Lab owners pay out millions to settle FCA allegations.
Metric Lab Services LLC and Metric Management Services LLC (i.e., Metric) and Spectrum Diagnostic Labs LLC (i.e., Spectrum), along with two of their owners, Sherman Kennerson and Jeffrey Madison, have agreed to pay $5.7 million to settle accusations that they paid kickbacks in return for generic testing samples, leading to the submission of false claims to Medicare. The False Claims Act was put into place to protect governmental programs from being defrauded and to ensure medical decisions are not persuaded by bribes.
Metric and Spectrum were clinical laboratories in Mississippi and Texas, which Kennerson and Madison co-owned. The United States Department of Justice (DOJ) alleged that the two companies and their owners “participated in a genetic testing fraud scheme with various marketers,” court records show. The marketers they used attempted to get testing samples from Medicare beneficiaries by having a doctor assert that the testing was medically necessary when it, in fact, was not. After the tests were taken, the labs would process them, receiving reimbursement from Medicare, a portion of which was then given to the marketers.
In an effort to make the arrangements between the companies and the marketers seem legitimate, the labs entered into fake agreements with them for consulting, advertising and other services that were never actually carried out. The marketers provided the companies with fake invoices for totals matching the kickback amounts they were to receive.
“Laboratories that attempt to profit from unlawful kickbacks will be held accountable,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department will continue to pursue those who undermine the integrity of federal health care programs and waste taxpayer dollars.”
“Rather than compete fairly for business, these labs engaged in a brazen kickback scheme to rake in millions of dollars of Medicare money,” said U.S. Attorney Philip R. Sellinger for the District of New Jersey. “A patient’s needs must guide medical decisions, not who is paying the biggest kickback. Today’s settlement recoups millions of dollars for the Medicare program and demonstrates this Office’s continuing resolve to protect the integrity of federal healthcare programs.”
“When health care providers engage in kickback schemes, the trust of both patients and taxpayers are at risk,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “This case shows our commitment to investigating such allegations in order to protect the Medicare program’s ability to subsist and serve its mission.”
Previously, Norman Smiley, 80, of Boca Raton, Florida, owner of Sun Health Advocates LLC, a company responsible for garnering DNA samples and physicians’ orders to submit these tests to labs, including Metric Lab Services LLC and Spectrum Diagnostic Labs LLC., pled guilty to entering into illegal agreements with the Metric and Spectrum. The labs paid Sun Health kickbacks in exchange for delivering samples and orders for testing. Sun Health issued fake invoices for an hourly rate identical to the kickback amount to be received.
Kennerson and Madison each pled guilty to one count of conspiracy to defraud the government and are awaiting sentencing.