Pennsylvania Lab Owner Sentenced to Prison in Illegal Kickback Scheme Involving Labs

The owner of two Pennsylvania testing labs in was sentenced to 18 months in prison, ordered to forfeit $9 million in criminal proceeds and pay more than $77 million in restitution for his involvement in an illegal kickback scheme.

Ravitej Reddy pleaded guilty in 2020 to three conspiracy counts and one substantive count related to the payment and receipt of unlawful kickbacks for genetic testing.

Reddy owned Personalized Genetics, LLC, d/b/a Personalized Genomics (PGL), and Med Health Services Management, LP (MHS). He admitted that from May 2018 to April 2019 he participated in three separate conspiracies relating to billing Medicare for two kinds of genetic tests — cancer genomic testing (CGx) and pharmacogenetic testing (PGx). CGX help forecast your risk of developing a particular disease, while tells how genetic factors impact a person’s ability to process and respond to medication.

Consultants, Marketers Assist in Illegal Kickback Testing Scheme

It was alleged that he a group of business consultants, marketers, and the operator of a telemedicine entity acquired thousands of testing samples from Medicare beneficiaries located throughout the United States, as well as physician-ordered prescriptions that the labs needed to bill Medicare for CGx and PGx testing.

The samples were obtained from the beneficiaries by means of cheek swabs sent to their homes or provided to them at purported health fairs. The marketers were paid illegal kickbacks in the form of percentage-based kickbacks depending upon the Medicare reimbursements for beneficiaries whose samples they had obtained and submitted to PGL or MHS.

He admitted he and the others took advantage of the fact that the labs were located in an area where Medicare offered the highest reimbursement rate. However, the labs themselves were not equipped to conduct the tests, so they were sent to a reference area outside of the coverage area yet were billed at a higher rate.

In total, during that year-long period, the defendant’s laboratories billed Medicare more than $127 million for CGx and PGx testing, with reimbursements of approximately $60 million in this illegal kickback scheme.

Government Targets Genetic Testing Fraud

The government has focused on genetic testing industry fraud in recent years. In 2019, the U.S. Department of Health and Human Services Office of Inspector General issued a Fraud Alert advising Medicare beneficiaries of testing scams.

In 2022, a Florida man was sentenced to 14 years in prison for his role in a genetic testing fraud scheme. And in July of this year, a pair of Florida brothers pleaded guilty to their roles in a $67 million genetic testing fraud scheme.

It is imperative that labs review their arrangements. The Health Law Offices of Anthony C. Vitale represents healthcare professionals in state and federal court who are charged with fraudulent billing, illegal kickbacks, Medicare and Medicaid fraud and false claims, among others. For more information, contact us at 305-358-4500 or email info@vitalehealthlaw.com