Clinical Lab Industry Ripe for Fraud and Abuse

A former account rep for a toxicology testing company in Texas is the latest to be sentenced for his role in a Medicare fraud scheme that has become more common in recent years.

Last month, Ivar Cantu was handed a 56-month sentence, to be followed by three years of supervised release, after pleading guilty to conspiring to commit healthcare fraud.

The government alleges that from May to December 2015, Cantu and co-conspirator Omar Solis Sanchez, a lab technician, conspired to defraud Medicare programs by submitting false claims for lab-testing services that were not medically necessary, authorized by a physician and without the patients’ knowledge. Medicare was billed $836,788.

According to the indictment, Solis, a lab tech at the Arrango Family Clinic, took urine specimens of patients and sent them to the toxicology testing company where Cantu worked without the consent of the patient or doctor. In exchange, the two received commissions and collection fees from Quality Toxicology. In addition to prison time, Sanchez, who also pleaded guilty, will have to repay $166,866.78 each. Sanchez is scheduled to be sentenced later this month.

Cantu’s is the latest in a series of fraud cases relating to toxicology labs.

Below are some of the more recent cases:

December 2018: Molecular Testing Labs, a Vancouver, Wash. toxicology and genetic testing laboratory agreed to pay up to $1,777,738 to settle allegations that between August 2014 and July 2015 it paid illegal kickbacks to obtain referrals from government healthcare insurance programs. The government further alleged that by submitting claims for payment to Medicare and TRICARE based on those illegal referrals, Molecular Testing Labs violated the False Claims Act.

September 2018: Calloway Laboratories, Inc., a clinical laboratory based in Woburn, Massachusetts, was ordered to pay $1.3 million for submitting false claims to federal healthcare programs. It was alleged that between May and November 2014, Calloway submitted false claims for payment for urine drug testing referred by physicians to whom Calloway provided free testing supplies. As part of the settlement agreement, Calloway acknowledged that it provided free testing supplies to physicians for the purpose of inducing or rewarding referrals of urine drug testing to Calloway. Calloway then submitted claims to Medicare and TRICARE seeking payment for the testing referred by these physicians.

September 2018: East Alabama Medical Center and its subsidiary Aperian Laboratory Solutions agreed to pay $4.25 million to resolve allegations that Aperian paid kickbacks to marketing companies in exchange for arranging for physicians across the nation to refer toxicology tests to the lab. A former Aperian employee brought the case under the qui tam, or whistle-blower, provisions of the False Claims Act.

In May 2018, the Healthcare Fraud Prevention Partnership (HFPP) issued a white paper detailing reasons why clinical labs can expect increased scrutiny and enforcement actions by federal healthcare authorities.

HFPP is a voluntary public-private partnership between the federal government, state agencies, law enforcement, private health insurance plans, and healthcare anti-fraud associations that aims to foster a proactive approach to detect and prevent healthcare fraud through data and information sharing.

The white paper noted that in 2017 clinical laboratory services generated an estimated $87.3 billion in revenue, totaling 2.6 percent of annual healthcare spending in the U.S., making it a “large target for potential fraud and abuse.”

The white paper identified three areas of potentially fraudulent or abusive practices – abuse of billing standards, improper laboratory relationships, and medically unnecessary testing.

The clinical laboratory industry continues to be a breeding ground for fraud, with new schemes surfacing each year.

Having a strong clinical laboratory compliance program in place is critical. The Health Law Offices of Anthony C. Vitale keeps up to date with frequently changing laws and regulations and can assist you with developing a program designed to stand up to investigations and enforcement actions. Give us a call at 305-358-4500, or send an email to and let’s discuss how we might be able to assist you.

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The Health Law Offices of Anthony C. Vitale

The Health Law Offices of Anthony C. Vitale