Steptoe & Johnson PLLC: False Billing Leads To Record Settlement In Medicare/Medicaid Fraud Case

The United States Attorney for the Southern District of West Virginia has announced a record $4.675 million settlement with a medical lab for false billings to Medicare and to West Virginia Medicaid.

R. Booth Goodwin, of Charleston, WV, said in his press release that Calloway Laboratories of Woburn, Massachusetts, allegedly submitted false billings for clinical lab services, mostly urine drug screens, to West Virginia’s Medicaid program and the Medicare program nationwide.  From March 2009 until April 2013, Calloway routinely billed Medicaid and Medicare using a code for pathology services, in addition to the code for urine testing. According to the United States Attorney, however, the investigation, conducted jointly by the WV Medicaid Fraud Control Unit and the office of the Inspector General of the U.S. Department of Health and Human Services (the OIG), revealed that the treating health care providers did not need the pathology services and did not knowingly order them.

Bad enough, but the investigation further found that Calloway did not provide the pathology services it billed for.  It provided other medical reviews, still unwanted and unneeded, that would not be paid for by either WV Medicaid or Medicare. Then why, the reader might ask, did Medicaid and Medicare pay for them? The answer is that Calloway submitted them under a code for covered pathology services. Remember? The services no one provided, and that no one asked for or needed.

According to the United States Attorney, this settlement represents the largest-ever recovery in a health care fraud case anywhere in West Virginia.  And in case there is any question about whether these investigations will continue, Goodwin observed in his press release that this recovery for the Government “. . .represents more than 80 percent of my office’s annual budget allocation,” or, in other words, “. . .nearly pays for the operation of my office for a year.”  This would include criminal, civil, appeals, tax cases, everything!

In 2010, Calloway and two of its top executives were charged criminally in Massachusetts for bribes and kickbacks to managers of group homes for recovering drug addicts.  Calloway, which was acquired by new owner Ampersand Capital Partners in 2012, agreed to pay $20 million in penalties to resolve the corporation’s liability.  Two of the former executives, CEO Arthur Levitan and COO Patrick Cavanaugh, along with the owner of one of the halfway houses, William Maragioglio, pleaded guilty and were placed on probation for four years and de-barred by Medicare. The new management team, which had been unaware of the billing shenanigans, voluntarily suspended those billing practices nationwide.

So the advice:  any thoughts one might have of using a false code or charging for something not actually provided should be put in our “Don’t Do That” file.

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