One-time laboratory CEO Christopher Grottenthaler, formerly of Frisco, Texas, has agreed to pay $4.25 million to resolve False Claims Act litigation with the United States alleging illegal payments to doctors for laboratory referrals in violation of the Anti-Kickback Statute.
Two physicians — Hong Davis, M.D., of Plano, Texas, and Elizabeth Seymour, M.D., of Denton, Texas — and seven marketers — Courtney Love, of Dallas, Texas, Stephen Kash, of Winnie, Texas, Laura Howard, of Lucas, Texas, Jeffrey Parnell, of Tyler, Texas, Stanley Jones, of San Antonio, Texas, Jordan Perkins, of Conroe, Texas, and Ruben Marioni, of Spring, Texas — have agreed to pay an additional $1,818,462 to settle the United States’ laboratory kickback allegations against them in the case.
The settling parties have agreed to cooperate with the Department of Justice’s investigations of, and litigation against, other participants in the alleged schemes. With these settlements, the Department of Justice has secured over $59 million in civil False Claims Act settlements for kickbacks to healthcare providers disguised as managed service organisation investment distributions, including recoveries from 50 physicians.
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded healthcare programs. It seeks to ensure that improper financial incentives do not compromise medical providers’ judgments and are instead based on the best interests of their patients.
Christopher Grottenthaler, the former Chief Executive Officer of True Health Diagnostics, LLC (True Health), a laboratory in Frisco, Texas, agreed to pay $4.25 million to resolve allegations that he caused false claims for laboratory testing to Medicare, Medicaid, and TRICARE from January 2015 to May 2018.
Grottenthaler allegedly agreed to a kickback scheme in which marketers, including True Health’s own employees, offered and paid doctors kickbacks disguised as MSO distributions to induce the doctors’ laboratory testing referrals. Grottenthaler allegedly facilitated True Health’s continued participation in the MSO kickback scheme after receiving warnings that the marketers “are a powder keg waiting to explode on us” and that “people are gonna go to prison”.
The settlement also 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, to induce laboratory testing referrals.
The settlement with Grottenthaler resolves certain allegations in a lawsuit originally filed by STF LLC under the qui tam or whistleblower provisions of the False Claims Act, which permit private parties to sue on behalf of the government when they believe that a defendant has submitted false claims for government funds and receive a share of any recovery.
The False Claims Act permits the United States to intervene in and take over the action, as it did here with respect to Grottenthaler. STF LLC, whose members are Christopher Riedel and Felice Gersh, M.D., will receive a $148,750 share of the Grottenthaler settlement. The United States also added claims to the lawsuit against additional defendants, and some of those are resolved in the settlements announced today.
The lawsuit, which continues as to other defendants, is captioned United States, et al. ex rel. STF LLC v. True Health Diagnostics LLC et al., No. 4:16-cv-547 (E.D. Tex.).
The settlements announced today resolve the United States’ allegations in the lawsuit that two physicians took kickbacks in violation of the Anti-Kickback Statute from laboratory marketers’ purported MSOs in return for laboratory testing referrals.
Dr. Hong Davis agreed to pay $124,627 to resolve allegations that from October 2015 to March 2017, she received thousands of dollars in payments from two purported MSOs, Ascend MSO of TX LLC (Ascend MSO) and Herculis MG LLC, in return for ordering laboratory tests from Little River Healthcare (Little River), a critical access hospital in Rockdale, Texas, and Boston Heart Diagnostics Corporation (Boston Heart), a clinical laboratory in Framingham, Massachusetts.
Dr. Elizabeth Seymour agreed to pay $234,215 to resolve allegations that from April 2016 to January 2018, she received thousands of dollars in payments from two purported MSOs, Ascend MSO and Eridanus MG LLC, in return for ordering laboratory tests from Little River, True Health, and Boston Heart.
The civil settlement amounts that Drs. Davis and Seymour agreed to pay are in addition to amounts they were ordered to pay in a criminal proceeding captioned United States v. Susan Hertzberg, et al., No. 6:22-cr-3-JDK (E.D. Tex.).
Lastly, the following seven marketers and their associated entities agreed to pay a total of $1,459,620 to resolve the United States’ allegations in the civil litigation that they paid kickbacks disguised as MSO payments to doctors to induce the doctors’ laboratory testing referrals: Former True Health Account Executive Courtney Love; former True Health Director of Strategic Accounts Stephen Kash; former Boston Heart Area Sales Manager Laura Howard; former Boston Heart sales representative Jeffrey Parnell; Stanley Jones, part-owner with Parnell of Texas marketing company LGRB Management Services LLC; and Jordan Perkins and Ruben Marioni, co-owners of Texas marketing company Next Level Healthcare Consultants LLC.
The settlement amounts for Kash and Howard were based on their ability to pay.
The civil settlement amounts for Kash, Howard, Parnell, and Perkins are in addition to amounts they were ordered to pay in criminal proceedings captioned United States v. Susan Hertzberg, et al., No. 6:22-cr-3-JDK (E.D. Tex.), and/or United States v. Christopher Grottenthaler, et al., No. 6:22-cr-135-JDK (E.D. Tex.).
