Two pain docs arrested for urine drug toxicology testing fraud

PPSA patients waiting in line (Fox10 News)

Patients waiting in line outside PPSA on May 21, 2015 (Fox10 News)

“We are committed to the highest standard of patient care.”  That is a quote from the website of Dr. John Patrick Crouch and Dr. Xiulu Ruan of Physicians’ Pain Specialists of Alabama (PPSA), who were arrested on May 20, 2015 by federal agents after being indicted on charges of unlawful distribution of controlled substances and healthcare fraud related to urine drug toxicology (UDT) testing.

Unfortunately, not many details are available in the indictment, Department of Justice press release, and various media reports, but I am sure more will come out as the case progresses.  Like other cases involving health care fraud (alleged, proven and/or admitted) I have discussed on the site, the lifestyles of the involved parties is quite fascinating (see below).

Drs. Couch and Ruan were arrested as part of “Operation Pillution”, a federal law enforcement effort aimed at prescription drug abuse in the southern US. On the day the two were taken into custody, federal agents conducted raids on multiple pain clinics and pharmacies in Arkansas, Alabama, Louisiana and Mississippi.

Indictment Contents

Distribution of Controlled Substances

In addition to owning PPSA, Drs. Couch and Ruan also own C&R Pharmacy, which I believe is located in the same building as PPSA.


Dr. John Patrick Couch (

Starting in about January 2011, Drs. Couch and Ruan allegedly conspired to distribute and dispense numerous Schedule II controlled substances “outside the usual course of professional practice and not for a legitimate medical purpose”.

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Jury awards couple almost $10 million for misread Pap tests

Scales of Justice

A jury in southwestern Maine needed to deliberate for only about 75 minutes before it awarded $7.65 million to a woman whose diagnosis of cervical cancer in 2011 was delayed by several years due to misread Pap tests. Her husband was also awarded $2 million for loss of consortium.

I contacted the plaintiffs’ attorney and asked for a copy of the complaint, but I have not heard back yet.  So unfortunately, the only information I have about the case comes from various media reports.  If the attorney ever gets back to me, and there is additional important information included in the complaint, I will update the story.

Mrs. Ruth Hricko had regular gynecological exams, which included Pap tests, at Central Maine Medical Center (CMMC) in 2008-2011.  She complained of pain during that time, but says her gynecologist merely reassured her that “everything was OK.”

In November 2011 she made another appointment just 7-8 weeks after her last one because her pain was so bad that she could not sit down. Her regular physician was out that day, so she saw a different gynecologist.  After examining her and seeing the “clearly visible” lesion, he told her she had Stage IIIB cervical cancer.

At some point after her diagnosis, Mrs. Hricko hired Dr. Owen Pickus, a physician and attorney, to represent her.  Dr. Pickus stated Mrs. Hricko had four Pap tests at CMMC, and the cytotechnologist misread three of them beginning in 2009.  The cytotech finally detected her cancer on the fourth and final Pap.

A lawsuit was filed in 2013 against CMMC, which employed both the cytotech and the gynecologist who failed to diagnose Mrs. Hricko.  The suit alleged Mrs. Hricko actually had cervical cancer in 2008, and the delay in diagnosis allowed the cancer to spread.

As a result, instead of a potential 95% cure rate with just a hysterectomy, Mrs. Hricko’s chances of survival dropped to less than 50%, and she had to undergo more extensive treatment.  She now has a colostomy, “low blood flow to her small bowel”, diminished vaginal muscle tone, chronic pain, and fatigue. She also apparently sustained chemotherapy-related cognitive decline.

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Health Diagnostic Laboratory files $66 million-plus counterclaim against Cigna

HDL logo

Health Diagnostic Laboratory (HDL) has filed a counterclaim against Cigna, alleging the health insurer owes at least $66 million in unpaid laboratory services.  The counterclaim was filed as part of a response to the suit Cigna filed against HDL in October 2014 that alleges HDL unlawfully extracted at least $84 million from it via an unlawful fee-forgiveness scheme.

Factual Allegations

HDL takes issue with claims from 2013 to the present day involving both fully insured plans and Administrative Services Only (ASO) agreements.  The ASO plans are those that are fully funded by employers with Cigna acting solely as the claims administrator with fiduciary responsiblities.  The employers pay Cigna in order to gain access to Cigna’s provider network and for “other services and programs”.

HDL highlights the fact that most Cigna plans allow ordering physicians to select the health care provider which best suits the needs of the patient, and do not mandate referral to an in-network provider.  From 2010 to 2012, Cigna paid thousands of HDL’s claims for laboratory services, indicating Cigna determined the services were medically necessary.

HDL claims it has attempted to join Cigna’s network on multiple occasions, but was rejected.  HDL argues Cigna, which had revenue of $34.9 billion in 2014, tries to steer members to use large in-network labs with which Cigna has “financially advantageous contracts”, and this is done to try and shut down providers and labs that are not in Cigna’s network.

Since HDL is not in Cigna’s network, it has no contract that requires it to bill or collect any co-pays, deductibles or coinsurance obligations from Cigna members.

CignaOften Cigna would use third party re-pricing agents to negotiate the amount HDL would be paid for those claims. The re-pricing agreements required HDL to accept the agreed-upon amount and not bill the patient or financially responsible party for the “difference between the Billed Charges and the Proposed Amount.”  HDL admits the third-party agreements allow HDL to bill patients for co-pays, deductibles and co-insurance, but do not make it a requirement.

Other times HDL would simply accept Cigna’s in-network rate, or would receive an explanation of benefits (EOB) from Cigna around the same time Cigna paid the claim (usually for around 42-50% of the billed amount).  The EOB also would contain the co-pay, deductible and co-insurance amounts the patient owed, but again did not require HDL to bill or collect money from the patient.

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Whistleblower allegations against Family Dermatology/Nelson Dermatopathology

Dr. Paula Nelson being confronted by a reporter (

Dr. Paula Nelson being confronted by a reporter (

A couple of weeks ago I wrote about the Department of Justice press release that announced Family Dermatology, which also operates a dermatopathology laboratory called Nelson Dermatopathology, had agreed to pay a little more than $3.2 million to settle allegations it violated the False Claims Act.

At the time, the whistleblower suits that contained the allegations were not yet on PACER, so I could not get into any more detail than was provided by the DOJ.  But now I have the three suits in hand and can discuss the allegations that were brought against Family Dermatology/Nelson Dermatopathology that led to the settlement.

The whistleblower suits were filed by three different dermatologists (Scott Ross, Harold Milstein and Mark Baucom); Dr. Ross’ is the longest and most detailed and will be discussed first.

Dr. Scott Ross’ Facts/Allegations

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Federal Trade Commission will not challenge testimony of former Tiversa forensic analyst


The Federal Trade Commission (FTC) has determined it will not challenge the testimony given last week by Mr. Richard Wallace, the former forensic analyst for data security company Tiversa, who stated Tiversa’s CEO, Dr. Robert Boback, directed him to fabricate evidence the FTC used against uropathology laboratory LabMD in an administrative action that eventually led to LabMD’s closure.

I reached out to Mr. Mike Daugherty, the owner of LabMD, and Dr. Boback, and both were kind enough to provide me with their perspective on the significance of Mr. Wallace’s testimony as well as the FTC’s decision to not offer rebuttal evidence.  In addition, Mr. Daugherty sent along a comment from one of the lawyers representing LabMD.

Many thanks to Mr. Daugherty and Dr. Boback for providing us with their perspectives on this very important case.

From Reed Rubenstein, attorney with Cause of Action who is representing LabMD:

The FTC confirmed [on May 12] that it found no reason to challenge the testimony given last week. The only evidence in the record now is that LabMD was telling the truth from the beginning that they were hacked by a cyber thief, and that the FTC did nothing to verify the information it was given by Tiversa.

This also shows that the government has spent millions of dollars to destroy an innovative cancer detection lab that was the victim of fraud, but is doing nothing to go after the fraudster.

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Former Tiversa employee admits to fabricating LabMD evidence

Tiversa logo

Richard Wallace, a former employee of data security company Tiversa, testified last week that he, at the behest of Tiversa CEO Robert Boback, fabricated evidence the Federal Trade Commission (FTC) used against uropathology laboratory LabMD in an administrative action that eventually caused LabMD to close its doors.


The dispute involving LabMD, Tiversa and the FTC has been going on for years now.  I have discussed much of what has transpired recently in a series of posts that can be found here, but I will do my best to briefly summarize for those who do not want to read them all.

According to a racketeering and conspiracy lawsuit LabMD filed against Tiversa in January 2015, Tiversa and Dr. Boback contacted LabMD multiple times between May and July 2008 and stated Tiversa had obtained a 1,718 page document (“1718 file”) containing “sensitive and confidential patient data” for approximately 9,000 LabMD patients from a peer-to-peer (P2P) network. Tiversa also told LabMD it continued to see people downloading copies of the file.  Tiversa used this incident to try and sell LabMD its services, which LabMD declined.

In a December 2014 letter from former House Oversight Committee chairman Rep. Darrell Issa (R-CA) to the chairwoman of the FTC, Tiversa, after its offer for services was rejected, turned over the information it had on LabMD to the FTC through an entity known as The Privacy Institute.

Based on that information, the FTC initiated an investigation and subsequently filed an administrative action against LabMD on August 29, 2013 that alleged inadequate data security practices on the part of LabMD led to the leakage of the PHI.

Tiversa turned over additional documents about the LabMD case to the FTC in response to a September 2013 subpoena.  These documents included a San Diego IP address from which Dr. Boback later told the FTC in a November 2013 deposition Tiversa had originally downloaded the 1718 file.

But according to Tiversa documents dated April 18, 2008 and August 2008, Tiversa actually first detected the 1718 file at an Atlanta IP address that likely belonged to LabMD.  In addition, an email Dr. Boback wrote to two Tiversa employees in September 2013 stated the “IP of the download was found to be in Georgia…”.

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Physician accuses pharmacogenetics laboratory Renaissance RX of fraud during DART study

Renaissance RX logo

Dr. Scott Wilson, a Rhode Island internist, has filed a lawsuit against Louisiana-based pharmacogenetics laboratory Renaissance RX (Ren RX) that alleges the company engaged in fraud related to the Diagnosing Adverse Drug Reactions Registry (DART) study.  Syntactx, a “contract research organization that specializes in medical device trials”, is also named as a defendant in the suit.

As I mentioned in a January 2015 post about a lawsuit filed by Ren RX’s former CEO that accuses the company’s founder, Dr. Tarun Jolly, of breach of contract, the laboratory’s legal name is UTC Laboratories, but it does business as Ren RX.

Readers will recall approximately 75% of Ren RX’s peak annual revenue came from Medicare for processing tests for the DART trial.  For reasons that have yet to be publicly disclosed, Medicare ceased DART payments to Ren RX “pending review” in December 2014, and massive layoffs at the company followed, including 90% of its Pharm Ds.


Dr. Wilson’s practice, Physicians Rhode Island Medical (PRIM), is also a member of an entity called Partners In Clinical Research (Partners), which “conducts and oversees medical-related studies and clinical research” at two PRIM offices in Rhode Island.

Around October 2013, Partners was invited to participate in the DART study, the purpose of which is:

…to assess whether the use of pharmacogenomic data results in a meaningful change in a subject’s drug or dose regimen. In addition, the Registry will evaluate the relationship between adverse drug reactions (ADR) and genotype and assess resource utilization (emergency department visits and hospitalizations) associated with ADR.

Partners accepted the invitation, and Dr. Wilson agreed to be the Sub-Investigator for Partners.  He was also asked to be the Regional Principal Investigator (RPI) for the DART study, but he declined that responsibility, and at no time signed any agreement to become an RPI.

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Jury finds Millennium Health infringed on Ameritox patent; awards $8.65 million

Millennium Health logo

A jury in Madison Wisconsin recently found Millennium Health (MH) infringed on a patent licensed to rival Ameritox and ordered it to pay $8,562,760.

The patent in question, #7,585,680 (‘680), was invented by Dr. Michael Larson and Dr. Thomas Richards, both of the Marshfield Clinic, and describes:

…methods for detecting and quantifying metabolites in a biological sample by measuring the concentration of a test metabolite in the sample and comparing that concentration against the concentration of the reference metabolite; enabling accurate metabolite concentration measurements to determine aberrant drug usage patterns.

The ‘680 patent is currently assigned to the Marshfield Clinic, which licensed it to Ameritox on March 15, 2010 in exchange for royalty payments and “good faith commercial efforts to develop, market, and sell a drug testing service” based on the patent.  Ameritox uses the methods within the ‘680 patent in its Rx Guardian CD drug monitoring service which was launched on May 16, 2011.

In June 2011, Ameritox and the Marshfield Clinic filed a lawsuit against MH that alleged it (through its RADAR reports) infringed upon the ‘680 patent as well as patent #7,785,895 (‘895), which was also invented by Drs. Larson and Richards and is also assigned to the Marshfield Clinic.  According to the judge, the ‘895 patent describes “a similar method for one biological sample generally.”

AmeritoxMH filed a motion for summary judgment and also asked the court to invalidate the two patents.  In the Opinion and Order, the judge stated this case is part of a larger debate that:

…reflects a broader tension in patent law between what is legitimate invention in need of the incentives of patent law and what is merely description of the natural world for which no further incentive is required than our desire to understand it better — a tension recognized virtually from the outset of the American patent system.

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Aetna sues Health Diagnostic Laboratory and Bluewave Healthcare Consultants


In a lawsuit filed earlier this month, health insurer Aetna seeks to recover “tens of millions” of dollars from Health Diagnostic Laboratory (HDL) and its sales contractor Bluewave Healthcare Consultants, claiming they paid illegal kickbacks to physicians and encouraged them to order unnecessary tests, and provided unlawful inducements to patients.

This lawsuit follows closely on the heels of the announcement from the Department of Justice that HDL will pay at least $47 million and could pay as much as $100 million to settle similar allegations in three separate qui tam lawsuits.

Factual Allegations

Aetna begins with a brief discussion of its network and how Aetna members have to pay substantially more copayment or coinsurance if they use an out-of-network provider.  This obviously serves as an incentive to stay in-network, which then leads to lower health care costs for the company, since the providers within the network have already agreed to a set fee for their services.

If an out-of-network provider is used, Aetna will have to pay far more for services since the providers do not have a contract.

HDL is not in Aetna’s network.  In order to secure referrals from Aetna physicians (who are contractually obligated to refer patients/services to in-network providers, including laboratories, whenever possible) to go outside Aetna’s network, HDL and Bluewave paid physicians $20 per specimen.  Aetna points out this is more than 6 times what Medicare allows.

HDL logoReaders may recall one of the qui tam suits I covered on April 13th (United States ex rel. Riedel v. Health Diagnostic LaboratoryInc., et al.) alleged physicians could increase the payments they received from HDL, Bluewave and Singulex depending on how they packaged the samples and ordered the tests:

A physician can draw four vials of blood, order four tests, ship them in four packages to defendants, and receive an $80 packaging fee.

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United States intervening in lawsuits against BlueWave Healthcare Consultants, Berkeley HeartLab


I received an email the other day from whistleblower law firm Phillips and Cohen which contained a press release about the $47 million settlement agreement Health Diagnostic Laboratory (HDL) entered into with the Department of Justice to settle allegations it paid kickbacks to physicians. The settlement covers allegations made against HDL in three whistleblower lawsuits, one of which had been filed by Phillips and Cohen.

The PR also notes clinical laboratory Singulex will pay $1.5 million to settle similar allegations, and that the US government decided to intervene against BlueWave Healthcare Consultants, the sales contractor for both HDL and Singulex, and Berkeley HeartLab (BHL).

Soon after I received the email, the Department of Justice put out its own press release on the matter which also included the fact the US government had elected to intervene against Floyd Calhoun (Cal) Dent and Robert Johnson, the owners of BlueWave, as well as Tonya Mallory, former CEO of HDL.

Now that settlements have been reached and decisions to intervene have been made, the original qui tam (whistleblower) complaints have been unsealed and are now publicly available.  Those three suits are:

All of the suits accuse the defendants of paying kickbacks in various forms to induce the referrals of expensive laboratory tests, many of which are medically unnecessary, and describe the ways in which financial inducements altered physicians’ behavior.  There are way, way too many allegations in the three complaints, so I will only mention what I feel are the most important and/or interesting tidbits within the individual suits.

Allegations in Lutz complaint

This suit is over 100 pages long, and uses the operations in the office of Lloyd Miller, MD, a South Carolina internist, as the way to tell its story of how the alleged kickback scheme worked, and how the scheme negatively impacted patient care.  The relators are the owner of the billing company Dr. Miller used and his nursing supervisor. [Read more…]