Abington Memorial Hospital laboratory accused of Medicare, Medicaid fraud

AMH logo

A former employee of Abington Memorial Hospital (AMH) in Pennsylvania has filed a federal lawsuit that alleges the hospital laboratory committed Medicare and Medicaid fraud and that she was retaliated against and wrongfully terminated after she informed hospital administration of the lab’s actions.


Ms. Joanne Cleighton was hired by AMH in February 1988 to work in the registration office.  Two years later she was promoted to supervisor and fourteen years after that she was promoted to manager. During the entire course of her employment at AMH, Ms. Cleighton claims her disciplinary record was “spotless”.

One of the responsibilities of the registrars at AMH was to enter patient insurance and billing information for outpatient tests, including laboratory tests, and generate an encounter number.  After doing this, the registrar would forward the physician’s orders for laboratory testing to the lab.  Lab employees would append the appropriate CPT code, which would then be used for billing claims.

If, however, the registrars received orders for routine blood work for a patient covered by Medicare Advantage (Part C) or Medicaid, the registrars did not generate an encounter number.  Instead, they were to simply highlight to which outside laboratory the specimens were required to be sent per the Medicare/Medicaid administrator.

Around May 2013, Ms. Cleighton overheard a lab employee state AMH lab employees were marking orders for routine blood work as STAT so that AMH could perform the testing instead of an outside lab. AMH was apparently permitted to perform STAT testing for Medicare/Medicaid patients so long as the physician ordered it STAT.

Ms. Cleighton informed the employee this was improper, and also informed the lab manager at the time.  A month or so later, a meeting attended by Ms. Cleighton, the lab manager and a hospital administrator was held, and AMH reportedly admitted there were some things being done incorrectly in the lab and that “changes would be made”.

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OIG investigating Health Diagnostic Laboratory for possible kickbacks

HDL logo

The Wall Street Journal is reporting the Office of the Inspector General for the Department of Health and Human Services is investigating Health Diagnostic Laboratory (HDL) for potentially paying illegal kickbacks to referring physicians.

HDL, which opened in late 2008, “offers the most comprehensive laboratory test menu of risk factors and biomarkers for cardiovascular and related diseases” according to the company’s website.  It generated $383 million in revenue in 2013, 41% of which was from Medicare.

At issue is the fact HDL, until late June 2014, was paying referring physicians $20 for each specimen sent to HDL.  HDL’s CEO, Ms. Tonya Mallory, claimed in an internal company memo that $17 of the fee is for “process and handling” and the remaining $3 is a CMS-allowable blood draw fee.  The memo lists all of the services HDL considers to be included in for specimen processing and handling.

The WSJ took a sample of HDL’s 2010 Medicare claims in order to identify the lab’s top referrers.  At the top of that 296-physician list is Charles Fillingane, DO, a family practitioner in Mississippi.  Dr. Fillingane, according to HDL documents, sent 1,179 specimens to HDL in just the first half of 2010, and could have “earned” up to $23,580 in payments from HDL.

Oh, and by the way, Dr. Fillingane also happens to be on HDL’s medical advisory board, which can pay up to $3,000 per month, and also gives paid lectures for HDL.  Nope, no potential conflict of interest there.

Another family physician, J. Frank Martin, MD of South Carolina, reportedly received up to $24,740 in fees during the same time period.

A former HDL employee who actually wrote the checks to referring physicians said some practices were paid more than $4,000 per week in “process and handling fees”.

Another interesting question raised by the WSJ piece is whether HDL performed medically unnecessary testing for Plavix sensitivity on stored samples.

Before opening HDL, Ms. Mallory was the senior lab operations manager for Berkeley HeartLab, another laboratory being investigated by the OIG.  Not long after Ms. Mallory’s departure, two Berkeley sales reps also left and formed a company which (conveniently?) became an independent sales and marketing contractor for HDL.

After losing referrals to HDL, Berkeley accused HDL of stealing its business and filed suit.  The case reportedly settled for approximately $7 million in 2010.

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Department of Labor sues AIT Laboratories founder Michael Evans for unjust enrichment

AIT Labs logoThe US Department of Labor (DOL) has filed a lawsuit against Michael Evans, PhD, founder of American Institute of Toxicology (AIT), alleging he unjustly enriched himself when he sold AIT to its employees for a vastly inflated price. The AIT Employee Stock Ownership Plan (ESOP) and its trustee, PBI Bank, Inc, are also named as defendants.

Dr. Evans founded AIT, which is now housed in 130,000 total sq ft of space, in 1990 with just five employees.  AIT is composed of three components:  AIT Holding and two subsidiaries, AIT Labs and AIT Bioscience. Of the two subsidiaries, only AIT Labs has any value, according to the DOL.

On June 30, 2009, Dr. Evans, who owned 88% of the company’s stock and was the CEO and sole member of the Board of Directors of AIT Holding, sold AIT Holding to its 300 employees.  Four other shareholders, each with a 3% piece of the company, also received proceeds from the sale.  Interestingly, one of those minority shareholders happens to be Dr. Evans’ wife.

According to the complaint, PBI Bank, which was hand-picked by Dr. Evans to be the trustee of AIT’s ESOP, enlisted accounting firm Moss Adams to provide a valuation of AIT Labs.  Moss Adams valued AIT Labs at $106.2 million on June 22, 2009 and again on June 30, 2009, the day the sale went through.

The final price the ESOP paid for AIT was $90 million, which was financed through a 30 year, $90 million loan from AIT.  Dr. Evans himself lent AIT $79 million of his own money for the purchase, and was to be paid back in quarterly installments over a ten year period.  The ESOP also received $11 million in cash from AIT, which AIT borrowed from a bank.

The Moss Adams valuation, according to the DOL, was unreliable for a number of reasons, all of which can be found on pages 10-12 of the complaint. For now, I want to focus on what I believe are the two most egregious reasons the valuation is alleged to be unreliable.

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Dr. Steven Hayne loses appeal in lawsuit against The Doctors Company

Dr. Steven Hayne (Hattiesburg American)

Dr. Steven Hayne (Hattiesburg American)

The Mississippi Supreme Court has upheld a lower court’s decision to throw out a lawsuit filed by pathologist Dr. Steven Hayne, who accused medical malpractice insurer The Doctors Company (TDC) of failing to honor the terms of his medical malpractice policy.


In 1992, Dr. Hayne performed an autopsy on the body of three year old Christina Jackson, who was raped and murdered.  Dr. Hayne testified at trial that he observed bite marks on the child’s body, and that there was no doubt the bite marks were made by Kennedy Brewer, the boyfriend of the child’s mother. This testimony was apparently the “centerpiece of the prosecution”.

Mr. Brewer was found guilty of capital murder and given the death sentence.  Brewer maintained his innocence, and years later, he was able to have DNA testing performed on semen that was found on the girl’s body.  The test determined the semen belonged to someone other than Mr. Brewer, and his conviction was overturned in 2002.

The state persisted in prosecuting him for rape and murder in part based on Dr. Hayne’s bite mark testimony.  Further DNA testing completely eliminated Mr. Brewer as the perpetrator, and the case against him was dropped in 2007.  All told, Mr. Brewer spent fifteen years in prison, seven of which were on death row.

Mr. Brewer filed suit against Dr. Hayne the following year for malicious prosecution, fraud, and negligent misrepresentation.  After being served with the suit, Dr. Hayne notified TDC, which had been his continuous medical malpractice carrier from July 1987 to July 2003.

TDC informed Dr. Hayne his policy did not cover the type of suit Mr. Brewer had filed against him, which led Dr. Hayne to file suit against TDC in 2011.

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Esoterix Genetic Laboratories sues Qiagen for patent infringement

Esoterix logo

Esoterix Genetic Laboratories has filed a lawsuit against Qiagen, claiming the German company breached a License Agreement signed in 2008 that involves a patent for detecting epidermal growth factor receptor (EGFR) mutations.


In 2008, a British company called DxS Ltd, which was purchased by Qiagen in 2009, signed a License Agreement with Genzyme Corporation.  This agreement allowed DxS to manufacture and sell test kits for detecting EGFR mutations that utilized US Patent No. 7,294,468 (‘468) in exchange for royalty payments.

The ‘468 patent, a “Method to determine responsiveness of cancer to epidermal growth factor receptor targeting treatments”, was originally assigned to The General Hospital Corporation, which does business as Massachusetts General Hospital (MGH), and the Dana Farber Cancer Institute on November 13, 2007.

But pursuant to an agreement announced on May 2, 2005, Genzyme Corporation, and not MGH and Dana Farber, actually had rights to the ‘468 patent.

When LabCorp acquired Genzyme Corporation in December 2010, it created Esoterix to control the assets acquired from Genzyme, which included the rights to the ‘468 patent.

The License Agreement DxS signed (and Qiagen assumed), allowed Qiagen to sell products utilizing the ‘468 patent for non-commercial research only until the entire EGFR test kit gained approval by the Food and Drug Administration (FDA).

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Working Stiff by Dr. Judy Melinek hits bestseller list; death penalty off table for alleged Sonnier murder mastermind

Dr. Judy Melinek (PathologyExpert, Inc)

Dr. Judy Melinek (PathologyExpert, Inc)

Working Stiff

Dr. Judy Melinek, a forensic pathologist based in San Francisco, has written a book entitled Working Stiff which details her two years of training as a forensic pathology and forensic neuropathology fellow at the Office of the Chief Medical Examiner in New York City from July 2001 to June 2003.

Working Stiff has received some very positive reviews from USA Today, New York Times, Washington Post, and has earned 4 1/2 stars so far from readers on Amazon.

In addition, Working Stiff this week hit #21 on the New York Times bestseller list for E-book nonfiction.

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Shawn Parcells makes national news with Michael Brown autopsy

Shawn Parcells and Dr. Michael Baden (NYT)

Shawn Parcells and Dr. Michael Baden (NYT)

Mr. Shawn Parcells made national news this week when he participated in the second autopsy of Michael Brown, whose shooting death by local police on August 9, 2014 sparked significant ongoing unrest in Ferguson, Missouri.


I first wrote about Mr. Parcells in May 2013 after an article in the St. Louis Post-Dispatch discussed concerns some Missouri prosecuting attorneys and county coroners had that Mr. Parcells, who only has a Bachelor’s degree, was performing unsupervised forensic autopsies without the appropriate qualifications.  Readers can refer to my earlier article or the Post-Dispatch piece for details.

Mr. Parcells contacted me via email a few weeks after my article went out and stated he wanted to “clear the air and present the truth”.  I called him back and we spoke for about 10 or 15 minutes, and then he provided me with a written rebuttal to the Post-Dispatch story.

Fast forward to August 2014.  After 18 year old Michael Brown was killed by Officer Darren Wilson, St. Louis County Chief Medical Examiner Dr. Mary Case performed an autopsy.  The family (or its attorney) then requested a second, private autopsy.

I was not the least bit surprised to see the family had asked Dr. Baden to perform the second autopsy, as there are very few forensic pathologists in this day and age who have the visibility and name recognition Dr. Baden has.

But I was very surprised to see Shawn Parcells standing on Dr. Baden’s right during the press conference in which the results of the second autopsy were revealed.

Media gets it very wrong

My surprise quickly turned to disappointment when I saw several large and experienced media organizations wildly misrepresent Mr. Parcells’ qualifications.

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ASCP seeks members’ opinions on Palmetto action; James Brady death ruled homicide

ascp_logoThe American Society for Clinical Pathology (ASCP) is asking for its members’ input on how the ASCP should proceed regarding recent actions by Medicare Administrative Contractor (MAC) Palmetto GBA regarding ancillary stain overutilization/fraud. In other news, former Reagan press secretary James Brady’s recent death has been ruled a homicide, which has generated some interest in the media about manner of death determinations.


In its August 4th ePolicy news, the ASCP opened a dialogue with its members regarding the recent move by Palmetto GBA to limit the number of ancillary stains ordered on gastric and breast biopsies. Specifically, the ASCP wants to know what members think of both the purpose of Palmetto’s move (reducing fraud) as well as the process (skirting the local coverage determination (LCD) process).

The ASCP states it is appreciative of the fact Palmetto is seeking to curb Medicare fraud without affecting all pathologists equally (as reimbursement cuts do), but is concerned the 20% hard utilization ceiling is not flexible enough for all patient populations.

The ASCP acknowledges Palmetto is within its rights to set jurisdictional payment policy for Medicare, but states payment policies are normally set through the LCD process.  It is through the LCD process, the ASCP states, that stakeholders are able to provide MACs with clinical expertise regarding practice standards.

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LabCorp suffers setback in Pap test negligence suit


The Court of Appeals for the 11th Circuit has reversed a district court’s ruling in a Pap test negligence suit filed by a woman who claims she developed metastatic cervical cancer due to multiple misreadings of her Pap tests by LabCorp employees.

In its decision, the appellate court noted its disagreement with the district court’s reliance upon the Pap test litigation guidelines put together by the College of American Pathologists (CAP) and the American Society of Cytopathology (ASC).

Case details

I first wrote about this case way back in February 2012, when it was being heard by the district court.

Very briefly, Christina Adams had five Pap tests between January 2006 and September 2008, all of which were sent to LabCorp for interpretation.  Four of those were reported as normal (January 2006, January 2007, March 2008, September 2008), and one (October 2007) was reported as ASC-US.

Ms. Adams was diagnosed with cervical cancer in August 2009.  It is unclear to me based on what I have read whether it was metastatic when she was diagnosed or metastasized later.

She and her husband filed suit against LabCorp in September 2010, alleging it is liable for the negligence of its employees who “misinterpreted and reported inaccurate test results” that “permitted her cancer to metastasize.”

The plaintiffs hired Dr. Dorothy Rosenthal, a pathologist at Johns Hopkins University, as their expert witness.  Dr. Rosenthal performed a non-blinded review of only the Pap tests in question and nothing else and concluded:

…LabCorp’s cytotechnologists’ review of Ms. Adams’s slides fell short of the applicable standard of care by failing to identify abnormal cells that should have been identified.

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Jury finds oncologist negligent for withholding crucial information from pathologist


A Massachusetts jury found an oncologist was negligent when he failed to provide pertinent clinical information to a hematopathologist that may have prevented an erroneous diagnosis of non-Hodgkin lymphoma in a patient who subsequently died from treatment complications.

The jury rendered its decision back in March but I only first heard about the case last week when a reader sent me the July 25th newsletter from the ECRI Institute.

That newsletter referred to an article on page 14 of the June 2014 edition of Medical Malpractice Verdicts, Settlements, and Experts that discussed the malpractice suit.  The website requires a paid subscription, but I contacted the site, and a representative was kind enough to provide me with the full article as well as permission to reproduce it in its entirety here.  Many, many thanks to the good people at Medical Malpractice Verdicts, Settlements, and Experts for doing so.

Case details

Mr. Martin Harrity, who carried a pre-existing diagnosis of an unspecified immunodeficiency disorder that could reportedly mimic lung cancer, was under the care of Dr. James Rooney, a hematologist/oncologist.  In July 2003, Mr. Harrity, who was 39 years old at the time, had a biopsy of a lung mass, which was sent to an unnamed hematopathologist.  The pathologist rendered a diagnosis of non-Hodgkin lymphoma.

Per the article, Dr. Rooney did not tell the hematopathologist about the patient’s immunodeficiency.

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