The RDx Biosciences, Inc. False Claims Act Settlement
On January 10, 2024, the Department of Justice (DOJ) and prosecutors from the U.S. Attorney’s Office for the District of New Jersey announced that Kenilworth, NJ laboratory RDx Biosciences, Inc. (“RDx”) and its CEO Eric Leykin agreed to pay $13 million to resolve False Claims Act allegations that RDx paid illegal kickbacks for patient referrals for its laboratory testing services.
Specifically, the Government alleged that, from January 2018 to December 2022, RDx funneled payments to healthcare providers through numerous marketing companies,[1] even though RDx knew that the marketers were paying providers through various means to induce them to refer patients to RDx. Some marketers disguised the kickbacks as consulting and/or medical director fees, while others created management services organizations (MSOs) that purported to pay providers “investment returns” unrelated to the referrals. In addition to direct cash payments, some marketers also offered to cover the costs of specimen collection (which normally would be borne by the providers’ practices) which also constitutes an illegal kickback if paid to induce the referral of patients.
Rising Enforcement Trend Against Individual Physicians Involved in Laboratory Kickback Schemes
The RDx settlement marks yet another case in a series of False Claims Act and criminal prosecutions specifically targeting laboratory kickback schemes utilizing MSOs. Indeed, in the same press release, the DOJ announced that it has recovered “over $46 million relating to conduct involving MSO kickbacks to healthcare providers.”
What is notable, however, is the DOJ’s trend of bringing enforcement actions against individual providers and physicians shortly following a False Claims Act or criminal settlement against the laboratory and marketing entities. This indicates that the DOJ is not content to target only the entities that paid the kickbacks, but they also have their sights on the referring healthcare providers and physicians who received the kickbacks as well. This is because the prohibition against kickbacks applies to those who pay for referrals and to those who receive them. As one example, in 2022, the DOJ settled False Claims Act suits against thirty-three (33) individual doctors who had received kickbacks from MSOs for laboratory services billed by a Texas critical access hospital even though they were actually performed by an out-of-state laboratory (a case Frier Levitt has already covered in this article). The settlements against the individual doctors came shortly after the DOJ sued the critical access hospital and other entities. Individual providers also have become targets of government investigations after another New Jersey laboratory, Biodiagnostic Laboratory Services, pleaded guilty in 2018 for a $100 million kickback scheme.
The RDx case appears to be following the same pattern. As part of the settlement terms, RDx CEO Leykin agreed to “cooperate with the Justice Department’s investigations of, and litigation against, other participants in the alleged schemes.” The settlement and press release already suggest that the DOJ is trying to tee up cases against individual physicians, as the DOJ claimed that the laboratory services were not medically necessary, and in fact the physicians had placed “identical orders of urine drug testing panels for all patients within a clinician’s practice without individualized decision-making.” Moreover, laboratory kickback schemes frequently involve the use of pre-printed, template order or requisition forms supplied by the laboratory to the providers. The order forms generally contain false certifications or attestations by the ordering provider as to the medical necessity of each test ordered.
The cooperation agreement between Leykin and the Government could mean that all documents containing any such false certifications are likely in the Government’s hands. If this is the case, any referring physician faces substantial exposure to subsequent civil enforcement and even criminal prosecution by the DOJ.
If you or your practice becomes subject to a False Claims Act investigation in connection with the RDx kickback scheme, it is critical to immediately seek legal advice from a healthcare attorney experienced in dealing with the government.
How Frier Levitt Can Help
Frier Levitt is dedicated to serving physicians, pharmacies, and other providers in the healthcare and life sciences industries. Frier Levitt routinely represents clients under investigation by the government and its attorneys understand the complex rules and regulations underlying the Anti-Kickback Statute and the False Claims Act, and work to develop a robust defense strategy. Please contact us for assistance.
[1] The marketing companies that participated in the kickback scheme included: BeauMed Consultants LLC (BeauMed), Corum Group LLC (Corum), Nocher Enterprises Inc., OC Genetic Consultants Inc. (OC Genetic), Ralston Health Group Inc. (Ralston), Seaworthy Recovery Services Inc. (Seaworthy).
