A clinical laboratory in South Carolina, along with its founder, has consented to pay a minimum of $6.8 million and enter guilty pleas to settle federal accusations of providing illegal kickbacks to physicians for patient referrals, as announced by the U.S. Department of Justice on Wednesday.
The clinical laboratory, LTD Holding LLC, previously known as Labtech Diagnostics LLC, located in Anderson, South Carolina, and its founder and CEO, Joseph Labash, have agreed to resolve civil claims filed under the False Claims Act. In a related criminal matter, Labtech will plead guilty to five charges of offering and paying healthcare kickbacks, which violate federal law.
Federal prosecutors indicated that the kickback scheme compromised the medical judgment of doctors and resulted in claims being submitted to Medicare, Medicaid, TRICARE, and other federally funded healthcare programs. As part of the settlement, Labtech and Labash will pay $6.8 million, with the possibility of an additional $3.27 million if specific financial conditions are met. Additionally, the company will pay $103,551.90 in restitution as part of its criminal plea.
The Justice Department reported that from 2018 to 2021, Labtech and Labash compensated doctors through arrangements that were disguised as office space rental fees, phlebotomy services, and toxicology payments, all aimed at encouraging referrals for laboratory testing. Prosecutors claimed that the defendants tried to hide the kickbacks by personally delivering money orders, falsifying contracts, and exaggerating square footage and work hours on compliance documents.
Authorities also claimed that Labtech paid an inflated price for used laboratory equipment from a physician practice in North Carolina in 2016 to obtain testing referrals, and subsequently provided free services and supplies to a pain management clinic in return for profitable drug testing business.
“Patients trust doctors to exercise their unbiased medical judgment in ordering clinical testing,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Illegal kickbacks corrupt that independence.”
The settlement resolves allegations originally raised in a whistleblower lawsuit filed by Mahmod Altwam under the False Claims Act. Altwam will receive $1.36 million from the recovery, according to the Justice Department.
Except to the extent that Labtech’s admissions are part of its criminal resolution, the claims resolved by the civil settlement are allegations only and there has been no determination of liability.
