$59 Million in Civil False Claims Act Settlements for Laboratory Kickbacks

Strategic Insights -

The U.S. Department of Justice announced a significant victory in the fight against healthcare fraud, with settlements totaling over $59 million in civil False Claims Act cases involving laboratory kickbacks. The settlements include a $4.25 million payment from former True Health Diagnostics CEO Christopher Grottenthaler, who allegedly facilitated a kickback scheme that disguised payments to doctors as managed service organization (MSO) investment distributions.

Key Takeaways:

  • The settlements resolved allegations that Grottenthaler and other defendants paid kickbacks to doctors in exchange for laboratory testing referrals, in violation of the Anti-Kickback Statute.
  • The case involved over 50 physicians who received payments from MSOs, which were disguised as consulting fees, processing and handling fees, and waivers of copayments and deductibles.
  • The settlements also resolved allegations that two physicians, Dr. Hong Davis and Dr. Elizabeth Seymour, took kickbacks from laboratory marketers in return for ordering laboratory tests.
  • The settlements were the result of a coordinated effort between the Civil Division's Commercial Litigation Branch, Fraud Section and the U.S. Attorney's Office for the Eastern District of Texas, with assistance from HHS-OIG and DCIS.
  • The government's pursuit of these matters illustrates the government's emphasis on combating healthcare fraud, and the False Claims Act remains a powerful tool in this effort.
  • Tips and complaints about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 1-800-HHS-TIPS (800-447-8477).

Statistics:

  • Total civil False Claims Act settlements: over $59 million
  • Settlement amount from Christopher Grottenthaler: $4.25 million
  • Number of physicians involved in the case: over 50
  • Number of marketers involved in the case: 7
  • Amount paid to Dr. Hong Davis: $124,627
  • Amount paid to Dr. Elizabeth Seymour: $234,215
  • Amount paid by the seven marketers: $1,459,620
  • Total civil settlement amounts paid by individual defendants: $1,818,462

Sources:

  • U.S. Department of Justice
  • U.S. Attorney's Office for the Eastern District of Texas
  • Office of Inspector General, Department of Health and Human Services
  • Defense Criminal Investigative Service, Department of Defense
  • 1-800-HHS-TIPS (800-447-8477) for reporting fraud and abuse