Feds Not Backing Away from Punishing CGx Testing Scams

Genetic tests using DNA sequencing to detect mutations in genes that may indicate a higher risk of a patient’s developing certain types of cancers can be very effective in preventing and treating cancer. But they’re also expensive. Last year, four of the 25 highest billing lab tests to Medicare were cancer genetic (CGx) tests with prices ranging from $508 to $3,878. In addition, many of the recent telehealth frauds targeted by federal and state enforcers involve CGx scams. So, it’s no surprise that CGx kickbacks and false billing have become a focal point of government investigations, prosecutions, and whistleblower lawsuits, as illustrated by their handling of a recent set of scams.

The Daniel Hurt Case

A 58-year-old Florida business owner named Daniel Hurt is on the wrong end of the most recent high-profile CGx test fraud enforcement action. On Sept. 16, the U.S. Department of Justice (DOJ) announced that Hurt was convicted for his role in an elaborate CGx kickback, money laundering, and fraudulent billing scheme that was actually three schemes in one.

The Pennsylvania Scheme

The first scheme originated in Pennsylvania and involved false billing of CGx tests. Hurt and co-conspirators associated with so-called marketing entities ran “targeted campaigns” to induce Medicare beneficiaries to submit CGx specimens collected by cheek swabs from kits sent to the beneficiary’s home or provided at “health fairs” across the country. The specimens were then sent to Pennsylvania-based Ellwood City Medical Center (ECMC) and referred to third-party reference CGx testing labs. To ensure Medicare reimbursement, Hurt and his co-conspirators paid kickbacks to physicians in return for test orders generated via telehealth visits that never actually took place. The kickbacks were hidden through sham contracts designed to make it appear that the payments were for legitimate services. Medicare paid ECMC over $25 million in reimbursement for the CGx tests, some of which Hurt used for a luxury boat that he named In My DNA, as well as other private purchases.

The New Jersey Scheme

As G2 Intelligence recently reported in a Sept. 14 roundup, Hurt was charged Aug. 30 for his participation in another scheme based in New Jersey in which he paid kickbacks for medically unnecessary CGx tests to be referred to several labs he owned. As with the Pennsylvania scheme, he disguised the kickbacks through fake contracts making it appear as if the payments were for legitimate referral and marketing services. That scheme caused at least $53.3 million to be fraudulently billed to Medicare, according to the DOJ.

The Florida Scheme

The third scheme involved prescription medications, rather than CGx tests. But the modus operandi was similar. Hurt and his accomplices paid patient recruiters kickbacks to obtain health information from beneficiaries of CHAMPVA, TRICARE, and private health insurance plans. The recruiters used the information to generate prescriptions for expensive compound medications using altered formulations to get the maximum possible reimbursement from the payer. The prescriptions were then referred to a telehealth service in Utah, which ordered the medications from a pharmacy in which Hurt owned a three percent stake. The pharmacy then sent a portion of the reimbursement proceeds it received from the payers to Hurt. At the end of the day, Hurt pocketed over $4 million in kickbacks from the scheme.

In a World of Hurt

In July and August, the government swooped in, charging Hurt and his accomplices with a series of charges in connection with the three schemes. Rather than risk a criminal trial, Hurt cut a plea bargain, agreeing to plead guilty to three charges, including:

• One count of conspiracy to commit healthcare fraud, pay and receive unlawful kickbacks, and commit money laundering
• One count of conspiracy to commit healthcare fraud
• One count of conspiracy to pay and receive kickbacks

He’s now looking at the prospect of up to 15 years in prison and up to $500,000 in fines, or alternate fines, depending on either how much he gained or others lost in the fraud schemes. As part of his plea bargain, Hurt also agreed to pay $97,360,451.76 in restitution to CHAMPVA, TRICARE, and Medicare. In addition, under a separate agreement, he will forfeit a total of $31,148,624.70 worth of the assets he obtained with his ill-gotten funds, including In My DNA.