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July 2023 Enforcement Roundup

by Rachel Muenz | Jul 4, 2023 | Enforcement-lca, Essential, Lab Compliance Advisor

Though UDT-related enforcement actions predominate, an uncommon vendor-related case was in the mix this month.

The key trends remain largely unchanged since our last roundup of laboratory testing-related enforcement actions announced by the U.S. Department of Justice (DOJ). From late April to mid-June, cases involving urine drug testing were the most common, followed by those related to COVID-19 and genetic testing fraud.

In one case, a former lab co-owner who had previously been convicted in a $3.7 million urine drug testing (UDT) kickback scheme in March 2022 caused a stir when he failed to report for prison at the end of April 2023 and a warrant for his arrest was issued.¹ However, the biggest UDT-related case involved an alleged $10 million scheme in which the CEO of a pain clinic was charged with conspiracy to commit healthcare fraud.²

Though they involved only three and two cases, respectively, COVID-19 and genetic testing were the next most common types of fraud announced by federal enforcement agencies.

April 2023

April 26, 2023: David Lyle Shehi, the owner of Alabama-based pain management clinic Etowah Pain, pled guilty to conspiracy to pay kickbacks and commit healthcare fraud relating to his referrals for items/services, including electro-diagnostic testing, that were then billed to Medicare. Shehi awaits sentencing, but could see up to five years in prison.³

April 28, 2023: Two doctors and their medical practice settled False Claims Act (FCA)-related charges for $1 million. Drs. Fadi El-Atat and Sarah Abdul-Sater, along with their practice, FA CV Consultants P.C., allegedly violated the FCA by performing and then billing medically unnecessary procedures to Medicaid and Medicare. The allegedly unnecessary tests include allergy, pulmonary, balance, cardiology ultrasound, and autonomic nervous system testing.⁴

May 2023

May 5, 2023: California citizen Steven Donofrio was found guilty of his role in a more than $28 million kickback scheme relating to the referral of pharmacogenetic (PGx) testing to clinical labs in the state. A sentencing date has not yet been set.⁵

May 6, 2023: An arrest warrant was issued for Richard Reid, the former co-owner of medical testing company Northwest Physicians Laboratory (NWPL) who was convicted in March 2022 of five felonies related to an illegal $3.7 million UDT kickback scheme. The warrant was issued after Reid failed to report to prison for a two-year sentence handed down in January 2023. Reid had “repeatedly petitioned” to have his prison reporting date delayed, first due to COVID-19, then long COVID, but was denied by Judge John C. Coughenour. According to an update, he was apprehended by police in Oregon on May 7 “without incident” and “remains detained.”¹

May 9, 2023: Gautam Jayaswal, a doctor from Kansas, pled guilty to one count of conspiracy to commit healthcare fraud related to his involvement in a roughly $16 million telemedicine scheme. Jayaswal ordered medically unnecessary genetic tests and orthotic braces for thousands of telehealth patients, which were then billed to Medicare. In addition to repaying the fraudulently obtained funds, Jayaswal could face up to five years in prison, a maximum fine of $250,000, or both.⁶

May 9, 2023: In a case previously reported in our June 2023 Lab Compliance Advisor,⁷ two Kentucky-based businesses—Blue Waters Assessment and Testing Services, LLC (BATS) and VerraLab JA, LLC (doing business as BioTap Medical)—were accused of improperly billing Medicare and the state Medicaid program for urine drug testing ordered by the Fayette County family courts. BATS collected and sent the specimens to BioTap for testing, which then billed the federal and state health insurance programs. However, because Medicare and the Kentucky Medicaid program only pay for tests used for medical diagnosis and treatment, the companies are accused of violating the FCA. The businesses settled the allegations for $1,740,620; of this, $1,490,620 will be paid by BioTap and $250,000 by BATS and its owner.⁸

May 11, 2023: Florentina Mayko, the CEO of Pain Medicine of York (PMY), was charged with one count of conspiracy to commit healthcare fraud in relation to an alleged $10 million Medicare fraud scheme involving the ordering and billing of medically unnecessary UDTs. These tests were referred to PMY’s in-house lab whenever possible and, of the more than $10 million billed to Medicare, over $4 million was paid for the tests.² Mayko pled guilty to the charge on June 14 and agreed to pay $1,408,976.48 in restitution, as well as forfeit several properties to the US.⁹ Depending on sentencing, she could also see a maximum of 10 years in prison, a period of supervised release after her prison term ends, and a fine.²

May 11, 2023: Gary S. Winn, DO, the former owner and medical director of a Maine-based family medical practice, settled FCA-related allegations for $330,607. He was accused of violating the FCA for allegedly billing Medicare and the state Medicaid program for services that were unreasonable, unnecessary, or not provided, including patient drug testing services.¹⁰

May 30, 2023: In allegations brought forward in a qui tam lawsuit, three parties are accused of violating the FCA by billing TRICARE and Medicare for medically unnecessary UDTs and for non-reimbursable evaluation and management services; two of the parties also violated the Anti-Kickback Statute by accepting payment of an employee’s salary in exchange for referring unnecessary UDTs to a reference lab. The three defendants settled the allegations for $625,000.¹¹ Read more in our Labs in Court section.

June 2023

June 1, 2023: Dr. Francis F. Joseph, the supervisory physician of a Colorado-based medical clinic, was sentenced to two and a half years in prison following his conviction for stealing about $250,000 from the Accelerated and Advance Payment and Paycheck Protection COVID-19 relief programs and using the money for personal expenses.¹² Read more in our Labs in Court section.

June 8, 2023: Steven King, chief compliance officer of pharmacy holding company A1C Holdings LLC, was convicted of wire fraud and conspiracy to commit healthcare fraud for his participation in over $50 million of fraudulent Medicare billing. King and his co-conspirators billed the federal healthcare program for unwanted and unneeded—but high-reimbursing—diabetic testing supplies and lidocaine, taking multiple steps to conceal their fraud. Scheduled to be sentenced in September, King faces up to 20 years in prison.¹³

June 8, 2023: Arkansas citizen Billy Joe Taylor was sentenced to 15 years in prison, followed by three years of supervised release, for his role in a more than $134 million Medicare fraud scheme that led to his pleading guilty to money laundering and conspiracy to commit healthcare fraud in October 2022. Taylor must also pay $29,835,825.99 in restitution. The scheme involved billing the federal healthcare program for medically unnecessary diagnostic lab tests, including those for respiratory illnesses and UDTs, during the COVID-19 pandemic. The tests were also “not provided as represented” and weren’t ordered by medical providers. Taylor and his co-conspirators pocketed nearly $40 million in Medicare reimbursements from the scheme.¹⁴

June 16, 2023: A Maryland-based diagnostic lab billing company, VitalAxis Inc., settled FCA-related allegations for $300,479.58. The billing company was accused of billing Medicare, under the direction of its diagnostic lab client, for medically unnecessary respiratory pathogen panels performed on seniors who had also been tested for COVID-19. However, these add-on tests were allegedly ordered by a doctor who hadn’t actually ordered the tests and was ineligible to treat Medicare beneficiaries. According to the DOJ, VitalAxis found and used the credentials of a different doctor and billed Medicare using that doctor’s name without authorization.¹⁵

Food for Thought

Although most of the period’s cases involve the usual kickback and FCA-related violations, healthcare enforcement and regulatory attorney Karen Lovitch notes that the VitalAxis settlement stood out for a couple of reasons. First, it involved a vendor, rather than a lab, and second, VitalAxis cooperated with the government by disclosing information from its own internal investigation and other relevant facts, as well as admitting liability, which resulted in a lower settlement amount. “The Department of Justice has been placing great emphasis over the past year or two on cooperation and is starting to note in press releases cases where cooperation credit was provided,” says Lovitch, who is chair of health law practice and co-chair of the healthcare enforcement defense practice at Mintz.

What does that mean for you and your lab? Ongoing auditing and monitoring efforts are valuable to avoid compliance issues—and Lovitch highlights that it’s vital to quickly investigate any reports of potential noncompliance. For labs that discover potential compliance violations, the VitalAxis settlement demonstrates the importance of disclosing these issues to government agencies as soon as possible and cooperating fully with the subsequent investigation.