States Benefit from Multimillion-Dollar FCA Urine Test Lab Settlement

Several states are now benefiting from a multimillion-dollar settlement agreement signed late last year by a Nevada clinical lab and two of its owners who were charged with submitting false claims for payment to federal healthcare programs.

Nevada Attorney General Aaron D. Ford recently announced that his state would receive $335,000 of the settlement money from MD Spine Solutions LLC, d/b/a MD Labs Inc. and its principal owners Denis Grizelj and Matthew Rutledge.

As we first wrote about in November 2021, the settlement resulted from a whistleblower lawsuit originally filed in the United States District Court for the District of Massachusetts. The company in question, MD Labs Inc., is headquartered in Reno, Nevada. 

According to the settlement agreement, the company and its founders admitted that between 2015 and 2019, MD Labs regularly billed federal healthcare programs (Medicare, Medicaid and others), for medically unnecessary urine drug testing. Specifically, it was alleged that the lab performed and billed for two types of tests: One is an inexpensive “presumptive” test that quickly provides results. The other is a more expensive “confirmatory” test. They were conducted at the same time and the results were simultaneously submitted to healthcare providers, according to the Office of Inspector General (OIG). This was done knowing that doctors would not review the inexpensive “presumptive” test when they already had the more conclusive test results. At the same time, the co-owners knew that without the less expensive test, the doctors had nothing to confirm and there was no reason to bill for the more expensive confirmatory test result.

A team from the National Association of Medicaid Fraud Control Units (NAMFCU) took part in the settlement negotiations on behalf of the states and included representatives from the Offices of the Attorneys General for Georgia, Massachusetts, Nevada, New Mexico, Texas and Virginia. NAMFCU’s job is to investigate and prosecute Medicaid fraud.

The United States previously resolved related allegations for $1 million in August 2001 against Nevada Advanced Pain Specialists, which used MD Labs for UDT services.

The settlement, which is based on MD Labs’ financial circumstances over time, is guaranteed at a minimum of $11.6 million and could reach up to $16 million.

In June 2021, the OIG issued a 34-page report that identified numerous weaknesses relating to Medicare payments for drug testing services that lead to improper payments.

Specifically, the OIG noted that Medicare contractors’ did not have the following:

  • Clear and consistent requirements or guidance for laboratories to use when determining the number of drug classes to bill for definitive drug testing services.
  • Procedures for identifying or limiting the frequency of drug testing services (e.g., the number of drug tests performed per year) for each beneficiary across all Medicare jurisdictions.
  • Consistent requirements in their LCDs or any procedures for identifying claims for direct-to-definitive drug testing.

“If CMS and its contractors cannot ensure that laboratories’ claims for drug testing services comply with Medicare requirements, laboratories may receive improper payments, and beneficiaries with substance use disorders may receive medically unnecessary drug testing services,” OIG noted

The Health Law Offices of Anthony C. Vitale can help you to develop an effective compliance program that allows you to identify and correct any problems before you become the target of an investigation. Should or your company become the target of an investigation, an effective compliance program may help you to mitigate or eliminate potential sanctions, penalties, and program exclusions. Give us a call at (305) 358-4500 or email

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The Health Law Offices of Anthony C. Vitale