On April 4, 2022, the United States Department of Justice announced that it filed a complaint against several individuals and entities – including two laboratory CEOs and one hospital CEO – alleging False Claims Act violations. According to the complaint, the parties engaged in patient referrals in violation of the Anti-Kickback Statute and the Stark Law and submitted claims improperly billed to federal healthcare programs for laboratory testing.
Background
According to the DOJ, from at least 2010 to 2014, laboratory executives and employees at Health Diagnostics Laboratory, Inc. (“HDL”) and its successor True Health Diagnostics, LLC (“THD”) as well as Boston Heart Diagnostics Corporation (“BHD”) allegedly conspired with small hospitals throughout the state of Texas, including Rockdale Hospital (d/b/a Little River Healthcare) (“LRH”), to pay doctors to make referrals to the hospitals for laboratory testing. The laboratory testing was then performed by BHD or THD.
According to the complaint, laboratories competed to offer the highest processing and handling fees to providers, with HDL paying the highest at $20 per referral. In April 2015, DOJ intervened in a False Claims Act suit alleging that HDL and three executives had offered and paid kickbacks for laboratory referrals. HDL settled for $47 million and each of the three executives were found liable for over $111 million in a judgment affirmed in all respects by the Fourth Circuit, with certiorari denied by the Supreme Court. Similarly, BHD paid over $26 million to settle allegations of paying processing and handling fees and other kickbacks.
However, despite prior published warning from HHS-OIG over kickbacks for laboratory referrals and DOJ’s enforcement action, a new laboratory kickback scheme began in or about August 2014, just two months after HHS-OIG’s special fraud alert. The kickback scheme involved payments to healthcare providers through purported management services organizations (MSOs), to induce the providers’ laboratory referrals. The MSO kickback scheme began by executives Jeffrey Madison and Peggy Borgfeld at LRH. While the MSO kickback scheme initially started out focused on toxicology testing, it shortly thereafter expanded to include diagnostic blood testing in or about May 2015, just one month after DOJ’s enforcement action against HDL and three executives.
The DOJ notes in its complaint that through this new MSO kickback scheme, many of the individuals involved in the prior laboratory processing and handling fee kickback scheme continued to use kickbacks to induce referrals, including THD and its executives. Many of the same providers who had received processing and handling fee kickbacks were targeted for this scheme as well.
The complaint further alleges that the hospitals paid a portion of their laboratory profits to recruiters, who would then give some of those profits to the referring doctors. The recruiters also allegedly set up companies (the MSOs) to make payments to referring doctors that were disguised as investment returns but were given in exchange for the doctors’ referrals. BHD and THD executives and sales employees allegedly leveraged the 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 stemmed from improper inducements but also involved tests that were unreasonable and unnecessary.
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, referring to the payments as consulting fees for participating in THD’s advisory board, despite THD not actually having an advisory board and
(c) waiving patient copayments and deductibles to increase patient access to prescribed medication, and subsequently, the amounts billed to federal healthcare programs.
Individuals Involved
The following defendants are named in the complaint:
- Christopher Grottenthaler (Frisco, Texas), THD’s founder and former CEO
- Susan Hertzberg (New York), BHD’s former CEO
- Jeffrey “Boomer” Cornwell (McKinney, Texas), THD’s former Vice President of Sales for the Southwestern Region
- Stephen Kash (Beaumont, Texas), THD’s former Director of Strategic Accounts and MSO recruiter
- Matthew Theiler (Mars, Pennsylvania), BHD’s former Vice President of Sales
- William Todd Hickman (Lumberton, Texas), owner and operator of defendants Ascend Professional Management Inc., Ascend Professional Consulting Inc., and BenefitPro Consulting LLC
- Courtney Love (Dallas, Texas), former THD Account executive
- Laura Howard (McKinney, Texas), former BHD Area Sales Manager and recruiter
- Christopher Gonzales (McKinney, Texas), recruiter
- Jeffrey Madison (Georgetown, Texas), LRH’s former CEO
- Peggy Borgfeld (Lexington, Texas), LRH’s former Chief Financial Officer and Chief Operations Officer
- Stanley Jones (San Antonio, Texas), recruiter and co-owner/operator of defendant LGRB Management Services LLC (“LGRB”)
- Jeffrey Parnell (Dallas, Texas), recruiter and co-owner/operator of LGRB
- Thomas Gray Hardaway (San Antonio, Texas), recruiter and co-owner/operator of LGRB
- Ruben Marioni (Spring, Texas), recruiter and co-owner/operator of defendant Next Level Healthcare Consultants LLC (“Next Level”)
- Jordan Perkins (Conroe, Texas), recruiter and co-owner/operator of Next Level
- Ginny Jacobs (Magnolia, Texas), recruiter and co-owner/operator of defendants S&G Staffing LLC (“S&G”) and Jacobs Marketing Inc. (“Jacobs Marketing”)
- Scott Jacobs (Magnolia, Texas), recruiter and co-owner/operator of S&G and Jacobs Marketing
All statements in the complaint are allegations and defendants are innocent until proven guilty. The complaint follows an initial qui tam lawsuit brought by STF LLC.