Six MDs Added to Laboratory Civil False Claims Case Filed in April

The U.S. Department of Justice has added six physicians to a Civil False Claims Act complaint it originally filed in April in a laboratory testing fraud case. According to the complaint, the Texas physicians received thousands of dollars in kickbacks in return for their referrals for laboratory testing.

The original complaint was filed against two laboratory CEOs, one hospital CEO and other individuals and entities alleging violations of the False Claims Act, the Anti-Kickback Statute and Stark Law.

The complaint alleges that True Health Diagnostics LLC (THD) and Boston Heart Diagnostics Corporation (BHD) executives and employees conspired with small Texas hospitals to pay doctors to induce referrals to the hospitals for laboratory testing, which was then performed by the labs. The hospitals are alleged to have paid part of their laboratory profits to recruiters, who in turn kicked back the money to the referring doctors. The activities are alleged to have taken place between 2010 and 2014.

The recruiters allegedly set up management service organizations to pay referring doctors. The payments were disguised as investment returns. The lab executives and sales force employees allegedly leveraged the MSO kickbacks to doctors to increase referrals and, in turn, their bonuses and commissions. The tests were billed to various federal healthcare programs, and the claims not only were tainted by improper inducements but, in many cases, also involved tests that were not reasonable and necessary, according to the allegations. In addition, the complaint alleges that, to increase reimbursement, the hospitals falsely billed the laboratory tests as hospital outpatient services.

The complaint also alleges that various THD employees, including its CEO, participated in schemes to pay other forms of kickbacks, including: (a) processing and handling fees to draw site companies; (b) monthly fees to a top-referring doctor, disguising the payments as consulting fees for participating in THD’s advisory board, even though no such board existed; and (c) waiving patient copayments and deductibles meant to ensure that patients share in, and have an interest in controlling, the amounts billed to federal healthcare programs.

The United States filed its complaint in a lawsuit originally filed under the qui tam or whistleblower provisions of the False Claims Act by STF LLC, whose members are Dr. Felice Gersh M.D. and Chris Riedel.  The case is captioned United States ex rel. STF, LLC v. Christopher Grottenthaler, et al.

The six physicians added to the original complaint are identified as:

• Doyce Cartrett, Jr., M.D., of Silsbee, Texas, allegedly received more than $320,000 from LRH and two MSOs, Ascend MSO of TX LLC and Eridanus MG LLC, in return for his referrals.
• Elizabeth Seymour, M.D., of Corinth, Texas, allegedly received more than $280,000 from two MSOs, Ascend and Eridanus, in return for her referrals.
• Emanuel Paul “E.P.†Descant, II, M.D., of Spring, Texas, allegedly received more than $125,000 from two MSOs, North Houston MSO and Tomball Medical Management Inc., in return for his referrals.
• Frederick Brown, M.D., of Missouri City, Texas, allegedly received more than $190,000 from two MSOs, Ascend and Indus MG LLC, in return for his referrals.
• Heriberto Salinas, M.D., of Cleburne, Texas, allegedly received more than $75,000 from two MSOs, Ascend and Herculis MG LLC, in return for his referrals.
• Hong Davis, M.D., of Lewisville, Texas, allegedly received more than $70,000 from two MSOs, Ascend and Herculis, in return for her referrals

The original complaint names the following defendants:

• Christopher Grottenthaler, of Frisco, Texas, THD’s founder and former CEO
• Susan Hertzberg, of New York, BHD’s former CEO
• Jeffrey “Boomer†Cornwell, of McKinney, Texas, THD’s former VP of sales for the southwestern region
• Stephen Kash, of Beaumont, Texas, THD’s former director of strategic accounts and MSO recruiter
• Courtney Love, of Dallas, Texas, former THD account executive
• Matthew Theiler, of Mars, Pennsylvania, BHD’s former VP of sales
• William Todd Hickman, of Lumberton, Texas, owner and operator of defendants Ascend Professional Management Inc., Ascend Professional Consulting Inc., and BenefitPro Consulting LLC
• Laura Howard, of McKinney, Texas, former BHD area sales manager and MSO recruiter
• Christopher Gonzales, of McKinney, Texas, MSO recruiter
• Jeffrey Madison, of Georgetown, Texas, LRH’s former CEO
• Peggy Borgfeld, of Lexington, Texas, LRH’s former CFO and COO
• Stanley Jones, of San Antonio, Texas, MSO recruiter and co-owner and operator of defendant LGRB Management Services LLC (LGRB)
• Jeffrey Parnell, of Dallas, Texas, MSO recruiter and co-owner and operator of LGRB
• Thomas Gray Hardaway, of San Antonio, Texas, MSO recruiter and co-owner and operator of LGRB
• Ruben Marioni, of Spring, Texas, MSO recruiter and co-owner and operator of defendant Next Level Healthcare Consultants LLC
• Jordan Perkins, of Conroe, Texas, MSO recruiter and co-owner and operator of Next Level
• Ginny Jacobs, of Magnolia, Texas, MSO recruiter and co-owner and operator of defendants S&G Staffing LLC (S&G) and Jacobs Marketing Inc.
• Scott Jacobs, of Magnolia, Texas, MSO recruiter and co-owner and operator of S&G and Jacobs Marketing

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

For more than 30 years, The Health Law Offices of Anthony C. Vitale has been representing clients under investigation by local, state and federal agencies. For more information you can contact us at 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.