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Strata Pathology Pays $559,000 on Whistleblower’s Allegations of Illegal Physician Referrals

Strata Pathology Laboratory, Inc. of Lexington, Massachusetts, has agreed to pay $559,000 to resolve claims that it was in the habit of paying doctors kickback fees for patient referrals, which ultimately resulted in extra expenses for Medicare and Medicaid, as well as private insurers.

The resolution is the result of a whistleblower lawsuit by former Strata employee Henry O'Dell, who decided to pursue the matter after observing that the company allegedly struck deals with physicians to increase referrals.

Medicaid Fraud Allegations on Phony “Consulting Fees” to Doctors

According to the Federal authorities and a recent Boston Globe article, Strata compensated some physician practices with “consulting fees,” for which there was no evidence of services provided, and struck unlawful bill-splitting deals with others. While billing insurance companies the full price for lab work, participating physicians subcontracted that work out to Strata for a discounted price. When a Medicare or Medicaid patient required tests, the doctors referred them to Strata, which proceeded to bill the healthcare programs full price. 

Although there are no laws against offering discounts, the United States alleged that Strata´s billing arrangements with the involved practices were tacitly dependent on physicians referring virtually all of their patients to Strata, whether they were covered by Medicare/Medicaid or private insurers.

Kickbacks by or to Physicians Violate Anti-Kickback Statute

Thus, the kickbacks offered by Strata were allegedly in violation of the federal Anti-Kickback Statute.  The statute strictly prohibits offering, paying, soliciting, or receiving remuneration in order to induce referrals in the case of services covered by government-funded programs like Medicare and Medicaid. 

The settlement is the final stage of a thorough FBI investigation. The Department of Justice hopes the resolution will help to deter healthcare providers from committing Medicaid and Medicare frauds of this kind in the future.

Special Agent Joseph Bonavolonta of the FBI's Boston Division expressed the Bureau's satisfaction with the investigation's outcome, “When laboratory referrals are made based on the amount of kickback money physicians can make from a lab, both patients and the healthcare system suffer. Patients expect their physicians to choose laboratories based on their competent medical practices, not how much money they can pocket.  The FBI will continue to aggressively investigate illegal kickback schemes designed to put profits over patient care.”

As a result of the settlement, the whistleblower is poised to receive up to 30% of the recovery, nearly $168,000 possible as a whistleblower reward for reporting Medicaid and other healthcare fraud. O´Dell´s initial False Claims lawsuit had been filed on October 30th, 2013.

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