For Immediate Release - April 23, 2013

Statement of Attorney General Martha Coakley on State Auditor’s Medicaid Drug-Screening Report

AG Coakley Files Legislation to End Fraud Between Drug Testing Labs and Sober Homes

BOSTON – Massachusetts Attorney General Martha Coakley today issued the following statement in response to State Auditor Suzanne Bump’s Medicaid Drug Screening audit, a report that supports the Commonwealth’s continued fight against fraud in the health care system.

“We appreciate the State Auditor’s Office addressing these unnecessary and excessive drug tests that are costing the Commonwealth millions of dollars, an issue of health care abuse that has been a high priority in our office,” AG Coakley said. “This report further supports the need for our recently filed comprehensive legislation that would help reduce fraud by prohibiting inappropriate self-referral arrangements between clinical labs and sober houses.”

BACKGROUND:

On Jan. 18, 2013, the AG’s Office filed An Act Prohibiting Clinical Laboratory Self-Referrals, legislation that would close the loophole between drug screen testing labs and referral sources such as sober homes by prohibiting clinical laboratory self-referrals. The bill, also sponsored by Senator Barry R. Finegold (D-Andover), Representative John V. Fernandes (D-Milford), and Representative Garrett Bradley (D-Hingham), will end referrals that occur with overlapping ownership of labs and their referral source. These ownership arrangements have been identified as one of the largest health care fraud issues facing the state.  The language of the legislation has been included in the House of Representatives Fiscal Year 2014 proposed budget.

Despite the federal government passing a comprehensive anti self-referral law in 1992, Massachusetts law does not currently prohibit these types of inappropriate relationships. The newly proposed legislation would allow for either civil or criminal penalties for violations of owning one’s own referral source, including civil penalties of up to $100,000 for engaging in a scheme to violate the law.

Specifically, An Act Prohibiting Clinical Laboratory Self-Referrals:

  • Prohibits referrals, solicitation and testing of specimens when there is an ownership interest between the clinical laboratory and the referral source;
  • Allows for physician owned clinical laboratories to continue to refer testing for their own patients, if it is in connection with treatment;
  • Allows for hospitals to continue to refer testing for their own patients;
  • Requires disclosure of ownership interests to the Department of Public Health and AGO every two years;
  • Like the False Claims Act civil penalty, establishes a fine of between $5,000 and  $10,000 per referral, treble and consequential damages;
  • Mirrors the federal civil penalty of $100,000 for entering into a referral scheme and allows for treble and consequential damages; and
  • Like the criminal false claims and anti-kickback statute, establishes sentencing options of state prison for not more than 5 years, house of correction for not more than 2 ½ years, a fine of up to $10,000, or both.

Settlements with eight laboratories through the Attorney General’s Medicaid Fraud Division have recovered more than $30 million dollars to MassHealth since 2007. Although the majority of the cases involved false claims and kickback schemes, several of the major clinical laboratories began their businesses by performing frequent testing on residents of sober houses owned – directly or indirectly – by clinical laboratories. 

In March 2012, Calloway Laboratories paid $20 million in restitution to resolve allegations of an elaborate kickback scheme involving two straw companies that funneled monetary incentives to employees at several sober houses to illegally obtain urine drug screening business paid for by MassHealth. Three defendants in the Calloway case pleaded guilty to criminal charges in October 2012. The fourth and final defendant pleaded guilty to charges in January 2013. All defendants have been excluded from participating in the Massachusetts Medicaid Program, as well as any other Medicaid or Medicare program.

In September 2011, a Suffolk Grand Jury returned indictments against Dr. Punyamurtula Kishore of Brookline, his company Preventive Medicine Associates, Inc. (PMA), as well as three others charged in connection with allegedly running an intricate “kickback” scheme and fraudulently billing MassHealth nearly $3.8 million. Dr. Kishore allegedly used bribes to induce sober house owners to require their residents submit to urine drug screens performed by PMA’s physician office laboratories a minimum of three times a week.

This month, Dr. Richard Ng, 54, the former director of a Suboxone clinic in Brighton was arraigned in connection with illegally prescribing Suboxone and collecting illegal fees from patients between 2006 and 2008. The clinic’s former office manager Renee Andrews, 43, was arraigned on charges of conducting an elaborate Medicaid kickback scheme with two laboratories worth more than $590,000. In exchange for Ng’s significant urine drug screening business, the laboratories – including Franey Medical Lab, Inc. in Hyannis – allegedly paid the salaries of some of Ng’s office staff, including the full-time salaries of Andrews’ daughter, nephew and boyfriend, who also worked as medical assistants and performed other administrative duties. 

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