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Justice News

Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Thursday, October 1, 2015

Strata Pathology to Resolve Allegations Regarding Kickback Payments

BOSTON – Lexington-based Strata Pathology Laboratory, Inc. (known as StrataDx), has agreed to pay $558,793 to resolve allegations that it violated the False Claims Act by inducing physicians to refer Medicare and Medicaid patients to Strata by paying kickbacks in the form of sham consulting fees and providing unlawful discounts to physicians.

“Billing arrangements like Strata’s, which provide a financial incentive to physicians to refer Medicare and Medicaid patients to a particular lab are unlawful,” said United States Attorney Carmen M. Ortiz.  “When a company prioritizes profit, it disregards laws that are intended to protect patient health and the integrity of the healthcare system.  Settlements like this serve to deter illicit kickback schemes.”

“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,” said Acting Special Agent in Charge Joseph Bonavolonta of the Federal Bureau of Investigation’s Boston Division.  “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.”

“Companies that financially reward physicians in exchange for the referral of business -- as the government contended in this case -- corrupt the physicians’ impartial medical judgment and drive up health care costs for everyone,” said Special Agent in Charge Phillip M. Coyne, U.S. Department of Health and Human Services Office of Inspector General.  “We will continue to investigate such wasteful business arrangements.”

According to the settlement agreement, Strata acknowledged paying consulting fees to two referring physician practices that did not provide consulting services in exchange.  Strata also acknowledged entering into “account billing” arrangements with seven referring physician practices that facilitated fee-splitting between the parties.  The government alleges that, under these arrangements, Strata allowed the physician practices to bill patients’ private insurers directly for pathology services that Strata performed.  Strata then charged the physician practices for its services at deeply discounted rates, allowing the physician practices to pocket the difference between Strata’s discounted price and the amount of the private insurers’ full reimbursement.  All of the physician practices allegedly referred specimens of federal health care program beneficiaries to Strata, and Strata billed those programs at its full price.

The United States alleges that Strata’s claims to Medicare and Medicaid were false because they resulted from kickbacks that Strata provided the referring physicians in violation of the federal Anti-Kickback Statute.  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.  Although Strata’s account billing arrangements did not explicitly condition the discounted prices upon the physicians’ referrals of Medicare and Medicaid business to Strata, the United States alleges that Strata offered the discounts with the understanding that physicians who entered into account billing arrangements with Strata would refer virtually all of their patients, including Medicare and Medicaid patients, to Strata.

The settlement announced today stems from a complaint filed by a former Strata employee under the whistleblower provisions of the False Claims Act, which authorize private parties to sue on behalf of the United States and to receive a portion of any recovery.  The settlement amount will be shared between the United States, the whistleblower, and the Commonwealth of Massachusetts.

U.S. Attorney Ortiz, Acting FBI SAC Bonavolonta, and HHS-OIG SAC Coyne, made the announcement today.  The matter was handled by Assistant U.S. Attorneys Abraham George and Deana El-Mallawany in Oritz’s Civil Division, Special Assistant U.S. Attorney Joshua H. Orr, and Assistant Attorney General Angela Neal of the Medicaid Fraud Division of Massachusetts Attorney General Healey’s Office.

Updated October 1, 2015