An ongoing federal bribery investigation into a New Jersey medical laboratory has recently obtained guilty pleas from over two dozen doctors that they accepted bribes to refer patients and perform unnecessary tests. According to prosecutors, the bribes were part of a long-running scheme and resulted in millions of fraudulent dollars being given to the laboratory.
The most recent doctor to plead guilty is Bret Ostrager, a New York resident with practices in Nassau County, New York, who plead guilty to three counts in an indictment charging him with conspiracy. Ostrager admitted to receiving cash bribes every month, typically around $3,300, from lab employees and associates of Biodiagnostic Laboratory Services. Ostrager also admitted he solicited and received several meals and tickets to entertainment events and sporting events from Biodiagnostic, a Parsippany-based company.
In return for the monthly cash bribes and occasional entertainment or sporting event, Ostrager referred patient blood samples to the lab, generating over $900,000 in business for the lab.
Another recent guilty plea came from Leonard Marchetta, a Staten Island physician’s assistant, who accepted roughly $3,000 per month in return for referring patient blood specimens to the lab, generating roughly $660,000 in lab business. Marchetta is set to serve forty-two months in federal prison, followed by three years of supervised release and forfeiture in the amount of $72,000.
It isn’t just physicians and medical professionals who are pleading guilty, but also employees of the laboratory, including the president of the lab and his brother, a senior employee. David Nicoli, president and part owner of the lab, used profits from the scheme to purchase a lavish lifestyle for himself, including a $580,000 Yenko Nova, a $300,000 Ferrari, expensive dinners, and a large tab at a local gentleman’s club.
So far, in total, thirty-nine people (twenty-six of whom are physicians) have pleaded guilty in connection with the bribery scheme. The organizers of the scheme have admitted that the scam involved millions of dollars in bribes and resulted in over $100 million in fraudulent payments to the laboratory from Medicare and private insurance companies. Those numbers are staggeringly high, especially when one considers only $12 million has been recovered through forfeiture so far.
Many of the guilty pleas and relevant information can be found here, with a search for “Biodiagnostic.” In general, the monthly bribe amounts varied between $1,500 to $5,000 per month, and were paid in an attempt to induce doctors to refer their patients’ blood specimens to the lab. Some of the fraud occurred through “bogus lease and service agreements,” where the lab paid doctors inflated rates for space in their offices and for blood-drawing services.
New Jersey banned those kinds of agreements between blood labs and doctors in 2010, which forced Biodiagnostic Laboratory to change their tactics. The lab created and funded at least six new entities to use in channeling bribes to doctors as “consulting fees.”
This is believed to be one of the largest, possibly even the largest, laboratory bribery prosecution. According to U.S. Attorney Paul J. Fishman, “this is the largest number of medical professionals ever prosecuted in the same case.” Mr. Fishman is hoping that such a large prosecution will help others take notice that this kind of fraudulent activity will not be tolerated, “[i]t shows how pervasive this practice can be. It has also made people in the profession sit up and take notice and made the deterrent message that much louder.”
U.S. Attorney Paul Fishman has worked to reorganize the health care fraud practice at the New Jersey U.S. Attorney’s Office, going so far as to create a stand-alone Health Care and Government Fraud Unit. Mr. Fishman’s changes to the USAO in New Jersey could lead to other changes in other states, resulting in more charges being brought against physicians and medical professionals who engage in fraud.
Currently, no other individuals are facing charges relating to this investigation, but the investigation remains ongoing. A list of defendants, their role in the scheme, and their sentence can be found here.