DOJ intervenes in whistleblowers’ laboratory fraud suit

by Ben Vernia | April 14th, 2022

On April 4, the Department of Justice announced that it had filed a complaint intervening in a suit alleging that several entities and numerous individuals violated the Antikickback Statute and Stark Law in connection with laboratory services. According to DOJ’s press release:

The Justice Department has filed a complaint against two laboratory CEOs, one hospital CEO and other individuals and entities, alleging False Claims Act violations based on patient referrals in violation of the Anti-Kickback Statute and the Stark Law, as well as claims otherwise improperly billed to federal healthcare programs for laboratory testing. 
According to the United States’ complaint, laboratory executives and employees at True Health Diagnostics LLC (THD) and Boston Heart Diagnostics Corporation (BHD) allegedly conspired with small Texas hospitals, including Rockdale Hospital dba Little River Healthcare (LRH), to pay doctors to induce referrals to the hospitals for laboratory testing, which was then performed by BHD or THD. The complaint alleges that the hospitals paid a portion of their laboratory profits to recruiters, who in turn kicked back those funds to the referring doctors. The recruiters allegedly set up companies known as management service organizations (MSOs) to make payments to referring doctors that were disguised as investment returns but were actually based on, and offered in exchange for, the doctors’ referrals. As alleged in the complaint, BHD and THD executives and sales force employees leveraged the MSO kickbacks to doctors to increase referrals and, in turn, their bonuses and commissions. The complaint alleges that laboratory tests resulting from this referral scheme were billed to various federal health care programs, and that the claims not only were tainted by improper inducements but, in many cases, also involved tests that were not reasonable and necessary. In addition, the complaint alleges that, to increase reimbursement, LRH falsely billed the laboratory tests as hospital outpatient services.
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The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs. The Stark Law forbids a hospital or laboratory from billing Medicare for certain services referred by physicians that have a financial relationship with the hospital or laboratory. The Anti-Kickback Statute and the Stark Law seek to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.
The United States’ complaint also alleges that various THD employees, including THD’s CEO, participated in schemes to pay other forms of kickbacks, including: (a) processing and handling fees to draw site companies; (b) monthly fees to a top-referring doctor, disguising the payments as consulting fees for participating in THD’s advisory board, even though no such board actually existed at THD; and (c) waiving patient copayments and deductibles meant to ensure that patients share in, and have an interest in controlling, the amounts billed to federal healthcare programs. These kickbacks allegedly were paid to induce referrals to Medicare, Medicaid and TRICARE for laboratory testing, including laboratory tests that were not reasonable and necessary. 
The United States’ complaint names the following defendants:
Christopher Grottenthaler, of Frisco, Texas, THD’s founder and former CEO
Susan Hertzberg, of New York, BHD’s former CEO
Jeffrey “Boomer” Cornwell, of McKinney, Texas, THD’s former Vice President of Sales for the Southwestern Region
Stephen Kash, of Beaumont, Texas, THD’s former Director of Strategic Accounts and MSO recruiter
Courtney Love, of Dallas, Texas, former THD Account executive
Matthew Theiler, of Mars, Pennsylvania, BHD’s former Vice President of Sales
William Todd Hickman, of Lumberton, Texas, owner and operator of defendants Ascend Professional Management Inc., Ascend Professional Consulting Inc., and BenefitPro Consulting LLC
Laura Howard, of McKinney, Texas, former BHD Area Sales Manager and MSO recruiter
Christopher Gonzales, of McKinney, Texas, MSO recruiter
Jeffrey Madison, of Georgetown, Texas, LRH’s former CEO
Peggy Borgfeld, of Lexington, Texas, LRH’s former Chief Financial Officer and Chief Operations Officer
Stanley Jones, of San Antonio, Texas, MSO recruiter and co-owner and operator of defendant LGRB Management Services LLC (LGRB)
Jeffrey Parnell, of Dallas, Texas, MSO recruiter and co-owner and operator of LGRB
Thomas Gray Hardaway, of San Antonio, Texas, MSO recruiter and co-owner and operator of LGRB
Ruben Marioni, of Spring, Texas, MSO recruiter and co-owner and operator of defendant Next Level Healthcare Consultants LLC (Next Level)
Jordan Perkins, of Conroe, Texas, MSO recruiter and co-owner and operator of Next Level
Ginny Jacobs, of Magnolia, Texas, MSO recruiter and co-owner and operator of defendants S&G Staffing LLC (S&G) and Jacobs Marketing Inc. (Jacobs Marketing)
Scott Jacobs, of Magnolia, Texas, MSO recruiter and co-owner and operator of S&G and Jacobs Marketing

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The case was brought by a company owned by two individuals, including one physician.

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