Feds say Kentucky lab defaulted on deal to pay $1.5 million over false drug-test bills
A Kentucky laboratory that got paid for doing medically unnecessary drug tests reneged on a pledge to pay nearly $1.5 million, the federal government has alleged in a lawsuit.
The company at issue, VerraLab JA LLC, filed a notice to dissolve itself the day after receiving notice it was on default on the agreement, according to a complaint by the U.S. Attorney’s Office in Lexington.
VerraLab, which did business under the name BioTap Medical, was based in Louisville but handled urine drug tests for a Lexington company called Blue Waters Assessment & Testing Services, according to the court record.
Blue Waters collected specimens from people who had been ordered by a judge to undergo drug testing in Fayette and other counties as part of court cases, and had them tested by BioTap.
BioTap billed the Kentucky Medicaid and Medicare programs for doing the work, federal authorities said.
Medicaid and Medicare will pay for tests used for medical diagnosis and treatment, but not for tests ordered by courts.
As a result, federal authorities alleged BioTap and Blue Waters took part in submitting false bills to the taxpayer-funded insurance programs.
In May 2023, BioTap agreed to pay $1,490,620 to the government to settle the allegations and Blue Waters and its owner, David Waters, agreed to pay $250,000.
“Submitting false claims to Medicare or Medicaid wastes taxpayer dollars and undermines the integrity of those programs,” Tamala E. Miles, Special Agent in Charge at the Department of Health and Human Services, Office of Inspector General, said in a release at the time.
The settlement agreement required BioTap to pay $10,000 within a few days, with the next payment of $190,000 due by Dec. 31, 2024.
The remainder of the money was due in payments in 2025, 2026 and 2027, according to a complaint written by Assistant U.S. Attorney Christine Corndorf.
BioTap made the first payment of $10,000, but didn’t pay the $190,000 due by the end of 2023, according to the complaint.
The U.S. Attorney’s Office mailed notices of the alleged default on Jan. 11 to the company’s address and the home address of its registered agent, Russell B. Scott Jr., but the letter to the business address came back undelivered, according to the complaint.
The letter to Scott’s house was delivered on Jan. 18 and Scott signed for it, but BioTap hasn’t responded to the notice, the complaint said.
The next day, BioTap filed with the Kentucky Secretary of State to dissolve the company, according to the complaint.
The company’s telephone number is out of service; its web site is not available; and mail sent to the business address has been returned as undeliverable, with no forwarding address, according to the federal complaint.
Because BioTap defaulted on the settlement agreement, it owes the federal government the rest of the money right away, a total of $1,480,620, plus 12 % interest building up since Jan. 1, 2024, according to the government’s complaint.
The complaint asks U.S. District Judge Gregory F. Van Tatenhove to order the company to pay the government.
The U.S. Attorney’s Office filed the complaint earlier this month.
BioTap has not answered the lawsuit, and efforts to reach the company were not successful.
This story was originally published May 28, 2024 at 4:59 AM.
