After Two-Year Battle with CMS, True Health on Verge of Collapse

Medicare payments stop after audit, allegations of fraud

CEO SUMMARY: In 2017, an auditor for CMS alleged that True Health filed fraudulent claims and the federal Medicare program cut all payments to the lab company and one month later reduced the cut to 35% of the billed amount. Two months ago, CMS ended all payments again. These facts became public on July 2 when True Health filed a lawsuit in federal court, asking for an injunction to compel CMS to pay the disputed lab test claims that by that time totaled over $20 million. When the judge dismissed the lawsuit, True Health filed for bankruptcy. 

LAST MONTH, True Health Diagnostics of Frisco, Texas, filed a Chapter 11 bankruptcy petition in federal court  in Delaware. On July 30, True Health said the bankruptcy filing was a consequence of Medicare officials suspending 100% of payments to the laboratory company in June, leaving it without the cash needed to continue operating.

On the same day, True Health announced plans to lay off 392 employees in its laboratory in Richmond, Va., and notified officials in Virginia and in Richmond that it may need to cease operations, depending on the outcome of its dispute with the federal Centers for Medicare and Medicaid Services (CMS). That dispute began in 2017 when CMS auditors found ‘credible allegations of fraud,’ prompting CMS to cut 100% of its payments to True Health. By last month, the total loss in payments over two years came to more than $20 million.

This story may be an important one for clinical laboratories because of federal audits and CMS’ actions in response. True Health detailed those actions in a lawsuit it filed on July 2 in U.S. District Court in Texas against the federal Secretary of Health and Human Services (HHS) Alex M. Azar II and CMS Administrator Seema Verma.

Over the past several years, THE DARK REPORT has reported on bankruptcies and closures of multiple lab companies after federal audits led CMS to assess sizable recoupment amounts—often in the tens of millions of dollars. At times, these amounts have totaled 100% of an audited lab’s revenue for three to five years.

THE DARK REPORT believes enough laboratory companies have failed after Medicare audits and sizeable recoupment demands that such aggressive actions from CMS may mean these steps represent a new trend for the clinical lab industry that did not exist five years ago.

That is why the information and allegations contained in the court papers filed by True Health offer useful insights into the actions of Medicare auditors and how CMS officials are using those audit findings to either to assess a substantial recoupment amount against the lab or even completely stop reimbursing claims submitted by that lab company.

“The situation at True Health shows how closely CMS and the federal Department of Justice continue to scrutinize the lab industry,” commented Justin T. Berger, a Principal with the law firm of Cotchett, Pitre and McCarthy and a lawyer who has represented whistleblowers in qui tam actions under the federal and California false claims acts.

Did Fraud and Abuse Happen?

Of equal importance to this story are allegations within the court documents of Medicare fraud and abuse. In its lawsuit, True Health denied that it has committed fraud. The Dark Report sought comment from CMS and True Health and as this issue went to press, True Health had not responded to our request.

In response to True Health’s lawsuit, HHS also filed documents with the court that describe the findings of the Medicare auditors and alleging that True Health billed CMS improperly.

The final chapter in this story has yet to be written because statements in the court documents indicate that True Health faces a federal qui tam (whistleblower) lawsuit that was filed in 2015 and that remains under seal.

The dispute between True Health and CMS became public on July 2 when True Health filed its lawsuit against HHS and CMS. In its lawsuit, True Health describes its two-year dispute with CMS.

This dispute started when CMS alleged True Health filed fraudulent claims for lab testing and CMS stopped paying True Health’s claims in May 2017. Since then, CMS has withheld more than $20 million in payments without due process, True Health said in the lawsuit. The dollar amounts are significant because True Health serves about 335,000 individuals annually, of whom more than 65,000 are on Medicare, the lawsuit said.

Medicare Withholds Payment

One month later, in June 2017, CMS decided that instead of stopping 100% of all payments to True Health, CMS would pay 35% of the total payments the lab requested in the lab test claims it filed.

At the point when True Health believed it was doing what was needed to end the suspension of payments, the case took an unusual turn in June of this year when CMS again stopped paying 100% of True Health’s claims. The move forced the lab company to file for bankruptcy protection and to lay off workers.

In response to CMS’ action to cut all payments in June, True Health sought an injunction against CMS on July 2 to require the agency to restore payments. Just three weeks later, on July 22, U.S. District Court Judge Michael J. Truncale dismissed the case, a move that led to the bankruptcy filing and layoffs in Virginia.

Based on information in True Health Diagnostics’ court filings, it appears that the private companies working as Medicare auditors used statistical sampling and extrapolation. Under this method, auditors audit a small number of claims, then extrapolate those results across the total number of claims filed over a specific period to determine a larger number that could be considered in error or fraudulent. (See “Under Audit, Labs Need Statistics on Their Side,” TDR, Sept. 10, 2018.)

Medicare Audits of Claims

True Health’s problems began after Health Integrity, a zone-program integrity contractor (ZPIC) working for CMS, issued a “Notice of Suspension of Medicare Payments” on May 26, 2017. In the notice, Health Integrity said CMS would immediately suspend Medicare payments on the basis of “credible allegations of fraud,” True Health said in its lawsuit. The suspension notice cited eight claims submitted over a year that allegedly did not comply with Medicare guidelines, the court filing said.

As noted earlier, the Medicare auditor’s actions would be consistent with the use of statistical sampling to review a small number of claims, then extrapolate those finding across a much larger number of claims.

“For the past 25 months, CMS has been indefinitely withholding at least 35% of True Health’s Medicare and Medicaid reimbursements for duly provided diagnostic testing services,” True Health said in the lawsuit. “The running total now exceeds $20 million.”

Calling the suspension of payments an “unlawful withholding,” True Health said it had no way to challenge the order, leaving the company in “financial ruin” and “on the verge of collapse.”

100% Holdback by CMS

“As if that were not bad enough, on June 13, 2019, CMS began holding back 100%—every penny—of True Health’s reimbursements for duly provided laboratory services. True Health is, as a consequence, just days away from insolvency,” the July 2 lawsuit said. The lab company asked for an injunction so that it could receive some payments and continue operating. That injunction was denied when Truncale dismissed the lawsuit on July 22.

True Health’s lawsuit also said that, within weeks of receiving the suspension notice in 2017, it submitted a rebuttal statement to Health Integrity asking that the suspension be rescinded and requesting that Health Integrity identify the eight claims in question. “True Health established that the eight claims did not support credible allegations of fraud because they were mere clerical errors made by entities other than True Health,” the court filing said.

In denying the request to lift the suspension, CMS said the eight cited claims were a sample “of a non-exhaustive list” of other factors, the lawsuit said. Also, CMS said it would investigate the matter to determine if there were any impermissible overpayments to the lab and that it would promptly notify True Health about its administrative appeal rights.

Timeline of True Health Diagnostics from Its Founding in 2014 through its Bankruptcy in 2019

SINCE ITS FOUNDING, TRUE HEALTH DIAGNOSTICS has attracted much attention, in part because of the perceived links its original executive team had with Health Diagnostics Laboratory of Richmond, Va.

In March 2014, True Health Diagnostics was founded and Chris Grottenthaler was named CEO. He had formerly been Vice President of Finance at AmeriTox.

On Sept. 16, 2015, a judge in the U.S. Bankruptcy Court approved True Health Diagnostics’ bid to spend $37.1 million to acquire almost all of the assets of Health Diagnostic Laboratory (HDL).

Three months earlier, HDL filed for Chapter 11 protection after reaching an agreement with the federal Department of Justice to pay almost $50 million to settle allegations that HDL had paid doctors kickbacks to order HDL’s tests. Under the settlement, HDL denied wrongdoing.

At the time, Grottenthaler said in a statement that True Health would adopt “an exacting corporate compliance program that, along with rigorous controls and intensive sales force training, will ensure that True Health will meet and exceed all regulatory requirements.”


May 25, 2017: CMS suspends 100% of payments to True Health, saying in a Notice of Suspension letter, “the suspension of your Medicare payments is based on ‘credible allegations of fraud.’”

June 23, 2017: CMS reduced the payment suspension to 35%.

Nov. 16, 2017: CMS informs True Health that it suspended payments at the request of the federal Department of Justice due to a 2015 False Claims Act suit filed under seal against True Health.

June 11, 2019: CMS suspends 100% of payments to True Health saying in a Notice of Suspension letter, “This suspension is based on recent credible allegations of fraud and is distinct from the suspension that was implemented on May 25, 2017.”

July 2, 2019: True Health files a lawsuit in the U.S. District Court for the Eastern District of Texas claiming that the Centers for Medicare and Medicaid Services (CMS) had withheld $20 million in payments to the company since 2017 without due process.

July 3, 2019: True Health Diagnostics files an emergency motion seeking a temporary restraining order to prevent CMS from “suspending, escrowing, or withholding any further Medicare or Medicaid reimbursements” and for the “release of the checks that CMS has made out to True Health since June 13, 2019, but not delivered.”

July 5, 2019: CMS asks the court to dismiss the suit and issued a letter notifying True Health Diagnostics that CMS made an overpayment determination, saying it overpaid True Health $27,467,142.30 for Medicare services.

July 22, 2019: U.S. District Judge Michael J. Truncale grants CMS’ motion to dismiss the case True Health Diagnostics brought against HHS and CMS.

July 31, 2019: True Health files for Chapter 11 protection in U.S. Bankruptcy Court for the District of Delaware. In its filing, True Health reported that it had more than 100,000 creditors, assets of $10 million to $50 million, and liabilities of $100 million to $500 million. True Health discloses it may need to lay off 392 employees, most of whom have worked in its lab in Richmond, Va.

Hold-Back Was ‘Oppressive’

On June 23, 2017, CMS reduced the Medicare suspension percentage from 100% to 35% of all payments. “While the reduction to a 35% hold-back somewhat relieved the immediate financial pressure on True Health and allowed it to stay in business at the time, the hold-back was still oppressive,” the filing said. “It represents approximately $800,000 per month held by CMS, which has ballooned to over $20 million in cumulative total.”

What’s more, True Health could not appeal the decision until CMS issued a final decision on any overpayments. “In the months that followed, however, CMS failed to make a final overpayment determination, even as it continued to withhold millions of dollars from True Health,” the lawsuit said.

Meanwhile, CMS apparently continued its investigation of True Health’s practices. Later in 2017, Health Integrity requested documentation for 92 other claims.

“Despite repeated requests, to date, CMS provided no further information on any of the claims. Hearing nothing and continuing to suffer under the 2017 suspension, True Health hired an independent third party, Navigant Consulting, to evaluate the claims,” the lawsuit said.

Navigant Reviewed Claims

“Navigant found that most of the claims in question would be considered medically reasonable and necessary, and that there were only a few minor mistakes and nothing to form the basis for allegations of fraud,” the lawsuit said.

True Health sent the Navigant findings to CMS, but the agency continued the suspension of payments, the True Health filing said.

At this point, the story becomes almost surreal. On Nov. 16, 2017. CMS informed True Health that it suspended payments at the request of the federal Department of Justice due to a 2015 False Claims Act suit filed under seal against True Health. “FCA cases are always civil but sometimes prompt a criminal case,” explained Berger. “In this case, there was probably a civil FCA case filed that was serious enough that the DOJ opened a criminal investigation.”

In its July 2 lawsuit, True Health described a series of meetings it had in 2018 with lawyers from the DOJ’s Civil Division. It says it was told that the suspension was due to a [whistleblower] lawsuit filed in 2015 under seal under the False Claims Act against True Health.

On Nov. 16, 2017, CMS informed True Health that it suspended payments at the request of the federal Department of Justice due to a 2015 False Claims Act lawsuit filed under seal against True Health.

“The Civil Division explained that the only circumstance in which it would agree to inform CMS that DOJ no longer requested maintenance of the suspension and dismiss the FCA suit was for True Health to agree to forfeit all escrowed funds,” the lawsuit said. “Faced with this Hobson’s choice, True Health was prepared to accept the terms.

“To that end, True Health finalized the terms of a settlement agreement with the Civil Division releasing it from liability for the 2015 lawsuit under the False Claims Act. The settlement was intended to culminate in the lifting of the suspension. CMS indicated that it would lift the 2017 suspension upon execution of this civil settlement agreement,” True Health said in the lawsuit.

“Yet just as the parties were on the verge of finalizing the settlement, True Health received a new June 13, 2019, suspension [from CMS] that reimposed a full 100% payment suspension on the basis of the very same alleged conduct as the original 2017 suspension,” the lawsuit said. “This second, duplicative suspension notice dated June 13, 2019, was issued by Qlarant, a third-party Unified Program Integrity Contractor (UPIC) for CMS.”

Statistical Sampling

The 2019 notice was based on five 2017 claims reviewed as part of the original investigation, True Health said. Such a determination could be consistent with a Medicare program auditor using statistical sampling and extrapolation.

“Despite being based on claims that were part of the 2017 suspension, the 2019 Suspension Notice incongruously asserts that this suspension is ‘based on recent credible allegations of fraud and is distinct from the suspension that was implemented on May 27, 2017,’” the lawsuit said. At that point, True Health submitted a rebuttal but still did not receive payment, it said.

“At the same time that True Health faces an indefinite and complete suspension of Medicare and Medicaid payments, no government agency will take responsibility for its implementation or its release,” the lawsuit said. “CMS has indicated that it will not engage in discussions concerning the 2019 suspension until True Health resolves the criminal investigation with the U.S. Attorney’s Office.”

Preliminary Stage

But rather than discuss the case with True Health’s attorneys, the U.S. Attorney’s Office told lawyers for True Health Diagnostics that its investigation was at a preliminary stage, that it did not request the 2019 suspension, and that it has no control over CMS’ actions, the lawsuit said.

“Meanwhile, True Health’s settlement with the Civil Division is jeopardized,” the lawsuit said.

“These facts are shockingly unjust: CMS is benefitting from the services that True Health is providing to Medicare and Medicaid beneficiaries without paying for them—and without reaching a final decision as to any wrongdoing on True Health’s part or allowing True Health to contest any adverse finding. In consequence, CMS has foreclosed True Health from utilizing its administrative appeal rights to which it is entitled …,” said True Health in its lawsuit.

In responding to True Health’s July 2 lawsuit, one document filed by the federal government was a declaration by Jack J. Geren, a special agent of the Office of the Inspector General.

Geren’s declaration describes what he found when investigating True Health. He includes statements about investigative findings that deal with the financial problems True Health claimed it was experiencing as a consequence of CMS’ decision to withhold hold back payments to True Health.

Special Agent’s Declaration

In his declaration, Geren said that True Health borrowed $110 million in 2017, then paid out $130 million to investors and stockholders of True Health. Of that amount, Geren added, “$36 million went to True Health Diagnostics CEO, Chris Grottenthaler,” and that millions were paid to other THD executives at this time.

Since filing for Chapter 11 bankruptcy protection on July 31, True Health has requested that the court auction its assets using a procedure similar to how True Health acquired the assets of Health Diagnostic Laboratories in its 2015 bankruptcy. Could a déjà vu moment happen in coming weeks, with parties related to True Health buying its assets from this bankruptcy court?

Lawsuit: True Health vs. HHS, CMS

Federal Special Agent Makes Declaration about True Health

Findings from his investigation of lab company are filed in case of True Health vs. HHS, CMS

IN THE COMPLAINT TRUE HEALTH DIAGNOSTICS filed on July 2, 2019, against two federal health agencies, the lab company in Frisco, Texas, detailed how the agencies’ actions put the company on the verge of financial collapse that could force it into bankruptcy. True Health sought an injunction to compel the federal Centers for Medicare and Medicaid Services to issue payment for lab test claim payments that CMS had withheld since 2017.

The lawsuit True Health filed tells one side of the story. Another side of the story comes from a sworn declaration from Special Agent Jack J. Geren Jr., of the Office of Inspector General of the federal Department of Health and Human Services. Geren’s declaration was filed in the U.S. District Court for the Eastern District of Texas, Lufkin Division, in the case True Health filed against HHS Secretary Alex Azar and CMS Administrator Seema Verma.

‘Scheme to Defraud’

Geren has served as a special agent since 1998 and is assigned to the Office of Investigations for HHS’ Office of Inspector General in its Dallas regional office. He investigates fraud in the Medicare and Medicaid programs. While investigating True Health, he said he believes “the company and its principals are engaged in a scheme to defraud federal healthcare programs.”

His declaration begins with the fact that True Health purchased the assets of Health Diagnostics Laboratory in 2015 and “hired many of the individuals associated with HDL’s fraudulent conduct,” he said. “Prior to the acquisition, HDL had been driven out of business as a result of pervasive healthcare fraud,” he added. (See, “In HDL Case, Judge Imposes Damages, Penalties of $114 Million,” TDR, May 29, 2018.)

‘Business as Usual’

After the HDL acquisition, said Geren, “…in an internal board of directors meeting on October 15, 2015, True Health noted that it was ‘business as usual.’” In his declaration, Geren often refers to True Health Diagnostics as THD.

“Specifically, evidence in the ongoing civil and criminal investigations, which began in 2017, suggests that True Health Diagnostics—following its acquisition of HDL and hiring its former employees— engaged (and continues to engage) in criminal activity commonly referred to as: payment of illegal remuneration, money laundering, billing for services not rendered, and billing for medically unnecessary services.”

Then, Geren explained, True Health worked with rural hospitals to route patient blood samples through those rural facilities because Medicare paid those hospitals more to process certain lab tests than it paid non-rural hospitals. Also, True Health recruited physicians and allegedly overpaid them to send patients’ specimens to rural hospitals that submitted claims to CMS on behalf of True Health, he said. “Ultimately, the scheme comes at the expense of the taxpayer,” he added.

Most claims that these rural hospitals submitted to Medicare stemmed from billing for outpatient laboratory tests, Geren explained. The physicians did not have privileges with these rural hospitals, nor did they visit the hospitals, he added.

The physicians also did not give patients a choice about where to send their lab test specimens, he reported. In several instances, kickbacks were used to entice physicians to order the same panel of clinical laboratory tests for all patients regardless of the patients’ diagnoses, Geren said in his declaration.

‘Induced Physicians’

True Health induced physicians to refer clinical laboratory tests to benefit the lab company, Geren declared. “For instance, THD provided referring physicians’ offices an embedded THD-employed phlebotomist, who would work in the physician’s office,” he explained.

“This benefited the physician because the THD-employed phlebotomist would provide services ordinarily provided by the physician’s staff. Once THD conspired with a rural hospital in order to obtain the higher reimbursement rates, the phlebotomist would become an ‘employee’ of the rural hospital and patient samples would be steered to that rural hospital instead of THD,” Geren said.

True Health Used MSOs

What’s more, THD induced lab test referrals in a scheme in which management service organizations or MSOs were used as shell companies, Geren stated. “Based on evidence gathered, it is my belief that THD, through the direction and counsel of its leadership, conspired with the MSOs to influence physicians to steer patient labs to rural hospitals which were working in concert with THD,” he said.

True Health recruited physicians to send patients’ specimens to the rural hospitals and paid them based on the revenue they generated, Geren explained. “The physicians were grouped by referral volume and compensated for referrals sent to hospitals associated with THD,” he said.

“The payments were disguised as returns on ‘investments’ in the MSOs,” Geren said. “However, the physicians’ return on investment was not reasonable and demonstrates the fact that the MSOs were merely a conduit for kickbacks.

“For instance, one physician invested $3,000 in an MSO, but was paid $308,000 as a return on investment within a few of years,” Geren said. “This represented a 10,000% return on investment. Given the MSOs’ structure, physicians could increase their return on investment by increasing the volume of referrals. The investigation has uncovered millions of dollars in kickbacks that were funneled to incentivize [lab test] referrals as part of this scheme.”

From the rural hospitals, True Health would “obtain various management fees” and would install its own billing company to bill the [lab test] claims, Geren alleged.

Abusive Arrangements?

Geren said he had evidence that True Health Diagnostics executives were aware that “the arrangements were abusive.” He explained, “For example, in February 2016, one of True Health’s senior vice presidents wrote to, among others, True Health’s CEO and stated that these types of arrangements were ‘a powder keg waiting to explode on us.’”

In his declaration, Geren alleged that, three months later, the same senior vice president wrote to another True Health official and mentioned that [federal] authorities were asking about the MSOs and funds paid to referring doctors. “In the correspondence, this senior vice president acknowledged that ‘the pain for a lot [sic] of people is coming soon … I think this is all gonna [sic] make HDL [sic-Health Diagnostic Laboratories] look like child’s play. [P]eople are gonna [sic] go to prison.’”

Lawsuit: True Health vs. HHS, CMS

OIG Investigator Questions Claim of True Health’s Financial Difficulties

IN ITS LEGAL BATTLE with federal authorities since 2017, True Health has maintained that the loss of payment from Medicare placed the company in jeopardy of running out of cash, a situation that could force the lab company to file for bankruptcy.

But in a declaration that Special Agent Jack J. Geren, Jr., filed in federal court on July 5, the investigator from the Office of Inspector General for the federal Department of Health and Human Services disputed those claims in two ways. First, True Health executed a “recapitalization,” that Geren questioned, and second, Geren challenged several statements made since early last year that the lab company would run out of funds.

Late in 2016, Medicare investigators visited True Health’s headquarters in Frisco, Texas, to conduct a billing audit, Geren said in his declaration.

In January 2017, True Health reported that it was undergoing a “recapitalization” on approximately $110 million in debt, Geren alleged. At the same time, True Health was paying its executives and shareholders approximately $130 million in distributions, he added.

$36 Million Paid to CEO

“This included a distribution of approximately $36 million to True Health Diagnostics’ CEO, Chris Grottenthaler. Other THD executives, including its CFO, Christian Richards, received millions of dollars,” stated Geren. “The United States is currently investigating the propriety of this ‘recapitalization.’”

Geren countered statements by True Health CFO Richards that True Health’s financial problems were the result of Medicare’s payment suspensions, saying Richards failed “to discuss a ‘recapitalization’ which stripped over $100 million out of THD.”

Also, Geren added, “Evidence suggests that True Health Diagnostics, after receiving an administrative subpoena and becoming aware of a civil investigation, engaged in a scheme to transfer its assets, thereby becoming insolvent, and reducing the United States’ ability to recover any judgment against it.”

Refuting Declarations

The second way Geren attempted to refute True Health’s declarations that it was running out of cash involved his review of all the times True Health claimed to be on the verge of exhausting its funds, but then continued to operate.

Court documents show that, after the billing audit late in 2016, the federal Centers for Medicare and Medicaid Services stopped paying True Health for all of its federal lab testing services in May 2017. Later it reduced the 100% stoppage to 35% but then stopped all payments again in June of this year. After the latest stop payment order, True Health asked the court for a temporary restraining order against CMS.

In its request for a restraining order, True Health submitted a declaration from Richards (called the Richards Declaration) in which Richards said that in True Health’s dealings with CMS since the spring of 2017, the lab company claimed many times that it would run out of cash and be forced into bankruptcy as a result of CMS’ suspension of payments, Geren explained. “None of THD’s claims have proven true,” he added.

“The Richards Declaration alleges that ‘without the court’s intervention, True Health will be nearly out of cash on or before July 8, 2019.’ The Richards Declaration offers no support for this statement.”

On Jan. 24, 2018, True Health’s legal counsel represented that the company was “close to shutting down on the basis of the payment suspension.” On Feb. 20, 2018, THD’s legal counsel represented that the company “does not expect to be able to continue to operate much longer, unless the suspension is lifted and the funds in escrow are returned.” Despite these assertions, the company continued to operate, Geren said.

On Sept. 30, 2018, True Health said in a letter to federal officials that, “As you know, True Health and the Department of Justice have agreed to an expedited 90-day timeline for possible resolution with an end date in mid-November. As previously expressed to DOJ, if that timeline is not met, True Health will no longer have the funding to maintain operations. True Health’s financial position has not changed with respect to that date.”

Still, True Health continued operations. Court documents show that, on March 28, 2019, Richards sent a letter to the assistant director of the federal Department of Justice Fraud Section in which he said that “absent additional funding or the release of the Medicare funds, the company will run out of operating funds in or around the third week of April. [W]e have serious doubts that additional funding will be forthcoming….”

Geren added, “This was not the case. The Richards Declaration recognizes that as of July 2, 2019, THD had still not run out of cash.”

In conclusion, Geren said, “The Richards Declaration does not offer any support for why THD’s current representations are any more accurate than the representations it has made for the last seventeen (17) months.”

Lawsuit: True Health vs. HHS, CMS

Special Agent: CMS Decision to Suspend Payments to True Health Was Correct

IN HIS DECLARATION TO THE COURT, Special Agent Jack J. Geren, Jr., explained that the evidence in the case supported the decisions the federal Centers for Medicare and Medicaid Services (CMS) made to suspend payments to True Health in 2017 and in June of this year. Geren is a fraud investigator for the Office of Inspector General of the federal Department of Health and Human Services.

The suspensions were needed “to protect the integrity of the Medicare program,” he said.

On May 25, 2017, CMS notified True Health that it would stop all payments to the lab company “due to credible allegations of fraud,” Geren said. At the time, CMS listed eight claims that it considered to be fraudulent and identified them by date of service (2015 or 2016) and claim control number. Less than a month later, on June 23, CMS reduced True Health’s payment suspension percentage from 100% to 35%, Geren said in his declaration.

“But True Health Diagnostics continued its fraud scheme. Even after a partial lifting of THD’s Medicare suspension, THD submitted over 4,000 new fraudulent claims,” he said.

In a notice of suspension, CMS identified five of the claims by date (2017) and claim control number. “Given these new fraudulent submissions, CMS implemented a 100% Medicare payment suspension and outlined a process for challenging the new suspension,” Geren commented. “On June 25, 2019, True Health Diagnostics submitted a rebuttal statement to the suspension; but before CMS could respond, THD filed its request for a temporary restraining order.”


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