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Good News for Honest Clinical Laboratories: Federal Fraud Case in New Jersey Brings More Convictions and Indictments of Doctors Who Accepted Illegal Inducements

Biodiagnostic Laboratory Services fraud case continues to bring more criminal convictions of physicians in a rare case of tough federal enforcement of anti-kickback laws

There’s good news for sales representatives who work for clinical laboratories and anatomic pathology groups and regularly run up against the sales practices of shyster labs that offer inducements to that class of doctors who are open to personal enrichment by accepting different forms of kickbacks in return for lab test referrals.

The good news comes from New Jersey, where one U.S. attorney has prosecuted dozens of doctors who accepted various illegal inducements and bribes from BioDiagnostic Laboratory Services Inc. (BLS) of Parsippany, the discredited lab company that was closed in 2012 after it was indicted by Paul J. Fishman, the U.S. attorney for Newark.

The most recent conviction was announced in April, 2016, when another New Jersey physician pleaded guilty in the continuing clinical laboratory fraud case involving BLS.

Gary Safier, MD, pleaded guilty to taking bribes in excess of $350,000 over a period of seven years. He was sentenced to two years in prison and, upon release, will have to perform an additional two years of supervised release. He was also instructed to forfeit the $353,000 he received for his role in the scam.

According to prosecutors in the case, Safier originally collected the money from BLS under a façade of false service and lease agreements. He later received monthly payments reaching as high as $10,000 from BLS for his participation in the scheme. Safier also admitted that on his federal tax returns for 2010 and 2011, he failed to report $90,000 in bribes he received from BLS.

39 Employees Including 27 Doctors Admit Guilt

BLS is under fire for paying bribes to members of the medical community to refer patients to their medical laboratory and to order unnecessary tests. To date, 39 people, including 27 physicians, have entered guilty pleas in the ongoing bribery case. Millions of dollars in bribes were accepted, resulting in payments to BLS exceeding $100 million from insurance companies and Medicare.

Additional sentences have been handed down since Dark Daily originally reported on this case in October of 2015.

In December, physician’s assistant Leonard Marchetta, 49, pleaded guilty to receiving bribes and was given a 42-month prison sentence. Court documents show he was paid approximately $3,000 per month to refer patient blood specimens to BLS. Prosecutors estimated that BLS made more than $660,000 in business as a result of Marchetta’s referrals.

Marchetta, who practiced in Staten Island, New York, will have to serve an additional three years of supervised release after his prison sentence has been completed. He was also ordered to forfeit the $72,000 he earned as a result of the scam.

The data above is from a U.S. Department of Justice Aug. 11, 2015, news release. According to the release, at that time 38 BLS employees, 26 of which were doctors, had pleaded guilty to being involved in the bribery scheme. Since then, additional physicians not on this list have pleaded guilty to receiving bribes. “It is believed to be the largest number of medical professionals ever prosecuted in a bribery case. The investigation has to date recovered more than $11.5 million through forfeiture,” stated the release. (Image copyright: Dark Intelligence Group.)

The data above is from a U.S. Department of Justice Aug. 11, 2015, news release. According to the release, at that time 38 BLS employees, 26 of which were doctors, had pleaded guilty to being involved in the bribery scheme. Since then, additional physicians not on this list have pleaded guilty to receiving bribes. “It is believed to be the largest number of medical professionals ever prosecuted in a bribery case. The investigation has to date recovered more than $11.5 million through forfeiture,” stated the release. (Image copyright: Dark Intelligence Group.)

Another doctor, Brett Halper, MD, 41, a family medicine practitioner in Glen Head, New York, also pleaded guilty to accepting bribes from BLS in exchange for patient referrals. Between January 2011 and April 2014, his referrals produced nearly three million dollars for BLS. Halper was typically paid more than $5,000 per month in bribe money.

In November, Halper was given a prison sentence of 46 months and will have to serve an additional two years of supervised release after his sentence has been completed. In addition, he was fined $100,000 and must forfeit $325,000.

Physician Bret Ostrager, DO, 50, a family practitioner in Woodbury, New York, admitted receiving approximately $3,300 per month in cash bribes from BLS associates. He also confessed collecting additional bribes worth thousands of dollars for meals and tickets to concerts, sporting events, and Broadway shows. Ostrager’s patient referrals to BLS generated nearly one million dollars for the company.

The counts to which Ostrager pleaded guilty carry a maximum penalty of five years in prison and a $250,000 fine. He will receive his sentence later this year.

In March, 2016, Bernard Greenspan, DO, 78, a family practitioner in Saddle Brook, New Jersey, was indicted for his part in the bribery scheme. He admitted to receiving monthly bribe payments disguised as rental and service agreements and consultant fees from BLS. He received approximately $200,000 in bribes and also persuaded BLS to hire one of his patients who was also his sexual partner. Greenspan’s role in the bribery scam netted BLS over three million dollars in business. His trial is scheduled for September.

$12 Million Recovered as Indictments Continue

Two years after the conspiracy originally surfaced, the New Jersey attorney’s office is still indicting and convicting medical personnel involved in the elaborate bribery scheme. To date, the investigation has recovered more than $12 million through forfeiture. The aggregate of medical professionals involved in this case is believed to be largest number of individuals ever involved in a medical bribery litigation.

There have been other recent cases where physicians were paid inducements, kickbacks, and other illegal remunerations in exchange for patient referrals, and for ordering medically unnecessary tests. However, very few laboratory organizations have been accused of fraud and abuse, and an overwhelming majority of labs operate in a highly ethical and professional manner.

Medical fraud is a major reason why payers have such restrictive coverage guidelines. It is one reason why clinical laboratories often encounter challenges getting reimbursed for tests. A few, highly publicized cases of fraudulent activities within the medical laboratory industry can tarnish the entire profession.

Sales representatives from clinical laboratories and anatomic pathology groups that take a conservative approach to operating in compliance with state and federal laws governing inducements and kickbacks should consider using this Dark Daily ebriefing to show skeptical physicians that there is a risk of federal prosecution when they agree to accept forms of remuneration and inducement from those lab competitors that adopt loose compliance policies.

—JP Schlingman

Related Information:

Health Diagnostic Laboratory Files for Bankruptcy: Company Owes About $49.5 Million to Settle Civil Probe into Payments to Doctors for Blood Samples

Doctor Sentenced to Two Years in Prison for Taking Bribes in Test-Referrals Scheme with New Jersey Clinical Lab

New York Health Care Professional Sentenced to Prison; Another Pleads Guilty in Connection with Test-Referral Scheme with New Jersey Clinical Lab

New York Doctor Sentenced to More Than Three and a Half Years in Prison for Taking Bribes in Test-Referral Scheme with New Jersey Clinical Lab

New York Doctor Charged with Taking Bribes in Test-Referral Scheme with New Jersey Clinical Lab

Health Diagnostic Laboratory and Singulex to Pay $48.5M to Settle Fraud Charges Involving Kickbacks and Unnecessary Testing as Feds Sue Two More Medical Labs and Three Executives on Similar Charges

More Doctors to See Jail Time in Biodiagnostic Laboratory Services Case, but Question Remains: Will Federal Prosecutors Send Lab Executives and Doctors to Jail in the Health Diagnostics and Singulex Case

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