Kentucky doctor, Indiana hospital part of $7 million settlement of alleged fraud
A retired Kentucky doctor and an Indiana hospital have agreed to make payments to settle a case in which they were accused of taking part in fraudulent billing to publicly-funded health programs, according to the U.S. Department of Justice.
The hospital, Physicians’ Medical Center in New Albany, Ind., is responsible for the largest payment of $5.2 million under the settlement, federal authorities said in a news release.
The facility had a testing laboratory lab managed at one time by United States Medical Scientific Indiana, which has since gone out of business, the release said.
Through the alleged fraudulent conduct of the lab manager, the hospital billed for drug tests between December 2016 and September 2018 that were not used for medical purposes, the government charged.
Federally-funded health programs only reimburse labs for drug tests that are used to diagnose or treat medical conditions.
The alleged fraudulent bills from Physicians’ Medical Center were for tests on urine samples submitted from a homeless shelter and recovery programs that were used to check compliance by participants, and not for medical purposes, according to the release.
Several other people and businesses also agreed to make payments under the settlement, according to authorities.
Those included Bobby Sturgeon, who was a sales representative for the hospital lab, and Derrick Arthur, who was a specimen collector for the lab.
Sturgeon allegedly worked to get non-medical clients such as the homeless shelter to send samples to the Physicians’ Medical Center lab and Arthur allegedly took part in getting a doctor to order drug tests even though he knew they wouldn’t be used in providing medical care, federal authorities said.
After the hospital closed the lab, Sturgeon became a sales representative for Bluewater Toxicology, a lab in Mount Washington, and caused the Kentucky lab to submit false claims for tests that weren’t medically necessary, the release said.
Steve Moore, a sales representative for the Indiana hospital and Bluewater, allegedly paid a Kentucky doctor, Pablo Merced, and his wife Theresa Merced, who was his office manager, to refer samples for drug testing to the two labs.
Pablo Merced owned St. John Neumann’s Extended Hours clinic in Breathitt County, and his wife was the office manager.
Moore gave the couple cash — a violation of a federal anti-kickback law — and made salary payments to people in their office who collected urine samples, according to the release.
In a separate criminal case, Theresa Merced pleaded guilty in connection with taking kickbacks to refer business to a lab.
She was sentenced to five months in prison and a $55,000 fine in 2020.
Pablo Merced gave up his medical license in 2023. A consultant to the Kentucky Board of Medical Licensure said Merced had improperly prescribed Suboxone, a drug used to treat opioid use disorder that also can be abused to get high.
In addition to the $5.2 million from Physicians’ Medical Center, the settlement reached late last month in the false-claims lawsuit included these payments, according to the government: Bluewater Toxicology, $895,952; Sturgeon, $713,466; Moore, $40,000; Arthur, $5,500; and the Merceds, $450,000.
The case involved bills to Medicare, Medicaid and TRICARE, which provides coverage for members of the U.S. military, their families and veterans.
“This money was appropriated to provide medical services to eligible Americans; instead, it improperly yielded proceeds to those who were submitting false claims,” said U.S. Attorney Carlton S. Shier IV. “When fraud and abuse deplete these valuable resources, it injures all of us.”
The settlement resolved a lawsuit filed by two people, who will share in the settlement. The federal government joined the lawsuit in part.
The defendants in the lawsuit did not admit liability under the settlement, according to the release.
