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Kentucky Lab, Rehab Center Pay $7.1M to Settle Drug Testing Fraud Case

NEW YORK – The US Attorney's Office for the Eastern District of Kentucky said this week that the federal government entered an agreed judgment and settlement with a Kentucky-based clinical lab and drug rehabilitation facility in a drug testing fraud case.

The government entered a $4.9 million agreed judgment with clinical lab AccuLab d/b/a Thoroughbred Diagnostics and a $2.2 million settlement with drug rehabilitation center Edgewater Recovery Center.

According to the government, Edgewater ordered the same panel of urine drug tests for all patients on a weekly basis regardless of medical necessity and in many cases did not even use the results of these tests for patient care. Thoroughbred performed this urine drug testing for Edgewater, billing them to Medicare and Kentucky Medicaid despite knowing the tests were not medically necessary. The lab also billed for urine drug screen testing done on Edgewater patients without proper medical orders requesting this testing. These actions were in violation of the federal False Claims Act.

Under the agreed judgment, Thoroughbred will pay the government $4.9 million consisting of an immediate payment of $450,000 followed by proceeds from the closing of its lab operations, including 100 percent of the net proceeds of the sale of its assets, 70 percent of its reimbursements from healthcare payors for one year, and any funds received pursuant to an Employee Retention Tax Credit.

Under the terms of its settlement, Edgewater will pay the government $2.2 million. It has also entered into a corporate integrity agreement with the US Department of Health and Human Services, Office of Inspector General, requiring the company to appoint a compliance officer and to retain an independent compliance expert to review the company's compliance program.

The settlement resolves a lawsuit brought by a private citizen under the qui tam provisions of the False Claims Act. As part of this resolution, the individual who filed the qui tam complaint will receive a portion of the settlement proceeds.