Diagnostic Laboratory Agrees to Pay More Than $9 Million to Settle Alleged False Claims Act Violations

Baltimore, Maryland - Patients Choice Laboratories (PCL), a diagnostic laboratory headquartered in Indianapolis, Indiana, agreed to pay the United States $9,620,000 to resolve allegations that it violated the False Claims Act and the Anti-Kickback Statute (AKS).

Kelly O. Hayes, U.S. Attorney for the District of Maryland, and Tom Wheeler, U.S. Attorney for the Southern District of Indiana, announced the settlement with Special Agent in Charge Maureen Dixon, Department of Health and Human Services Office of Inspector General (HHS-OIG), and Mario M. Pinto, Special Agent in Charge, HHS-OIG - Chicago Regional Office.

The government alleges that PCL knowingly submitted claims to Medicare for respiratory pathogen panels (RPPs) that were either medically unnecessary or obtained through kickbacks. PCL also paid commissions to independent sales representatives and marketing firms (1099 representatives) based on the volume or value of referrals.

Specifically, the United States alleges that on November 20, 2020, PCL entered into a Marketing Services Agreement (MSA) with a purported infection prevention company (the Company). Through the MSA, PCL agreed to pay $5,000 per month in exchange for "marketing and management services" in long-term care facilities. In reality, according to the United States, the MSA served as a pretext for paying the company for laboratory test referrals, which PCL then billed to Medicare.

Additionally, the United States alleges that PCL paid the Company to perform services in long-term care facilities, including specimen collection for infectious disease testing. The Company swabbed residents for COVID-19, and PCL used the same specimens to conduct and bill Medicare for medically unnecessary RPPs. In some cases, PCL billed for RPPs without performing any COVID-19 tests at all.

Between December 1, 2020, and May 11, 2022, PCL paid the company approximately $1.86 million in exchange for RPP referrals. During this time, PCL billed Medicare for thousands of RPPs conducted at 43 long-term care facilities nationwide, receiving more than $6 million in reimbursement.

Additionally, from January 1 to March 31, 2021, PCL contracted with 1099 representatives to promote its laboratory tests to health care providers. The United States alleges that these individuals were not bona fide employees. PCL paid them a percentage of the revenue generated from testing they facilitated. The representatives helped arrange referrals and orders for tests billed to Medicare in violation of the AKS. PCL's commission payments to these representatives totaled at least $372,000.

"Providing impermissible compensation to induce patient referrals that then lead to medically unnecessary diagnostic tests is simply unacceptable," Hayes said. "We're committed to taking the necessary actions to protect patients and taxpayer-funded government health programs."

"Kickback arrangements that drive unnecessary testing waste taxpayer dollars and undermine the integrity of our healthcare system," Wheeler said. "This settlement reflects our commitment to holding accountable those who seek to profit at the expense of federal healthcare programs and the patients they serve."

"Entities who submit false Medicare claims destroy public trust in federal health care programs and divert taxpayer-funded resources away from vulnerable citizens who truly need them," Dixon said. "We are unwavering in our dedication to safeguarding the integrity of the Medicare trust fund and the services provided to enrollees."

"Wasteful spending fueled by kickback arrangements undermines the public's confidence in our health care system and depletes valuable resources that should be used to improve patient care," Pinto said. "Working together with our law enforcement partners, HHS-OIG will continue to identify and investigate alleged violations of federal law."

U.S. Attorney Hayes commended the HHS-OIG for its work in the investigation. Ms. Hayes also thanked Assistant U.S. Attorneys Tarra DeShields, District of Maryland, and Adriana Figueroa, Southern District of Indiana; and Trial Attorneys Kelly McAuliffe and Asha Natarajan, DOJ Civil Division - Fraud Section, who jointly handled this case.

The United States' settlement in this matter illustrates the government's emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

The claims resolved by this settlement are allegations only and there has been no determination of liability.

For more information about the Maryland U.S. Attorney's Office, its priorities, and resources available to report fraud, visit justice.gov/usao-md and justice.gov/usao-md/community-outreach.

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