Bostwick Laboratories’ former owner agrees to pay up to $3.75 million to settle false claims allegations

by Ben Vernia | January 10th, 2016

On January 8, the Department of Justice announced that the former owner of the oncology testing laboratory company, Bostwick Laboratories, had agreed to pay up to $3.75 million to settle claims, originally brought by a whistleblower, that the company had billed federal health care programs for medically unnecessary tests. According to DOJ’s press release:

Dr. David G. Bostwick has agreed to pay the United States up to $3.75 million to resolve alleged violations of the False Claims Act for billing Medicare and Medicaid for medically unnecessary cancer detection tests and offering incentives to physicians to obtain Medicare and Medicaid business, the Department of Justice announced today.  Dr. Bostwick was the founder, owner and chief executive officer of Bostwick Laboratories Inc. from 1999 to 2011.  Bostwick Laboratories is a pathology laboratory headquartered in Glen Allen, Virginia.

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The settlement announced today resolves claims that, from 2006 to 2011, Dr. Bostwick allegedly directed Bostwick Laboratories to bill Medicare and Medicaid for expensive cancer detection tests known as Fluorescent In Situ Hybridization (FISH) tests, as well as other tests, that were not medically necessary and were performed without the treating physicians’ consent or order.  FISH tests are used to detect bladder cancer.  During the time period covered by the settlement, Medicare reimbursement for FISH tests ranged from $456 to $966 per test.

The settlement also resolves allegations that Dr. Bostwick, through Bostwick Laboratories, offered various discounts and billing arrangements to treating physicians to induce physicians to refer business to Bostwick Laboratories in violation of the federal Anti-Kickback Statute.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs.  The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

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Under the settlement announced today, Dr. Bostwick has agreed to pay over $2.6 million plus an additional $1.125 million if certain financial contingencies occur within the next five years – for a total potential payment of up to $3.75 million.  On Aug. 28, 2014, Bostwick Laboratories previously agreed to pay over $6.5 million to resolve the allegations in this lawsuit.

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The Department announced that the whistleblower, who had worked in the industry, will receive $2.5 million of the combined settlements (approximately 25% of the total, when the contingent payments are taken into account) — possibly reflecting the relator’s efforts to continue the case after the government initially declined to intervene in it.

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