COVID-19 Testing and Illegal Kickbacks – Another Warning Lesson

On March 30, 2020, the U.S. Department of Justice for the District of New Jersey announced the arrest of Erik Santos, an individual who owned a marketing company that generated leads for clinical laboratories.  Santos is alleged to have received kickbacks by being paid on a per-test basis for submitting genetic cancer screening tests that were not medically necessary and more recently, for COVID-19 tests bundled with the respiratory pathogen panel (“RPP”) test.  He is charged with violating the Anti-Kickback Statute (42 USC § 1320a-7b(b)(1)), and for health care fraud (18 USC § 1347).

The Anti-Kickback Statute prohibits the knowing and willful solicitation or receipt of a cash or in-kind payment (whether by bribe, kickback or other form) in return for referring an individual to a person that furnishes or arranges for the furnishing of a service that is paid by a Federal health care program.   More broadly, the criminal statute for health care fraud prohibits willfully executing a scheme to defraud any insurance program. 

According to the criminal complaint, Santos approached a call center and clinical laboratory to generate “qualified patient lead[s]” for CGx Tests and more recently, COVID-19 tests and RPP tests to be conducted by the laboratory. https://www.justice.gov/usao-nj/press-release/file/1263416/download.  It is alleged that Santos collaborated with downstream suppliers to generate qualified leads through cold calls, targeted internet campaigns, and in-person solicitations to Medicare beneficiaries.  The criminal complaint alleges that after Santos’ suppliers identified qualified patient leads to the “Testing Companies” (i.e. Lab-1 and Call Center), those entities would arrange for a telemedicine healthcare provider to reach out to the patient for the telehealth doctor to write a prescription.  Additionally, it is alleged that the suppliers had pre-arranged relationships with ordering providers who would order the tests for the already identified qualified leads and send it to Lab-1 for testing and billing.

It is also alleged that Santos and his company entered into a sham marketing agreement with Lab-1.  According to the complaint, while the agreement reflected that Santos would be paid based on hours and expenses, text messages and emails conveyed that Lab-1 and Santos had agreed that Santos would be paid $1,750 for each test that was reimbursed.  It is alleged that Santos created sham invoices that would reflect an hourly rate of $1,750 and the number of hours worked would be the number of tests referred. 

Furthermore, it is  alleged that from November 2019 to February 2020, this scheme was focused on CGx testing.  However, with the influx of the pandemic, in March 2020, Santos approached the owner of the Testing Companies about COVID-19 testing and RPP testing.  According to the allegations, Santos was working with three other laboratories to send them COVID-19 and RPP bundled tests under a similar scheme.  It is alleged that Santos proposed to  Lab-1, that since the laboratory could not do COVID-19 testing, Santos could refer him specimens and then introduce him to one of the other laboratories that was testing for COVID-19 so that Lab-1 could act as both the billing and referring laboratory.  According to the allegations, Santos proposed a different per test amount for each of these referrals.  Again, it is alleged that Santos and the lab entered into a sham consulting agreement that disguised the per-patient fee. 

The Department of Justice has made clear in this press release, a prior release and the DOJ priorities memorandum, that it would aggressively identify and “guard against criminals” who are seeking to exploit the current crisis or profit off illegal wrongdoing.

As with any crisis, there is a risk of fraud and abuse and heightened scrutiny to the same.  While these may seem to be obvious kickbacks to those in the industry, it is important to review your compliance plan and marketing arrangements to ensure that they are compliant and appropriate, especially in a time of crisis.   

For more information you can contact Danielle Holley Tangorre at 518-462-5601 or dtangorre@oalaw.com.