The former owner of a Virginia-based pathology laboratory will pay the U.S. government up to $3.75 million to settle a whistleblower complaint filed under the False Claims Act alleging the defendant ordered his company to fraudulently bill Medicare and Medicaid for costly cancer tests that patients didn’t need.
Michael Daugherty, a medical testing professional, accused Dr. David G. Bostwick of directing Bostwick Laboratories to bill federal health care programs for expensive bladder cancer detection tests known as Fluorescent In Situ Hybridization (FISH) tests and other pathological tests that were not medically necessary and performed without the consent or order of the patients’ physician.
Through Bostwick Laboratories, D. Bostwick sought reimbursement of $456 to $966 per test from Medicare and Medicaid, the whistleblower complaint alleged. The company’s submissions of false claims occurred from 2006 to 2011, according to the lawsuit.
“The Department of Justice is committed to ensuring that every laboratory test ordered is based on the medical needs of the patient and not just to increase physician and laboratory profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. Mr. Mizer called the tests “excessive” and “non-patient specific.”
The settlement also resolves allegations that Dr. Bostwick offered various discounts and billing arrangements to physicians to sway them to refer business to Bostwick Laboratories. The scheme, the government alleged, violated the federal Anti-Kickback Statute, which prohibits health care professionals from offering, paying, seeking, or receiving kickbacks in exchange for products or services covered by federal programs.
“The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient,” the Justice Department said in a statement about the settlement.
Under the terms of the settlement, Dr. Bostwick has agreed to pay more than $2.6 million plus an additional sum up to $3.75 million if certain financial contingencies occur within the next five years – for a total potential payment of up to $3.75 million, the Justice Department said.
Mr. Daugherty will receive $2.5 million as his share of the settlement and a previous settlement Bostwick Laboratories reached with the U.S. government in the same case in August 2014, in which it agreed to pay more than $6.5 million.
In August 2013, Bostwick Laboratories settled a similar case with the federal government, agreeing to pay nearly $504,000 to resolve allegations that it illegally paid physicians to use its laboratory testing services for prostate cancer detection, oftentimes unnecessarily, to boost reimbursements from Medicare.