Settlement resolves False Claims Act litigation alleging illegal payments disguised as management service organization distributions.
The Department of Justice announced more than $6 million in settlements to resolve allegations that a laboratory CEO, physicians, and marketers violated the Anti-Kickback Statute by making illegal payments for laboratory referrals.
Christopher Grottenthaler, former CEO of True Health Diagnostics LLC in Frisco, Texas, agreed to pay $4.25 million to settle allegations that he facilitated kickback schemes from January 2015 to May 2018. Two physicians and seven marketers agreed to pay an additional $1.8 million.
The settlements bring the Department of Justice’s total recoveries to more than $59 million in civil False Claims Act settlements for kickbacks disguised as managed service organization (MSO) investment distributions, including recoveries from 50 physicians.
“The Department of Justice will continue to pursue and prioritize healthcare fraud, including redressing illegal kickbacks,” says assistant attorney General Brett A. Shumate of the Justice Department’s Civil Division, in a release. “Kickbacks to doctors can undermine medical decision-making, subject patients to wasteful medical treatments, and squander taxpayer money.”
MSO Distribution Scheme
According to the allegations, Grottenthaler caused false claims for laboratory testing to Medicare, Medicaid, and TRICARE by participating in a kickback scheme where marketers offered doctors payments disguised as MSO distributions to induce laboratory testing referrals.
The settlement alleges that Grottenthaler continued True Health’s participation in the scheme despite receiving warnings that the marketers “are a powder keg waiting to explode on us” and that “people are gonna go to prison.”
Beyond the MSO scheme, the settlement resolves allegations that Grottenthaler arranged for True Health to pay kickbacks disguised as consulting fees, processing and handling fees, and waivers of copayments and deductibles.
Physician and Marketer Settlements
Dr Hong Davis of Plano, Texas, agreed to pay $124,627 to resolve allegations that she received thousands of dollars from two purported MSOs between October 2015 and March 2017 in return for ordering tests from Little River Healthcare and Boston Heart Diagnostics Corporation.
Dr Elizabeth Seymour of Denton, Texas, agreed to pay $234,215 to resolve allegations that she received payments from two purported MSOs between April 2016 and January 2018 in return for ordering tests from Little River, True Health, and Boston Heart.
Seven marketers and their associated entities agreed to pay $1.46 million total. The group includes former True Health employees Courtney Love and Stephen Kash, former Boston Heart employees Laura Howard and Jeffrey Parnell, and others associated with Texas marketing companies.
Ongoing Enforcement Efforts
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by federally funded healthcare programs. The law seeks to ensure medical providers’ judgments are based on patients’ best interests rather than financial incentives.
“Laboratory testing is an essential part of patient care, not a vehicle for greed and exploitation,” says deputy inspector general for Investigations Christian J. Schrank of the Department of Health and Human Services, Office of Inspector General, in a release.
The settlement resolves allegations in a lawsuit originally filed by STF LLC under the qui tam provisions of the False Claims Act. STF LLC will receive a $148,750 share of the Grottenthaler settlement.
The investigation was conducted by the Civil Division’s Commercial Litigation Branch, the US Attorney’s Office for the Eastern District of Texas, HHS-OIG, and the Defense Criminal Investigative Service.
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