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Press Release

Pair Sentenced on Health Care Fraud, Conspiracy Charges

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

ABINGDON, VIRGINIA – A pair of former lab professionals, who were convicted of billing Medicaid, Medicare, TennCare and a variety of other insurance companies following a bench trial earlier this year, were sentenced yesterday in the United States District Court for the Western District of Virginia in Abingdon, United States Attorney John P. Fishwick Jr., Virginia Attorney General Mark R. Herring and HHS Office of Inspector General Special Agent in Charge Nick DiGiulio announced today.

Beth Palin, 50, and Joseph D. Webb, 55, both of Bristol, Tenn., were convicted on April 7, 2016 following a bench trial of one count of conspiracy to commit health care fraud and health care fraud. Yesterday in United States District Court, Palin and Webb were both sentenced to 36 months in federal prison and ordered to pay $1,436,887 in restitution.

“These defendants stole over a million dollars from health care programs designed to provide care to those who need the most help. Medicare and Medicaid are not a means to line the pockets of fraudsters like Ms. Palin and Mr. Webb,” United States Attorney Fishwick 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.”

“Palin and her associates exploited important safety net programs and the prescription drug abuse crisis to benefit themselves to the tune of over a million dollars,” said Attorney General Mark Herring. “We will continue to work with U.S Attorney Fishwick and other local, state, and federal partners to crack down on this kind of theft and fraud, and to address the problem of heroin and prescription drug abuse from every possible angle.”

“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 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 August 16, 2016

Health Care Fraud