JUST WEEKS AFTER THE FIRST CASES OF SARS-CoV-2 appeared in the United States, federal prosecutors filed criminal charges in a COVID-19 lab test fraud scheme. Erik Santos, 49, of Braselton, Ga., was charged with conspiracy to defraud federal and private healthcare programs by submitting fraudulent testing claims for COVID-19 and genetic cancer screenings.
This may be a sign that federal healthcare investigators will act swiftly during the SARS-CoV-2 outbreak to bring criminal charges and civil actions against clinical labs and others violating the federal anti-kickback statute and other laws. All lab owners should take this as a warning that there is heightened risk to participate in schemes involving illegal inducements and medically-unnecessary orders for COVID-19 tests.
In the Santos case, he was charged with one count of conspiring to violate the federal Anti-Kickback Statute (AKS) and one count of conspiring to commit fraud. He faces 10 years in prison on the conspiracy charge and five years on the charge of conspiracy to violate the AKS. Also, he faces a fine under both offenses of $250,000, or twice the gross gain, the Department of Justice said.
The DOJ did not say if any of the physicians, diagnostic labs, or others who conspired with Santos would face charges. Some information the DOJ collected in the case came from a cooperating witness (CW1) who was previously involved in a scheme to commit healthcare fraud, court records show. The cooperating witness had a financial interest in a marketing call center and in a clinical laboratory (Lab 1) that worked together to arrange for a variety of medical tests. The laboratory could bill Medicare for cancer genetic (CGx), coronavirus, and respiratory pathogen panel (RPP) tests, the DOJ said.
In court documents, the DOJ explained that Santos and others engaged in a fraudulent kickback scheme in which lab companies paid Santos on a per-test basis for referring CGx, coronavirus, and RPP tests to the labs. Some of the tests would be conducted through Lab 1.
After cases of COVID-19 were identified in the United States, Santos encouraged physicians to order COVID-19 tests and respiratory pathogen panel (RPP) tests, and the physicians agreed to order both tests even if not medically necessary, according to the DOJ. Also, Santos got kickbacks from three clinical labs for generating referrals from physicians, the documents show.
“Santos offered kickbacks in exchange for medically unnecessary tests—including potentially hard-to-obtain COVID-19 tests—thus preying on people’s fear in order to defraud the government and make money for himself,” commented U.S. Attorney Craig Carpenito.
According to court documents, the COVID-19 and RPP test scheme grew out of a scheme that Santos ran to generate cancer genetic (CGx) screening tests. Santos ran a marketing company that generated leads for clinical laboratory testing from physicians for cancer screening since November 2019. Santos worked with others to “defraud Medicare by soliciting and receiving kickback payments from companies involved in clinical and diagnostic testing in exchange for steering to those companies individuals eligible for testing that Medicare would reimburse,” court records show.
The CGx testing scheme ran from about November 2019 through March of this year. In that time, the labs paid Santos kickbacks of approximately $33,250 for qualified patient leads and completed tests. “The leads and tests submitted by Santos to the testing companies were intended to be billed to Medicare for a total of approximately $1.2 million in reimbursements,” the documents show.
The labs paid kickbacks to Santos on a per-test basis for submitting CGx screening tests to the labs, regardless of medical necessity, records show. “Santos’ scheme aimed to submit more than $1.1 million in fraudulent claims to Medicare,” the DOJ explained.
COVID Testing Added
When news reports showed growing demand for coronavirus tests, Santos expanded his schemes so that he could be paid kickbacks on a per-test basis for COVID-19 tests, court records show. To do so, the COVID-19 tests were bundled with a more expensive RPP test that does not identify COVID-19, records show. Beginning last month, and running from about March 12 to 26, Santos ran a scheme to generate leads for coronavirus tests, court records explain.
In a conversation the DOJ recorded on March 19, Santos said he was working with three laboratories (called the Santos Laboratories) and had processed about 5,000 bundled coronavirus and RPP tests, records show. Also, Santos told CW1 that because Lab 1 could not run tests for COVID-19 or the RPP tests, Santos could arrange for a lab-to-lab reference relationship between Lab 1 and one of the Santos Laboratories to run those tests. Doing so would allow Lab 1 to submit claims to Medicare and act as both a referring lab and a billing lab, records show.
“Santos explained that Medicare paid about $35 for each coronavirus test, but that the RPP Test reimbursement was much higher, records show. Therefore, Santos told CW1 that doctors would order both a coronavirus and an RPP test.
Kickback of $125 Per Test
“If a Medicare beneficiary tested positive for COVID-19, the prescription directed the laboratory to then run a partial RPP test, which Medicare would reimburse for approximately $300 to $400 per test,” court records show. “In that circumstance, Santos would expect a kickback of approximately $125 per test. If a beneficiary tested negative for COVID-19, the prescription directed the laboratory to then run a complete RPP test, which Medicare would reimburse for approximately $650 per test. In that circumstance, Santos would expect a kickback of approximately $250 per test.”
The goal of the scheme was to target Medicare beneficiaries who were asymptomatic and otherwise unlikely to test positive for the virus, records show. Doing so would increase the chance of being paid at the higher kickback rate of $250 for a complete RPP test, documents show.
Santos expected to generate 8,000 to 10,000 completed tests for the combined coronavirus and RPP tests from patients in assisted living facilities, hospitals, urgent care centers, and medical practices, the records show. Also, Santos revealed that not one doctor refused to prescribe both tests, regardless of medical necessity, documents explain.
The fact that not one doctor refused to order medically-unnecessary tests in this scheme shows why federal prosecutors need to file cases against the physicians who order these tests. It is their lab orders that make possible this type of lab fraud.