South Carolina Healthcare Clinics to Pay $140M in Default Judgements

A group of South Carolina pain management clinics, drug testing labs and a substance abuse counseling center owe the government $140 million in default judgements after failing to defend against charges relating to federal anti-kickback laws and False Claims Act violations.

Earlier this month, the U.S. District Court for the District of South Carolina entered the judgements totaling $136,025,077 against Oaktree Medical Centre P.C., FirstChoice Healthcare P.C., Labsource LLC, Pain Management Associates of the Carolinas LLC, and Pain Management Associates of North Carolina P.C. All were owned or operated by chiropractor Daniel McCollum.

This was the second time the court entered a default judgment in this matter. On July 20, 2020, the court entered a default judgment in the amount of $4,269,084.78 against ProLab LLC and ProCare Counseling Center LLC. According to the complaint, McCollum and Pain Management Associates entered into a business agreement with ProCare’s substance abuse and addiction counseling services whereby patients seen there were required to provide a urine sample that were sent to McCollum’s and ProCare’s lab, ProLab. This resulted in thousands of claims submitted to federal healthcare payors that were not medically necessary. ProLab ceased operations in late 2014.

The complaint alleged that from at least Jan. 1, 2011, through Dec. 31, 2018, McCollum and his pain management clinics executed a series of elaborate and extensive fraud schemes to maximize profits at this pain clinics and drug testing labs at the expense of both patients and federal healthcare programs.

He did so by allegedly paying bonuses to physicians and other healthcare providers that included amounts based directly on their referrals of urine drug testing to McCollum’s laboratories. It also was alleged that McCollum and Labsource violated the Anti-Kickback Statute by entering into direct bill agreements with physicians and other providers around the country that entitled providers, after paying Labsource a set fee to run the test panels they ordered, to bill private insurance companies directly for those tests – and generally for much more than they had paid Labsource. The United States contended that McCollum and Labsource induced them to refer their tests for Medicare, Medicaid, and TRICARE patients to Labsource in exchange for making a profit.

The complaint also alleges that McCollum and the other defendants directed or encouraged providers to use “standing orders” of laboratory tests across all or most of their patients regardless of whether it was medically necessary, therefore causing Medicare, Medicaid, and TRICARE to pay for medically unnecessary tests. Finally, the complaint alleges that McCollum and his pain management clinics caused these federal healthcare programs to pay for excessive and unnecessary steroid injections and unnecessary prescriptions for opioids and lidocaine ointment.

The government alleged that McCollum knew he was in violation of the law because when the Centers for Medicare and Medicaid Services(CMS) imposed a payment suspension on Oaktree for billing medically unnecessary drug tests and steroid injections he “simply transitioned his fraudulent schemes to, and pursued those schemes at, other entities that he owned and operated, including First Choice Healthcare and Labsource,†according to the complaint.

The claims initially were brought under the qui tam or whistleblower provisions of the False Claims Act by five former employers of the pain management clinics owned and operated by McCollum. The cases are captioned United States ex rel. Rauch, et al. v. Oaktree Medical Centre, P.C., et al., No. 6:15-cv-01589-DCC (D.S.C.); United States ex rel. Mathewson v. Dr. Daniel A. McCollum, et al., No. 6:17-CV-01190-DCC (D.S.C.); and United States ex rel. Hawkins v. Pain Management Associates of the Carolinas, LLC, et al., No. 8:18-cv-02952-DCC (D.S.C.).

Under whistleblower provisions, a person known as a “Relator” can bring a civil action for a violation of False Claims Act for the person and for the United States government. The government then can intervene in the case and prosecute the action. If it does not, the person still can pursue the claim on their own. Those Relators who prevail are entitled to a portion (15 and 30 percent) of the proceeds of the action or settlement.

The Stark Law and Anti-Kickback Statute are designed to prevent financial incentives from influencing medical decisions, because such incentives may result in excessive or unnecessary testing and services.

The Health Law Offices of Anthony C. Vitale has experience representing laboratories in a variety of criminal, civil, and regulatory issues. The firm also represents whistleblowers, as well as those who become the target of a whistleblower complaint. Please contact us for a free consultation if you have any questions related to regulatory issues related to laboratory testing.

For more information contact us at 305-358-4500 or email info@vitalehealthlaw.com.