Kentucky Addiction Treatment Center, Clinical Laboratory And Two Physician Owners To Pay $15.75 Million To Resolve Allegations Of Fraudulent Urine Drug Testing

LEXINGTON, KY - A chain of opiate addiction recovery centers, headquartered in Harrodsburg, KY., and a Russell Springs, KY., clinical laboratory, along with two physician owners, agreed to pay the U.S. Government millions of dollars to resolve civil allegations that they fraudulently billed federal health care programs for medically unnecessary and excessive urine tests.

PremierTox 2.0, LLC (“PremierTox”), Addixxion Recovery of Kentucky, LLC d/b/a SelfRefind (“SelfRefind”), Dr. Bryan Wood and Dr. Robin Peavler have agreed to pay a total of $15,750,000, plus interest, to resolve allegations that they violated the False Claims Act by submitting claims to Medicare and Kentucky’s Medicaid program for urine tests that were medically unnecessary and more expensive than the actual tests that were performed. Under federal law, health care programs only reimburse health care providers for services that are deemed medically necessary.

“Federal health care programs are essential to many of our citizens,” said U.S. Attorney Kerry B. Harvey. “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.”

According to the settlement agreement, Dr. Wood and Dr. Peavler owned and operated SelfRefind, a chain of addiction treatment clinics located in 12 Kentucky cities including, Danville, Frankfort, Hazard, Middlesboro, Pikeville, Barbourville, Morehead and Carrollton. As part of its treatment program, SelfRefind required all of its patients to submit to regular urine drug screening, as often as every two weeks, to ensure that the patients were not abusing controlled substances and were taking addiction treatment medications as prescribed.

The government alleged that after Wood and Peavler became owners of PremierTox they began automatically referring all drug screens completed at SelfRefind to PremierTox clinic for additional comprehensive urine drug screening tests that were frequently unnecessary and often more expensive than suitable alternative tests. The government also alleged that PremierTox submitted false claims that misidentified the class of drug that was tested for and received a higher financial reimbursement than necessary.

Before Dr. Wood and Dr. Peavler became part owners of PremierTox, SelfRefind did not automatically refer urine samples for additional confirmation testing to outside laboratories.

According to the settlement agreement, in December 2010 when Drs. Wood and Peavler referred urine samples to PremierTox, the lab did not have the equipment necessary to test the large volume of urine samples sent to it by SelfRefind. Therefore, PremierTox froze the samples in a storage unit for many months before performing the additional tests, which by that time were medically unnecessary for the treatment of the patients. Nevertheless, PremierTox submitted claims, seeking reimbursement for the tests.

In connection with the settlement, PremierTox has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services, Office of Inspector General (“HHS-OIG”). The agreement obligates PremierTox to undertake substantial internal compliance reforms and commit to a third-party review of its claims to federal health care programs for the next five years. The agreement also resolves allegations that the defendants violated the Stark Law, which forbids a laboratory from billing Medicare and Medicaid for certain services referred by physicians that have a financial relationship with the laboratory.

“Billing Medicare and Medicaid for laboratory tests that are not necessary contributes to the soaring costs of health care,” said Assistant Attorney General for the Civil Division Stuart F. Delery. “Providers will be aggressively investigated and held accountable for falsely billing federal health care programs.”

The Commonwealth of Kentucky is also a party to the agreement and will receive approximately $2.74 million, which represents the state’s share of the government’s recovery of Medicaid funds. The Medicaid program is funded jointly by the federal and state governments.

“Substance abuse is devastating our Commonwealth and addiction is ripping families apart,” Kentucky Attorney General Jack Conway said. “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.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $17.3 billion through False Claims Act cases, with more than $12.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation was conducted by the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit (“MFCU”), Kentucky State Police, and the U.S. Attorney’s Office. The settlement agreement and Corporate Integrity Agreements resulted from joint efforts of HHS-OIG, MFCU, the U.S. Attorney’s Office, and the Civil Frauds Section of the Department of Justice in Washington, D.C.