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Press Release

Laboratory to Pay $26.67 Million to Settle False Claims Act Allegations of Illegal Inducements to Referring Physicians

For Immediate Release
Office of Public Affairs

Laboratory Boston Heart Diagnostics Corporation (Boston Heart), of Framingham, Massachusetts, has agreed to pay $26.67 million to resolve False Claims Act allegations involving payments for patient referrals in violation of the Anti-Kickback Statute and the Stark Law, as well as claims otherwise improperly billed to federal healthcare programs for laboratory testing, the Department of Justice announced today.

The settlement announced today resolves allegations that Boston Heart conspired with others to pay doctors kickbacks disguised as investment returns.  From 2015 to 2017, Boston Heart allegedly agreed to provide laboratory testing services to small Texas hospitals in exchange for per-test payments.  To generate more referrals for the hospitals and more money for itself, Boston Heart allegedly coordinated with the hospitals’ independent marketers, who set up companies known as management service organizations (MSOs), to make payments to referring physicians that were disguised as investment returns but were actually based on, and offered in exchange for, the physicians’ referrals.  Boston Heart allegedly helped the MSOs identify physician targets, referred interested physicians to the MSOs to secure their business, and participated with the MSOs in sales pitches to offer physicians money in exchange for referrals.  As a result, physicians allegedly referred patients to the Texas hospitals and Boston Heart for laboratory tests performed by Boston Heart, which were then billed to Medicare, Medicaid, and TRICARE. 

“Paying kickbacks to doctors in exchange for referrals undermines the integrity of federal healthcare programs,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “We will hold accountable those who enter into unlawful agreements that harm taxpayers, corrupt doctors’ medical judgment, and subject patients to expensive and unnecessary testing.”

“This company created lots of complex relationships to try to hide what it was doing, and that is illegally paying kickbacks for medical referrals,” said US Attorney Joseph D. Brown for the Eastern District of Texas.  “The law requires that medical decisions be made based on what is best for the patient, not on what financially benefits the healthcare provider.   Doctors and hospitals need to understand that these kinds of violations will be pursued.”

“This office will continue to take all appropriate action to help prevent improper inducements that can corrupt the integrity of physician decision-making,” said U.S. Attorney McGregor W. Scott for the Eastern District of California.

“When medical companies pursue profits by paying kickbacks to doctors, they undermine our health care system,” said U.S. Attorney Jessie K. Liu for the District of Columbia. “This settlement represents our continued commitment to fight aggressively to protect patients and the integrity of federal health care programs.”

“Schemes designed to defraud federal healthcare programs undermine our healthcare system by driving up medical costs, wasting taxpayer dollars, and often harming patients,” said Special Agent in Charge C.J. Porter of the Office of Inspector General at the U.S. Department of Health and Human Services (OIG-HHS).  “This settlement shows our unwavering commitment to working closely with our law enforcement partners to hold accountable those misusing healthcare funds, regardless of the complexity of the scheme used to circumvent laws and regulations.”

“The Defense Criminal Investigative Service (DCIS), in partnership with our federal law enforcement partners, will continue to aggressively investigate those who defraud the federal government, and ultimately the American taxpayers, in order to protect the integrity of federal healthcare programs,” said Special Agent in Charge Michael C. Mentavlos of the DCIS Southwest Field Office.  “Fraud and abuse pose a significant threat to the viability of TRICARE, the Department of Defense’s healthcare program for service members, retirees, and their families.”

The settlement also resolves allegations that Boston Heart conspired with the Texas hospitals and others to submit claims for outpatient laboratory testing for patients who were not hospital outpatients, in order to receive higher reimbursements from federal healthcare programs.

In addition, the settlement resolves allegations that Boston Heart directly or indirectly paid processing and handling fees, waived patient copayments and deductibles, and provided physician practices with in-office dietitians in exchange for physician referrals for laboratory testing.  Those allegations were originally made in two cases filed under the whistleblower, or qui tam, provision of the False Claims Act.  The act permits private parties to sue for fraud on behalf of the United States and to share in any recovery.  The whistleblowers will receive approximately $4.36 million of the settlement.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs.  The Stark Law forbids a laboratory from billing Medicare and Medicaid for certain services referred by physicians that have a financial relationship with the laboratory.  The Anti-Kickback Statute and the Stark Law are intended to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.

The civil settlement was the result of an investigation by the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Offices for the Eastern District of Texas, District of Columbia, and Eastern District of California, OIG-HHS, and DCIS.  The two lawsuits are captioned United States ex rel. Riedel v. Boston Heart Diagnostics Corp., No. 1:12-cv-1423 (D.D.C.) and United States ex rel. FBH1 LLC v. Boston Heart Diagnostics Corp., No. 2:17-cv-2061 (E.D. Cal.).  The claims resolved by the settlement are allegations only and there has been no determination of liability.

The government’s pursuit of these matters illustrates the government’s emphasis on combating healthcare fraud.  One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 800‑HHS‑TIPS (800-447-8477).

Updated November 26, 2019

False Claims Act
Press Release Number: 19-1311