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Georgia Lab Owner Pleads Guilty to Fraudulent Drug, Respiratory Panel Testing

NEW YORK – The owner of a clinical laboratory in Atlanta has pleaded guilty to conspiring to pay kickbacks, and he and his lab have agreed to pay $14.3 million to resolve the allegations that they paid volume-based commissions for fraudulent drug tests and respiratory pathogen panels, the US Attorney's Office for the Northern District of Georgia said on Wednesday.

According to the US Department of Justice,  Andrew Maloney of Roswell, Georgia, owned Capstone Diagnostics, and from August 2017 through December 2018, the lab collaborated on a program dubbed "Do It 4 the Hood" that required frequent urine-based drug tests for at-risk teenagers who participated in the program.

With Maloney's knowledge, Capstone paid the program operators a percentage of the Medicaid reimbursements that the company received for its analysis of samples that were submitted through the program in violation of federal law, prosecutors said. Capstone submitted more than $1 million in claims and Georgia Medicaid paid at least $400,000 for claims related to the drug tests.

In addition to Maloney, Capstone Chief Operations Officer Rachel Sheats has pleaded guilty to conspiring to pay healthcare kickbacks and she is awaiting sentencing.

"Unfortunately, Capstone and Maloney are hardly alone, as we have witnessed some clinical laboratories and their owners across the country engage in unscrupulous kickback and billing schemes that caused incalculable harm to Medicare," US Attorney Ryan Buchanan said in a statement. "We are committed to aggressively investigating and prosecuting those who defraud valuable government programs designed to benefit our most vulnerable citizens."

Prosecutors said that physician Duriel Gray of Cartersville, Georgia, was sentenced in April 2023 to two years of probation and ordered to pay $417,000 in restitution for participation in the scheme. Gray served as the program's medical director and provided a standing order under which Capstone submitted fraudulent drug testing claims to Medicaid.

Two more participants in the scheme, Bree'Anna Harris and Glenn Pair, have also been sentenced to prison on guilty pleas to charges of healthcare fraud and money laundering.

The DOJ also said on Wednesday that it has reached a settlement with Maloney and Capstone to resolve allegations that the laboratory hired contract sales representatives who filed fraudulent orders for respiratory pathogen panel (RPP) testing for senior communities rather than the COVID-19 tests that physicians had ordered. From April 2020 through December 2021, the sales representatives completed test requisition forms for the more expensive RPPs using the forged signatures of physicians and false diagnosis codes.

Capstone billed federal healthcare programs for the medically unnecessary tests and paid its sales representatives commissions for each respiratory panel, according to the DOJ.

The settlement also resolves a lawsuit filed by a whistleblower under the federal False Claims Act. Jesse Allen, who was Capstone's laboratory manager from April 2017 through January 2019, will receive $2.86 million through that settlement.