Government Settles With Kentucky-Based Addiction Center Under False Claims Act

One of the hallmark goals of the False Claims Act is to help eliminate fraud and wasteful healthcare spending, thereby reducing healthcare costs for all Americans. In a recent settlement under the False Claims Act, a Kentucky-area addiction center and two of its physicians were found to be engaging in a consistent and unlawful scheme involving overbilling and billing for services that were not necessary in conjunction with treatment for substance abuse. The case actually involved both the FCA and its partner, the Stark Law, and involved 12 rehabilitation centers across Kentucky.

The Stark Law is a piece of federal legislation significantly limiting the types of business relationships in which physicians may enter. It is formally known as the Ethics in Patient Referrals Act and began as a way to prohibit physicians from referring patients for laboratory services at facilities in which the physician had a financial interest. The law has since burgeoned to include prohibitions against any referral of a Medicare or Medicaid patient to a facility with which the referring doctor has a financial interest.

Details of Case Against SelfRefind and Premier Tox

This case involves two physicians at the helm of addiction center SelfRefind who were allegedly engaging in unlawful self-dealing and kickback practices. Beginning in 2010, physicians Bryan Wood and Robin Peavler, both owners of SelfRefind, became part owners of the laboratory PremierTox. During this time, both were alleged to have unnecessarily referred patients to PremierTox for drug testing and urine screens that were either unnecessary or more costly than services at other facilities.

According to the specifics of the complaint, Peavler and Wood required weekly or bi-weekly urine tests for patients as part of their recovery from opium addiction. Pursuant to the doctor’s ownership interests in PremierTox, 100 percent of patients were referred to the facility for testing.

Over time, the doctors began insisting upon additional urine tests beyond what was needed to detect for drug use, resulting in billing for unnecessary medical services, or overbilling. One of the most commonly invoked prohibitions of the False Claims Act is that against submitting claims to Medicare or Medicaid for services that are not “medically necessary,” and a high number of health care fraud cases involve this kind of conduct.

In a related set of allegations, the government contends that Peavler and Wood began freezing and saving urine samples prior to the upgrades to PremierTox, thereby allowing them to test urine samples months or years after patients had checked out of the clinic.

Government’s Response to the Settlement

U.S Attorney Kerry B. Harvey said in a statement:

“Federal health care programs are essential to many of our citizens….We will not tolerate efforts by misguided providers to unfairly enrich themselves at the expense of these programs and the taxpaying public. This settlement underscores the continuing commitment of our office to use every available tool to protect these vital programs from false claims.”

Assistant U.S. attorney Stuart F. Delery reiterated this point by stating:

“Billing Medicare and Medicaid for lab tests that are not necessary contributes to the soaring costs of health care…. Providers will be investigated aggressively and held accountable for falsely billing federal health care programs.”

The federal government settled the matter for $15.75 million, $2.74 of which will go to the state of Kentucky for its contribution to Medicare and Medicaid. The Department of Justice released a statement about the case, but did not reveal the whistleblower’s award amount — however, the FCA allows for up to 30 percent recovery.

The Kentucky Attorney General keenly summed up the nucleus of the devastation caused by healthcare fraud:

“Substance abuse is devastating our Commonwealth and addiction is ripping families apart…. Treatment centers and their owners should be focused on patient care rather than profits. Companies that take advantage of Kentucky’s Medicaid program will not be tolerated and I am pleased that we were able to recover this money for such a vital state program and for Kentucky taxpayers.”

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