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Kentucky Rehab Center and Lab Will Pay $7.1 Million to Settle Lab Testing Fraud Case

February 9, 2024

The U.S. Attorney for the Eastern District of Kentucky recently announced that a Kentucky rehab center and lab will pay a combined $7.1 million to settle a lab testing fraud case. The settlement resolves False Claims Act allegations against AccuLab, LLC dba Thoroughbred Diagnostics (“Thoroughbred”) and Edgewater Recovery Center, LLC (“Edgewater”).  According to the press release, Thoroughbred will pay $4.9 million. Edgewater will pay the remaining $2.2 million.

Whistleblower Files Lab Testing Fraud Case Under False Claims Act

In 2021, a nurse employed by Edgewater as Program Director filed a whistleblower complaint under the False Claims Act. The False Claims Act permits individuals to file lawsuits on behalf of the government against those who have defrauded the government.  If the case is successful, the statute provides for rewards to the whistleblower.

Medicare and Medicaid only pay for medically necessary laboratory testing.  That is, testing that is individualized to each patient, used for medical diagnosis or treatment, and ordered by a treating physician.  The whistleblower alleged that Edgewater ordered, and Thoroughbred conducted, unnecessary lab testing that was then reimbursed by Medicare and Kentucky Medicaid.

Specifically, Edgewater, a residential and outpatient drug rehabilitation facility, allegedly requested an extensive panel of urine drug tests for all patients every week, regardless of medical necessity. Further, Edgewater allegedly did not even use the test results for the patient’s medical diagnosis or treatment.

Thoroughbred is the laboratory that performed urine drug testing for Edgewater’s patients. Thereafter, Thoroughbred billed Medicare and Kentucky Medicaid for these unnecessary tests. In addition, Thoroughbred allegedly billed for urine drug screens that were not ordered by a physician.

Both Facilities Agree to Settlement

Edgewater agreed to a settlement of $2.2 million to resolve its False Claims Act liability. As part of the agreement, Edgewater entered into a Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services, Office of Inspector General. According to the CIA, a Compliance Officer and an independent compliance expert will oversee and the business’s compliance with federal health care program requirements.  Thoroughbred consented to an Agreed Judgment in the amount of $4,925,441.42.

Medicare and Medicaid are intended – and funded – to provide medically necessary health care benefits to millions of eligible Americans. When the valuable and limited resources of these programs are depleted, by fraud, waste, or abuse, it has a profound impact on us all.  We simply must prioritize taking the steps available to us to prevent inappropriate billing like this, and to return the funds to their proper purpose – providing necessary medical care.

-Carlton S. Shier, IV, United States Attorney for the Eastern District of Kentucky.

As part of the settlement, the whistleblower will receive a portion of the settlement proceeds.

We Help Whistleblowers Expose Lab Testing Fraud and Other Problematic Practices

The Whistleblower Law Collaborative LLC devotes its practice to representing clients nationwide in bringing actions under the federal and state False Claims Acts and other whistleblower programs. Among the firm’s many successes is the government’s $6 million settlement with CleanSlate, a case that included claims of unnecessary urine drug tests.  If you are aware of healthcare fraud or any other type of government fraud, contact us for a free, confidential, consultation.