PATHOLOGISTS AND CLINICAL LAB MANAGERS SHOULD WELCOME every federal prosecution of a physician who accepts illegal bribes and inducements in exchange for laboratory test referrals. If physicians understood that federal prosecutors would file criminal charges against them for this behavior, fewer doctors would engage in fraudulent schemes involving lab test referrals.
As explained in the previous story, federal prosecutors filed criminal charges against seven physicians and a hospital CEO in Texas for receipt of bribes and illegal inducements based on the physicians’ referral of clinical laboratory tests, which violated the False Claims Act and the Anti-Kickback Statute.
The fact that physicians who accepted bribes from clinical laboratory companies in exchange for test referrals were prosecuted by the federal Department of Justice (DOJ) is a positive development for the clinical lab industry.
Bribe Requires Two Parties
Every scheme to induce the referral of a clinical lab test in return for a bribe or illegal inducement requires two parties: a lab to offer the bribe and a physician willing to accept the bribe.
Unfortunately, the prosecutors from the DOJ have a long-established track record of filing criminal charges against the lab companies paying these illegal inducements, while seldom taking the additional step of filing charges against the doctors who accept the illegal bribes.
For this reason, many physicians believe they have little risk of federal prosecution. More importantly, these same physicians can become “serial participants” in the inducement schemes offered by multiple labs.
A good example of this is cardiologists who accepted illegal inducements from now-defunct Health Diagnostic Laboratories (HDL) of Richmond, Va. Once HDL went out of business, many of these cardiologists followed some of the same lab managers and lab sales reps to True Health Diagnostics of Frisco, Texas, and continued to accept allegedly illegal inducements from True Health until it filed bankruptcy in 2019.
Restitution of $1.1 Million
In the Texas case, a total of $1.1 million in restitution will be paid by seven doctors and a hospital CEO. Details of the settlements with the doctors in this case are presented below.
Laboratory sales reps will find this information useful for sharing with their client physicians to demonstrate that there truly is a risk of criminal and civil charges for physicians willing to refer large volumes of often medically-unnecessary laboratory tests in exchange for an illegal payment or bribe.
In a press release datelined Jan. 20, 2022, Sherman, Texas, the federal Department of Justice announced settlements in a criminal case that centered on “False Claims Act allegations involving illegal remuneration in violation of the Anti-Kickback Statute and Stark Law.”
Reproduced below is the DOJ’s description of the settlements with the physicians who were charged in this case:
The settlements announced today resolve allegations that seven Texas doctors received thousands of dollars in illegal remuneration from eight management service organizations (MSOs) in exchange for ordering laboratory tests from Rockdale Hospital d/b/a Little River Healthcare (Little River), True Health Diagnostics LLC (True Health), and Boston Heart Diagnostics Corporation (Boston Heart).
Little River allegedly funded the illegal remuneration to the doctors, in the form of volume-based commissions paid to independent contractor recruiters, who used MSOs to pay numerous doctors for their referrals. The MSO payments to the doctors were allegedly disguised as investment returns but in fact were based on, and offered in exchange for, the doctors’ referrals.
- Jaspaul Bhangoo, MD [internal medicine], of Denton, Texas, agreed to pay $125,625 to settle allegations that (a) True Health paid him kickbacks from January 1, 2015 to December 1, 2015; and (b) True Health referred him to an MSO, established by Little River marketers, which paid him MSO kickbacks from June 14, 2016 to September 16, 2016.
- Robert Megna, DO [clinical lipidologist], of Ferris, Texas, agreed to pay $232,000 to settle allegations that from February 2, 2016, to December 31, 2017, he received kickbacks from (a) one MSO, Ascend MSO of TX, LLC, in exchange for ordering Boston Heart laboratory tests from Little River; and (b) another MSO, Geminorium MG LLC, in exchange for ordering laboratory tests from Boston Heart.
- Baxter Montgomery, MD [cardiology], of Houston, Texas, and his professional association B-Saz, P.A., agreed to pay $60,000 to settle allegations that from December 29, 2015, to February 3, 2018, he received kickbacks from (a) one MSO, Ascend MSO of TX, LLC, in exchange for ordering True Health laboratory tests from Little River; and (b) another MSO, Indus MG LLC, in exchange for ordering laboratory tests from True Health.
- Murtaza Mussaji, [internal medicine], of Houston, Texas, agreed to pay $215,000 to settle allegations that from August 7, 2015, to November 14, 2017, he received kickbacks from (a) one MSO, SYNRG Partners LLC, in exchange for ordering True Health laboratory tests from Little River; and (b) another MSO, Catalyst Health Partners LP, in exchange for ordering laboratory tests from True Health.
- David Sneed, DO [family medicine], of Austin, Texas, agreed to pay $200,000 to settle allegations that from September 30, 2015, to December 23, 2016, he received kickbacks from an MSO, Alpha Rise Health LLC, in exchange for ordering True Health and Boston Heart laboratory tests from Little River.
- Kevin Lewis, DO [family medicine], of Houston, Texas, agreed to pay $57,324 to settle allegations that from June 24, 2015, to April 20, 2016, he received kickbacks from an MSO, Alpha Rise Health, LLC, in exchange for ordering Little River and Boston Heart laboratory tests.
- Angela Mosley-Nunnery, MD [family medicine], of Kingwood, Texas, agreed to pay $166,500 to settle allegations that from April 12, 2016, to June 14, 2018, she received kickbacks from one MSO, North Houston MSO Group, Inc. and another MSO, Tomball Medical Management, in exchange for ordering laboratory tests from Little River and True Health.
Hospital CEO’s Settlement
Along with settlements with these seven doctors, the U.S. Attorney also settled with a former CEO of a small hospital in Texas.
Details in the court documents indicate that the alleged fraud used a pass-through billing arrangement whereby lab tests originated elsewhere were billed by the hospital using the higher lab test prices it had with various health plans.
In the Jan. 20 press release issued by the U.S. Attorney, titled, “Seven Texas Doctors and a Hospital CEO Agree to Pay over $1.1 Million to Settle Kickback Allegations,” the DOJ described its agreement with the ex-hospital CEO:
…the United States announced a settlement with Richard DeFoore of Anson, Texas, the former Chief Executive Officer of Jones County Regional Healthcare d/b/a Stamford Memorial Hospital (Stamford), which was a small hospital [of 25 beds] in Stamford, Texas. In late 2015 and early 2016, DeFoore allegedly was approached by representatives of True Health and a partner company, who proposed an arrangement by which Stamford could profit by billing for diagnostic laboratory tests. Under the arrangement, which expanded to include Boston Heart tests, Stamford allegedly coordinated with True Health and Boston Heart representatives and paid volume-based commissions to independent contractor recruiters, who used MSOs to make payments to doctors that were disguised as investment returns but in fact were based on, and offered in exchange for, the doctors’ referrals.
Pursuant to the alleged arrangement, Stamford billed the resulting claims to commercial insurers and True Health and Boston Heart billed the resulting claims to Medicare and other federal healthcare programs. Under the terms of the settlement agreement, DeFoore agreed to pay $50,000, to cooperate with the Department’s investigations of and litigation against other parties, and to be excluded from participation in federal healthcare programs for three years.
Doctors at Risk of Charges
This federal case shows why physicians who accept inducements in violation of the federal Anti-Kickback Statute and the Stark Law are at of risk criminal indictments and civil settlements. Calling the attention of the physician community to the outcomes of these federal prosecutions and settlements may help individual doctors understand the true level of risk they face, should they participate in such arrangements.
Dozens of Doctors Guilty in BDL Case
RECENT SETTLEMENTS IN TEXAS aren’t the only examples of physicians indicted by federal prosecutors for fraud involving lab test claims.
One major prosecution of physicians accused of accepting illegal inducements in return for lab test orders was the Biodiagnostic Laboratory (BDL) case, filed by federal prosecutors in 2014. Nearly 100 people were charged in the case over the following years, which involved bribes connected to a long-running lab test referral scheme at BDL, based in Parsippany, N.J.
According to details previously released by the U.S. Department of Justice (DOJ), 39 people—including 26 physicians—eventually pleaded guilty to charges in the BDL case. Those convicted admitted to taking millions of dollars in bribes, and the scheme resulted in payments to BDL of more than $100 million from Medicare and private insurance companies.
As part of the convictions, the goverment collected $12 million in forfeitures, DOJ previously noted. Health insurer Aetna also filed a civil suit against BDL for allegedly submitting false claims for tests. (See TDR, Sept. 22, 2014.) This case remains active.
On Oct. 7, 2021, the New Jersey State Appeals Court reinstated the case after parts of it had been dismissed by a lower court. Recent arguments have focused on whether Aetna properly stated its legal arguments.