United Health Law Suit vs. Sky Toxicology – Patient Brokering

DAVID MEAGHER

SFYB Legal Consultant

Breaking Down the United Health Law Suit vs. Sky Toxicology, Frontier Toxicology, numerous other labs, treatment centers and individual owners AND DOES 1-150.
Case Number: 9:16-cv-80649-RLR,
United States District Court – Southern District of Florida

By M. David (Mick) Meagher, Esq.

Over the past several years many treatment centers have been enticed into buying “memberships” in Limited Liability Partnerships set up by drug testing laboratories. These arrangements have returned large sums of money to investors. In some instances the amounts returned would make Bernie Madoff and J. David Dominelli look like rank amateurs in the world of financial schemes.

bad news

The basics of this law suit by United Health are that various laboratories, treatment centers, individuals and Sober Living centers have defrauded the insurance company by excessive billing, and by either paying or being paid kick-backs for referring drug tests to the labs. In the lawsuit, United claims they were defrauded out of more than $50,000,000.00 by these actions.

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The way the scheme works is simple. An “investor” buys a membership. The investor then refers urine samples to the lab for analysis. By way of example, the lawsuit alleges Elements Behavioral Health, Inc. (owners of Promises in the Los Angeles area), bought an investment of Thirty Thousand Dollars ($30,000.00), and refer their UA’s to Sky Toxicology. In return, they received Six Hundred Thousand Dollars ($600,000.00) per month. The suit alleges that Solid Landings of Costa Mesa, CA, actually forged doctors signatures to have a medical referral for the UA’s. The suit names the facility as well as two of its owners as defendants. Another California individual named in the suit is Kory Avarell, owner/operator of Above it All.

Other relevant posts and news articles on this topic click image below and learn more about this

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A significant red-flag as to the impropriety of these actions is the fact that if an “investor,” whether a treatment program or owner of a program, did not refer a sufficient number of specimens for testing, the Lab would remove them from the Partnership. If you did not have referrals to make, you could not buy in to the partnership.

In response to these acts, United has sued claiming the participants have committed fraud, deception, unfair business practices, negligent misrepresentations, interference with the contract between United and its insured, as well as unjust enrichment. The fraud comes in the form of excessive billing; lab tests that are not medically necessary; and violations of the various State laws that prohibit self-referrals and kick-backs for referrals.

In addition, it alleges the waiver of co-insurance and/or deductible costs that should be paid by the patient constitutes fraud and therefore is an unfair practice, interferes with the relationship between the insurance company and its clients, and unjustly enriched the defendants.

A review of the list of defendants in this law suit is long. The current defendants include Sky Toxicology, Ltd., Sky Toxicology Lab Management, LLC, Frontier Toxicology, Ltd., Ft Lab Management, LLC, Hill Country Toxicology, Ltd., Eclipse Toxicology, Ltd., Eclipse Lab Management, LLC, Axis Diagnostics, Inc., Dr. William “Wade” White, Lance Hupfeld, Bradley West, Elements Behavioral Health, Inc., South Florida Recovery Center, LLC, Solid Landings, LLC, Kory Avarell, Stephen Fennelly, Elizabeth Perry, Ferriel Consulting Group, Inc., Jeffrey L. Cohen, LLJ Consultants, Inc.

Importance_of_TDOf critical importance is the fact that the law suit also names “Does 1 – 150.” This means that United does not yet know all of the companies and individuals involved, but intends to find out who they are and add them to the law suit. United’s attorneys will use “Discovery,” a legal device to search the records of the labs and other defendants to see who else bought in and was paid for their referrals. This legal device then allows United to go back to court and say “through discovery, we have identified XYZ center, or individual who also received these kickback payments.” As discovery takes place, new defendants will likely be added to the suit.

damages-640x480The damages, the money and the retraining orders being sought by United, if they prevail at trial has the potential to be massive. United is seeking an award that would include the return of all of the money they paid out; statutory treble damages (three times the amount of money paid out, in addition to the money they paid out); an award of punitive and exemplary damages, which cannot be discharged in a bankruptcy; a court order for Declaratory and injunctive relief that would prevent them from these acts again. In addition they are asking for reasonable and necessary attorneys’ fees; the costs of court; and prejudgment and post-judgment interest.

risk-ratings
The risk exposure if the defendants lose is a monetary judgment against them that could easily run into hundreds of millions of dollars in damages and millions of dollars in legal fees to be paid to United. For corporate defendants this could mean the closing of the business after all of the assets are sold off to pay the judgment. For individual defendants, this could mean a loss of virtually all of their assets to satisfy a punitive damages award. Secondary risks include both State and Federal criminal investigations and potential prosecution for these acts as well as the loss of the professional licenses for the doctors that are involved.

Even if some of the defendants were to avoid a finding against them, the likely costs of their defense is well over $1,000,000.00. If they were to prevail, they would not be able to recovery the legal fees they paid for their defense.

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