Laboratory companies pay $5.7 million in kickback settlement

by Ben Vernia | July 25th, 2022

On July 22, the Department of Justice announced that three laboratory companies and two of their owners had agreed to pay $5.7 million to resolve civil charges that they paid kickbacks to physicians for patient referrals. According to DOJ’s press release:

Metric Lab Services LLC and Metric Management Services LLC (collectively, Metric) and Spectrum Diagnostic Labs LLC (Spectrum) and two of their owners and operators, Sherman Kennerson and Jeffrey Madison, have agreed to pay $5.7 million to resolve allegations that they caused the submission of false claims to Medicare by paying kickbacks in return for genetic testing samples, the Department of Justice announced today.

Metric and Spectrum were clinical laboratories in Mississippi and Texas, which Kennerson and Madison co-owned and operated along with other individuals. The United States alleged that Metric, Spectrum, Kennerson and Madison participated in a genetic testing fraud scheme with various marketers. These marketers solicited genetic testing samples from Medicare beneficiaries. The marketers arranged to have a physician fraudulently attest that the genetic testing was medically necessary, and Metric and Spectrum would process the tests, receive reimbursement from Medicare and pay a portion of that reimbursement to the marketers. 

In an attempt to conceal the nature of the kickback arrangement, Metric and Spectrum entered into sham agreements with marketers to provide various consulting, marketing and other services at an hourly rate. In reality, however, Metric and Spectrum paid the marketers a percentage of revenue, including Medicare reimbursement, in return for the samples. The marketers then generated sham invoices for hourly services that matched the agreed-upon kickback amount. 

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Kennerson and Madison have previously each pled guilty to one count of conspiracy to defraud the United States in connection with this scheme and are awaiting sentencing.  United States v. Kennerson, No. 20-cr-00448 (BRM) and United States v. Madison, No. 20-cr-00449 (BRM) (D.N.J.).

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The case apparently arose from a government investigation, and not from a qui tam whistleblower complaint.

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