DOJ Charges 35 Individuals In Genetic Testing Scam

Allegations involve Medicare fraud totaling more than $2.1 billion for unecessary testing

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CEO SUMMARY: Federal prosecutors said those charged illegally lured elderly patients nationwide into giving cheek swabs for fraudulent genetic tests. The indicted individuals allegedly paid kickbacks and bribes to medical professionals working with telemedicine companies in exchange for referring Medicare beneficiaries for unnecessary genetic tests. Indictments were announced on Sept. 27 in an investigation that federal officials called Operation Double Helix.

FEDERAL AGENTS RAIDED LABORATORIES AND CHARGED 35 INDIVIDUALS IN FOUR STATES in connection with one of the largest healthcare frauds in history, a scheme that federal officials said generated $2.1 billion in fraudulent payments from Medicare and Medicaid Advantage plans.

In a crackdown on genetic testing fraud, the federal Department of Justice (DOJ) announced raids and indictments on Sept. 27. Among the 35 individuals indicted are nine physicians, at least six laboratory owners, and other individuals associated with dozens of telemarketing companies and genetic testing lab companies in Florida, Georgia, Louisiana, and Texas.

Calling the results of the investigation “one of the largest healthcare fraud schemes ever charged,” the DOJ said it worked with the Inspector General of the federal Department of Health and Human Services to bring charges against individuals who were accused in an indictment of soliciting medically unnecessary genetic cancer tests and paying illegal bribes and kickbacks.

In recent months, federal agencies have issued warnings to the public—and particularly to Medicare beneficiaries— about fraud schemes involving genetic tests. What may also be significant is how quickly federal prosecutors moved against this new type of fraud involving genetic tests. It has only been in recent years that new understanding of the human genome has triggered a surge in the number of genetic tests offered for clinical use.

By contrast, fraud in such lab testing areas as toxicology, pain management, and specialty cardiology screening went on for between five and eight years before federal prosecutors began filing charges and announcing civil settlements intended to end these abuses.

DOJ and CMS Collaborated

In cooperation with the DOJ, the federal Centers for Medicare and Medicaid Services’ Center for Program Integrity announced that it took adverse administrative action against cancer genetic testing companies and medical professionals who submitted more than $1.7 billion in claims to the Medicare program.

The lab companies allegedly paid kickbacks and bribes to medical professionals working with fraudulent telemedicine companies in exchange for referring Medicare beneficiaries for unnecessary and expensive genetic tests to screen for cancer. Some of the defendants controlled a telemarketing network that lured hundreds of thousands of elderly or disabled patients nationwide, the DOJ said.

Medically-Unnecessary Tests

In addition, the defendants allegedly paid doctors to prescribe genetic tests without any patient interaction or after only a brief telephone conversation with patients they had never met or seen, officials said. Medicare does not pay for screening tests and genetic tests are rarely used to screen for cancer. “Often, the [genetic] test results were not provided to the beneficiaries or were worthless to their actual doctors,” federal officials said.

NPR described how the alleged scheme worked. “First, telemarketing companies trolled elderly Medicare beneficiaries online or called them on the phone or even sent people to approach beneficiaries face-to-face at health fairs, senior centers, low-income housing areas, or religious institutions like churches and synagogues,” NPR explained.

Seniors were offered no-cost genetic tests to estimate their risk of cancer or to evaluate how well they would metabolize certain medications, NPR wrote. For these tests, Medicare beneficiaries provided their Medicare account information, a driver’s license, and submitted a cheek swab for DNA testing, NPR said.

These indictments support Medicare’s plan to end its current “pay and chase” method of payment. Starting Nov. 4, new rules will allow Medicare to revoke enrollment and deny payment in an effort to stop fraud before it occurs in Medicare, Medicaid, and the Children’s Health Insurance Program.

DOJ Indicts Six Labs and the Lab Owners

OFFICIALS FROM THE FEDERAL DEPARTMENT OF JUSTICE (DOJ) NAMED six clinical laboratory owners and six clinical laboratories in an indictment that was announced Sept. 27 under Operation Double Helix.

The DOJ alleged that the labs submitted false claims to Medicare and Medicare Advantage plans for genetic tests that were not medically necessary.

Among the defendants was Khalid Satary, 47, of Suwanee, Ga., who owns Performance Laboratories in Oklahoma, Lazarus Services in Louisiana, and Clio Labs in Georgia.

The DOJ said the three labs billed Medicare for more than $547 million.

Federal officials also charged:

  • Minal Patel, 40, owner of LabSolutions in Atlanta and Easton, Pa., which billed Medicare for more than $494 million.
  • Kevin Hanley, the CFO of Acadian Diagnostics, in Baton Rouge, La. Hanley and others submitted false claims to Medicare of at least $127.4 million.
  • Edward B. Kostishion, 59, of Lakeland, Fla.; Kacey C. Plaisance, 38, of Altamonte Springs, Fla.; and Jeremy Richey, 39, of Mars, Pa.

Kostishion, Plaisance, and Richey operated Ark Laboratory Network, a company that purported to operate a network of clinical laboratories that facilitated genetic testing, said the DOJ in its indictment.

Ark partnered with Privy Health and another company to acquire DNA samples and Medicare information from hundreds of patients through various methods, all without the involvement of a treating healthcare professional, the DOJ said.


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