Skip to main content
Press Release

Pair Convicted on Health Care Fraud, Conspiracy Charges

For Immediate Release
U.S. Attorney's Office, Western District of Virginia
Beth Palin, Joseph D. Webb Jr. Billed Programs Over $14 Million for Unnecessary Drug Screenings

ABINGDON, VIRGINIA – A pair of lab professionals who billed Medicaid, Medicare, TennCare, and a variety of other health care providers and insurance companies, were convicted yesterday of federal conspiracy and health care fraud charges following a bench trial, announced United States Attorney John P. Fishwick Jr. and Virginia Attorney General Mark R. Herring.

Beth Palin, 49, and Joseph D. Webb Jr., 55, both of Bristol, Tenn., were convicted on April 7, 2016 following a bench trial of one count each of conspiracy to commit health care fraud and health care fraud.

“These two individuals abused the healthcare system and billed programs and insurance companies for unnecessary tests for no other reason than to line their own pockets,” United States Attorney John P. Fishwick Jr. said today. “I am thankful for the work of the Virginia AG’s Office, Medicaid Fraud Control Unit and all of our law enforcement partners who worked on this case. It is important for us to keep fraud and abuse out of these very important social programs.”

“Heroin and prescription opioid addiction is touching families in every corner of the state, and Southwest Virginia has been hit as hard as anywhere,” said Attorney General Mark Herring. “It’s unconscionable that anyone would exploit this epidemic to enrich themselves on such a massive scale. Virginians are dying every single day from heroin and prescription drug overdose, and fraud schemes like this can make it harder for people who are trying to get treatment and make a change in their lives.”

“Clinical labs play a critical role in providing care for people on Medicare,” said Nick DiGiulio, Special Agent in Charge for the Office of Inspector General at the U.S. Department of Health and Human Services. “Lab professionals who aim to get rich quick by cheating patients and taxpayers, as in this case, can expect to pay a high price for their crimes.”

According to evidence presented during the bench trial by Assistant Attorney General and Special Assistant United States Attorney Janine Myatt, Webb and Palin owned Bristol Labs, which was a lab that specialized in urine drug screen testing. Bristol Labs worked with Dr. Charles Kim Wagner, a medical doctor licensed by the Drug Enforcement Administration to prescribe Suboxone. Wagner opened what purported to be a substance abuse treatment program that involved only medication assisted treatment using Suboxone in Bristol, Virginia. His practice accepted cash payment only and charged $250 for an initial visit and $100-$110 each week thereafter.  Wagner’s office was located next to Bristol Labs in an adjacent office suite within the same physical building as Bristol Labs. Drug screenings were required for Wagner’s patients at each weekly visit and Wagner sent 100 percent of his patients to Bristol Labs for their drug screenings.

Although patients often paid cash for doctor’s appointments, they could use Medicare or Medicaid to pay Bristol Labs for prescriptions and the cost of urine drug screenings. The type of drug screening Wagner ordered depended solely on the method of payment. If a patient was uninsured or “self-pay,” Wagner ordered a $25 dip-stick or “quick cup” urine drug screen from Bristol Labs. However, if a patient was paying via insurance, Medicaid or Medicare, Wagner ordered two separate, automated screens performed by Bristol Labs and by another confirmation Lab in Denver, Colorado. These patients paid nothing out of pocket, however Medicare, Medicaid or their insurance company would be billed between $120-$1,800 for these tests each week. These tests were medically unnecessary and Wagner did not use the results of the tests to direct patient care.

Palin and Webb eventually opened their own addiction practice in Gate City, Virginia, called Mtn. Empire Medical Care. Palin and Webb instituted a nearly identical drug testing protocol to the one at Wagner’s practice, self-pay patients paid an extra $25 and got a quick cup test while insured patients got two automated screens which were billed to their insurance companies and paid nothing out of pocket. These expensive tests were medically unnecessary.

In total, this conspiracy fraudulently billed Virginia Medicaid, TennCare, Medicare, Aetna, Optum/United Health Care, Anthem/Blue Cross-Blue Shield of Virginia, Anthem/Blue Cross-Blue Shield of Tennessee and Cigna, $14,278,340 for medically unnecessary urine screens.

Dr. Wagner died during the course of this investigation and was therefore not charged in this matter.

The investigation of the case was conducted by Virginia Office of the Attorney General’s Medicaid Fraud Control Unit, United States Health and Human Services-Office of Inspector General, the Tennessee Bureau of Investigation, the Internal Revenue Service, the Bristol, Virginia Police Department, The Virginia State Police, the Bristol, Tennessee Police Department, the Scott County Sheriff’s Office and the United States Marshals Service.  Assistant Attorney General and Special Assistant United States Attorney Janine Myatt and Assistant United States Attorney Zachary T. Lee prosecuted the case for the United States.

Updated April 8, 2016

Health Care Fraud
Prescription Drugs