6th Circuit Court of Appeals Upholds Health Care Fraud Conviction for Urinalysis Testing Company Owners

The United States Court of Appeals for the Sixth Circuit recently ruled on a case involving 5 defendants accused of health care fraud in their operation of a jointly-owned urinalysis company.

Urinalysis is frequently used by drug treatment centers and behavioral health hospitals as a way to monitor recovering addicts’ progress toward sobriety and track permissible medications. Given the increased number of drug treatment facilities, there has also been an increase in the demand for urinalysis testing. As a result of the fact that these particular urinalysis tests are meant to track progress, physicians prefer to get those results very soon after collection in order to tailor their treatments.

The 5 defendants in United States v. Bertram recognized a need for urinalysis testing in rural Kentucky and jointly formed PremierTox. Two of the defendants were physicians already operating a substance abuse treatment company (SelfRefind), one of the defendants previously worked for that company, and two additional defendants owned a drug testing service. Together, they formed and opened PremierTox and began accepting specimens for testing from Selfrefind and other treatment facilities. However, the company began to accept frozen samples without yet having the proper equipment to test frozen samples. Once they obtained the correct equipment, the equipment malfunctioned. The result was that PremierTox did not test samples for more than seven to ten months after collection. PremierTox then sent insurers the bills for the testing without indicating the date of collection. PremierTox submitted these claims despite the fact that the results were of little to no use to the ordering physicians.

The defendants argued that they had provided the services they billed for, they never made any material misrepresentations, and they did not omit any information that the doctors requested. The court disagreed. It held that when PremierTox submitted bills for services rendered many months after they were requested, the defendants knew that the tests were no longer medically necessary and failed to inform the doctors of this fact. The court found that the defendants knowingly concealed material facts which constituted a scheme to defraud. The court affirmed the defendants’ convictions.

Notably, the court also pointed to a similar case in the 4th Circuit where health care providers performed medical unnecessary urinalysis tests and billed insurers for them. In that case, the providers omitted information that the test was duplicative and thus medically unnecessary. Again, the court concluded that the omissions constituted “a scheme to defraud.”

Urinalysis testing is clearly on the government’s radar, and it will be interesting to see additional cases brought by the government or whistleblowers that are critical of testing companies looking to cash in on the opioid epidemic.

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