Lab Owners to Pay $13.6M in False Claims Act Whistleblower Case

A Missouri laboratory and its three owners have been ordered to pay more than $13.6 million to settle charges they violated the False Claims Act – the federal government’s primary tool for civil enforcement.

Jerry, Jerrod and Joel W. Murphy, owners of Gamma Healthcare Inc., were accused of submitting false claims to Medicare for lab tests that were not ordered by healthcare providers and were not medically necessary.

In addition to the monetary penalty, Jerry (CEO) and Jerrod (President) are excluded from participating in Medicare, Medicaid, and all other federal healthcare programs for 15 years.

The U.S. Department of Health and Human Services Office of Inspector General (HHS OIG) is required by law to exclude from participation in all federal healthcare programs individuals and entities convicted of various offenses outlined here.

The False Claims Act Allegations

The settlement resolves False Claims Act allegations that from Jan. 1, 2020, to Oct. 31, 2020, the lab and Murphys submitted claims to Medicare for polymerase chain reaction (PCR) urinalysis tests that were not ordered by treating physicians. When a physician ordered a urinalysis with culture and sensitivity (C&S) or just a C&S, Gamma automatically performed and submitted claims for payment to Medicare for a urinary tract infection (UTI) panel of tests by PCR.

Medicare paid about $11 for a urinalysis test with C&S and paid an additional $573 for a panel of UTI PCR tests. Gamma’s forms were written in a way that did not allow physicians to opt out of the more expensive tests.

Under the False Claims Act, any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty.

Physicians Raised Suspicions

Physicians began expressing concern about Gamma as early as March 2020, that they did not order the tests, that the tests were expensive and that they were not medically necessary.

The allegations in the False Claims Act case that was settled stem from a whistleblower action made by a physician who owns 30 healthcare clinics and provided services to patients for whom Gamma performed laboratory tests. The whistleblower will receive $2.3 million from the settlement.

The Whistleblower Complaint

According to the original whistleblower complaint filed in November 2020, Gamma sent a letter to its nursing home clients telling them that any time there was a positive urinalysis result, Gamma would automatically add on the more expensive PCR test.

The whistleblower who became suspicious contacted a Medicare Advantage plan Medicare contractor that handles complaints. The complaint was based on a referral from the whistleblower and his clinics that Gamma was performing and billing for tests that were not ordered by the doctor and in some instances even in cases where the doctor said not to conduct the more expensive test.

“The Murphys were not responsible for diagnosing patients or prescribing medications for UTIs or any other condition; that was the job of the physician or APRN. The Murphys directed the performance of and billing for the medically unnecessary PCR tests as a way to increase revenue, expand Gamma’s business, and enrich themselves as owners,” the original complaint stated.

Whistleblower Complaints on the Rise

As we wrote about in March, whistleblowers filed 712 qui tam, or whistleblower, actions in fiscal year 2023, up from 652 the year before. Of the more than $2.68 billion recovered, more than $2.3 billion was the result of these actions. Of those 712 new cases, 348 related to healthcare.

During the same period, the government paid more than $349 million to the individuals who exposed fraud and false claims by filing these actions. Whistleblowers receive a portion of the monies recovered – generally between 15 percent and 20 percent.

The False Claims Act imposes triple damages and penalties on those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States. These recoveries restore funds to federal programs such as Medicare, Medicaid, and TRICARE, the healthcare program for service members and their families.

How We Can Assist

The Health Law Offices of Anthony C. Vitale represents whistleblowers, as well as i those who become the target of a whistleblower action. For more information call 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.