Inc., in Waltham, to settle Medicaid false claims violations. Boston Clinical agreed to pay $615,000 to MassHealth and $14,000 to the federal Medicare program. In October 2007, Coakley alleged that Boston Clinical intentionally filed claims and received payment for urine drug screens that were improperly ordered. From January 2000 through October 2007, Boston Clinical submitted more than 66,000 claims for urine drug screens to Medicaid and many of these claims were not properly ordered by an authorized prescriber or were ordered for non-medical purposes, the AG’s office said.

In September 2007, Coakley reached an agreement with Willow Street Medical Laboratory, LLC, in Lynn, settling allegations of overpayment and inappropriate referrals. Under the agreement, the company (also known as Willow Laboratories and Medical Center, Inc.) agreed to pay $8.15 million to the commonwealth.

Willow Street Laboratories had billed Medicaid for urine drug and alcohol tests which were not properly ordered by a doctor or other authorized prescriber, the AG’s office said. The tests were often inappropriately ordered for non-medical purposes, such as probation, parole, or residential sobriety monitoring.

Inappropriate Payments

Further, the AG’s office stated that Willow Street Laboratories had made inappropriate payments to a third-party to obtain additional Medicaid business. It had also made payments to some substance abuse treatment programs, halfway houses, shelters and sober houses, in the form of free urine drug screen services. In addition to making these payments to the state, the labs involved in these settlements all agreed to institute compliance programs, Coakley said.

At the federal level, a whistleblower case against Ameritox, Ltd., of Baltimore, Maryland, was settled in 2010 for $15.5 million. Ameritox was alleged to have “made cash payments to its physician clients… to induce the referral of drug testing services. It also resolves claims arising from the offer by Ameritox of free collector personnel to its physician clientele… in order to induce the referral of Medicare business,” according to the U.S. Attorney’s office.

Collectively, these cases demonstrate that certain lab testing companies continue to be willing to induce business in ways that violate state and federal laws.

Massachusetts AG’s Case Against Executives Of Calloway Laboratories Remains Unsettled

AMONG THE CASES THAT Massachusetts Attorney General Martha Coakley has pursued is one announced last year that remains unsettled.

In July 2010, a grand jury in Middlesex County returned 42 indictments against a laboratory in Woburn, two of its principals (CEO Arthur Levitan and COO Patrick Cavanaugh), and two employees of a sober house for allegedly orchestrating a Medicaid fraud and kickback scheme using “straw companies” and overcharging the state’s Medicaid program, Coakley said.

In the indictments, state officials alleged that Calloway Laboratories of Woburn, Levitan, and Cavanaugh engaged in a kick-back scheme involving two straw companies that funneled kickbacks to sober houses and paid middlemen and a medical office to illegally obtain urine drug screening business paid for by MassHealth. Coakley alleged that MassHealth paid in excess of $10.6 million for urine drug screen business obtained by Calloway as a result of these illegal kickbacks.

Calloway was charged with three counts of filing Medicaid false claims, 16 counts related to Medicaid kickback, and two counts of larceny over $250. Levitan was charged with 12 counts related to Medicaid kickbacks, Cavanaugh was charged with five counts related to Medicaid kickbacks and one count related to corruption of a witness. Two other defendants were charged with three counts related to Medicaid kickbacks.

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