Cigna accuses urine drug toxicology laboratories of fraud, kickback scheme


Health insurer Cigna recently filed a lawsuit against Sky Toxicology Lab Management and urine drug toxicology (UDT) laboratories Sky Toxicology, Frontier Toxicology and Hill Country Toxicology that, among other things, accuses them of engaging in fraud and a lucrative patient-referral kickback scheme.

All three labs are located in San Antonio Texas.  Sky Tox and Frontier Tox are about a block apart from one another, and Hill Country Tox is about a 10 minute drive away.  According to the “About Us” pages on the websites, the three UDT labs share the same executive team:  W. Wade White, MD-CEO and Medical Director; Lance Hupfeld-Chief Sales Officer; Bradley West-Chief Operating Officer.

Sky Toxicology Lab Management is a limited partnership organized in Florida in 2013, according to the Form D on file with the Securities and Exchange Commission.  Its principal place of business has the same address as Sky Toxicology, and it lists Dr. White, Mr. Hupfeld, Mr. West and a fourth individual named Nick Boatman as its executive officers.

Factual Allegations

The vast majority of health insurance plans administered by Cigna are called Administrative Services Only (ASO) plans that are funded by private companies through employee contributions, with Cigna providing claims processing and appeal adjudication services.  Cigna has fiduciary responsibility for these plans, which are also governed by the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that provides protection for individuals with private health insurance plans through a set of minimum standards.

Cigna allows members to choose whether they want to receive care from health care providers (including laboratories) that are in Cigna’s network or outside of Cigna’s network.  If the member chooses an out-of-network provider, the member will incur more financial responsibility through higher co-pays, deductibles and co-insurance than if they had used an in-network provider.

The member can also be balance billed, which is when the out-of-network provider bills the patient for the difference between what they charged for their services and what the insurance company paid.

Cigna claims it is “widely-known” that patients who pay for even a small portion of their health care out-of-pocket will make “more informed choices regarding medical care, and choose care that is medically necessary, and not simply free of charge.”

Since July 2011, Cigna has paid more than $17.5 million to Sky Tox for over 40,000 processed claims, more than $3.4 million to Frontier Tox for over 5,900 claims, and more than $1.8 million to Hill Country Tox for over 3,400 claims. The overwhelming majority of these claims were submitted under ASO plans.

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Negligence suit against Creighton dermatopathologist Dr. Deba Sarma will continue in Illinois

Scales of Justice

A US District Court judge has ruled a negligence lawsuit filed in Illinois against Creighton University and now-retired Creighton dermatopathologist Dr. Deba Sarma will be allowed to continue in Illinois.

Factual Allegations

Ms. Kayla Johnson had a 1 cm lesion on her left leg excised by Dr. Damian Grivetti on January 31, 2011 at St. Margaret’s Health Center in Peru, Illinois. The specimen was sent to the pathology department and examined by pathologist Dr. Eric Santos.  Dr. Santos felt the lesion represented an “atypical compound melanocytic proliferation” and that the differential diagnosis was between an atypical Spitz nevus and malignant spitzoid melanoma.

Prior to signing the case out, Dr. Santos sent the slide to Creighton University, where it was examined by Dr. Tracey Harbert, who at the time was a second year pathology resident, and attending dermatopathologist Dr. Deba Sarma, Director of Dermatopathology until his retirement in 2012.

Dr. Sarma signed out Ms. Johnson’s specimen as a Spitz nevus with clear margins and stated there was “no suggestion of melanoma”.  Dr. Sarma must have said the nevus demonstrated cytologic and/or architectural atypia, as there was also apparently a comment in the report that said the “atypia may be treated with a wider conservative excision” but no residual tumor was expected to be found.

Dr. Sarma reportedly called Dr. Santos to discuss the case with him, and Dr. Santos subsequently “included and adopted” Dr. Sarma’s findings into his final report.  Ms. Johnson was later told by an unnamed person at St. Margaret’s that no additional treatment was necessary.

Around August 29, 2012, Ms. Johnson was diagnosed with Stage III melanoma. She was pregnant at the time and either could not, or elected to not, receive therapy during her pregnancy.  Unfortunately, by the time she began treatment, she had progressed to Stage IV.

The slides from her original excision were reviewed by dermatopathologist Dr. Kelli Ann Hutchens at Loyola University in October 2013.  Dr. Hutchens reported the differential diagnosis of the lesion included either a 1.6 mm malignant melanoma or an atypical Spitz nevus, and given the patient’s history of metastatic melanoma, malignant melanoma was favored.

Ms. Johnson filed a lawsuit in US District Court in Illinois on June 19, 2014 that accused Drs. Sarma and Harbert of negligence and Creighton University of vicarious liability.  At some point, Ms. Johnson dropped Dr. Harbert from the lawsuit.

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Dr. Franklin Cockerill now CEO of Analyte Health, defendant in stolen trade secrets lawsuit

Analyte Health LogoDr. Franklin Cockerill, the former chairman of the Department of Laboratory Medicine and Pathology at the Mayo Clinic in Rochester Minnesota who was accused of misappropriating Mayo’s trade secrets, has recently been named CEO of Analyte Health, one of the defendants in an ongoing trade secret violation lawsuit.

Those interested in learning more about the trade secret misappropriation allegations leveled against Dr. Cockerill by the Mayo Clinic can do so here; they certainly make for entertaining reading.

It is important to note the lawsuit against Analyte was originally filed in June 2013, and the alleged acts took place between 2007-2009, long before Dr. Cockerill had anything to do with Analyte.  But it is interesting nonetheless that Dr. Cockerill’s days of dealing with trade secret violation allegations are not yet over.

The Players


Mark Romz and Charles Dorfman in 2003 began work on developing an internet-based company that would perform confidential sexually transmitted disease (STD) testing without the need for a doctor’s visit.  The fruits of their labor was found at, and according to the complaint, was the industry leader by 2007.


Analyte Health is a self-described “diagnostic triage company” that provides “convenient access to education, diagnostic testing, personalized results and recommendations to consumers through our online clinics.”

Daniel Malven, Dan Bodde, Michelle Sobel, and Jonathan Kawa are or were shareholders in Analyte.  In addition, Malven used to be an officer at Analyte, and Sobel is currently VP of New Services.

Malven, Bodde, Sobel and Kawa all used to work for an entity called Ajuga Media, which will be discussed in more detail below.

Factual Allegations

Dorfman and Romz purchased advertising from major internet search engines (like Google AdWords) that would cause ads for tSTD to appear on web pages when prospective patients performed online searches for various STDs. They purchased these ads by “bidding on certain key words, combinations, permutations, and even misspellings of words, in on-line auctions”.  They spent “thousands of hours of trial and error and hundreds of thousands of dollars” to develop their online advertising campaign that would also cause tSTD to appear at the top of search engine results.

The ads would direct the patient to tSTD’s website, where they could (with or without a counselor’s help) select what STD testing they needed, and where they wanted their blood drawn.  The patient was then provided with an identification number that allowed them to confidentially review their results online, and could discuss those results with a tSTD counselor.

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LabCorp succeeds in keeping labor law violations class action suit in federal court


A US District Court in California has denied a motion to remand the case to state court filed by the lead plaintiff in a putative class action lawsuit that alleges LabCorp failed to pay employees for overtime and meal allowances.


Ms. Rita Varsam filed this suit on behalf of herself and “all persons who worked as non-exempt Patient Service Technicians for Defendants in California, within four years prior to the filing of this complaint until date of certification” in the Superior Court of California, County of San Diego on June 3, 2014.

She alleged eight causes of action:

  1. Violation of California Labor Code §§ 510 and 1198 (unpaid overtime)
  2. Violation of California Labor Code §§ 1194, 1197, and 1197.1 (unpaid minimum wages)
  3. Violation of California Labor Code §§ 226.7 and 512(a) (unpaid meal period premiums)
  4. Violation of California Labor Code § 226.7 (unpaid rest period premiums)
  5. Violation of California Labor Code §§ 201 and 202 (wages not timely paid upon termination)
  6. Violation of California Labor Code § 226(a) (non-complaint wage statements)
  7. Violation of California Labor Code §§ 2698, et seq. (Private Attorney General’s Act or “PAGA”)
  8. Violation of California Business & Professions Code §§ 17200, et seq. (unfair and harmful business practices)

LabCorp removed the case to federal court in November 2014 pursuant to the Class Action Fairness Act of 2005 (CAFA) due to the fact LabCorp is a citizen of Delaware and North Carolina and the plaintiff is a California citizen, the proposed class has more than 100 members, and the amount in controversy exceeds $5 million.

Ms. Varsam filed a motion to remand the case back to California court, arguing LabCorp failed to prove both the amount in controversy is greater than $5 million and that there is “minimal diversity of citizenship”.


The judge relied on the deposition of the lead plaintiff and the declarations of Daniel Lontay, an expert for LabCorp who analyzed time and pay data, and Joseph Martin, LabCorp’s Senior Human Resources Information Management Specialist, to determine the amount in controversy.  Mr. Martin apparently already had put time and pay data together for another California class action lawsuit against LabCorp, and that data overlapped with the time period at issue here.

Ms. Varsam alleges class members were “required to work for periods longer than five (5) hours without a meal period of not less than thirty (30) minutes”. Employers that violate this California labor law must pay the employee an extra hour of wages.  Mr. Lontay determined that between June 3, 2010 and April 24, 2014, there were 145,723 shifts in which a LabCorp patient service technician (PST) ate a meal after the fifth hour of the shift, the meal break was less than 30 minutes in duration, or a meal break was not recorded at all. This represented about 25% of all PST shifts greater than six hours in duration.  Given the average hourly wage of LabCorp PSTs of $17.48, the amount in controversy for this claim is at least $2.547 million.

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Laboratory whistleblower Chris Riedel must pay other lab whistleblowers approx. $7 million

Scales of Justice

A US District judge has ruled laboratory whistleblower Chris Riedel must honor an agreement he had with fellow whistleblowers Fair Laboratory Practices Associates (FLPA) and NPT Associates (NPT) and pay them about $7 million.

The Parties

FLPA is composed of general partners Andrew Baker, Richard Michaelson, and Mark Bibi, the former CEO, CFO and general counsel, respectively, of a clinical laboratory called Unilab that was purchased by Quest Diagnostics in 2003.  It filed a qui tam against Quest and Unilab in 2005 that was thrown out because Mr. Bibi, as former general counsel for Unilab, was ethically precluded from blowing the whistle on a former client.  In addition, Judge Robert Patterson disqualified FLPA and its attorneys from participating in “any subsequent action arising out of the same facts” since Mr. Bibi had disclosed confidential information to his FLPA partners and also his attorneys.

The partners in NPT are Mr. Baker, Jerry Tice, and Thomas Golubic.  It brought a qui tam suit against LabCorp in 2007 and was represented by the same attorneys that represented FLPA.  During discovery, LabCorp learned four of NPT’s original members were also members of FLPA.  At least part of that suit was dismissed on September 30, 2014.

Mr. Riedel has been the relator in multiple qui tam actions, the most successful of which (to my knowledge) was one he brought against Quest and LabCorp in California that was settled in May 2011 for $290.5 million; Quest paid $241 million and LabCorp paid $49.5 million.

The Agreement and Subsequent Legal Action

FLPA, NPT and Mr. Riedel entered into an agreement on May 26, 2010 that stated Mr. Riedel would pay FLPA and NPT a total of 15% of any qui tam award he received in his lawsuit, and FLPA and NPT would pay Mr. Riedel 15% of any qui tam award they received in their lawsuit.

Since this agreement was entered into prior to the $290.5 million award mentioned above, FLPA and NPT alleged Mr. Riedel was obligated to pay FLPA and NPT 15% of his share of the award, which would equal about $7 million. But Mr. Riedel did not do so and paid FLPA and NPT only “a portion” of the proceeds.  Mr. Riedel told FLPA and NPT he did not honor the agreement because of Judge Patterson’s ruling in the FLPA v. Quest Diagnostics suit that disqualified FLPA from participating in “any subsequent action arising out of the same facts.”

As a result of his refusal to pay, FLPA and NPT filed suit against Mr. Riedel in April 2014 that alleged breach of contract, conversion, and unjust enrichment, and argued Judge Patterson’s ruling has no bearing on their agreement.

Mr. Riedel’s motion for judgment on the pleadings, FLPA and NPT’s motion for summary judgement, and Quest’s request for leave to appear as a friend of the court were ripe for the judge’s consideration.


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Attorneys take issue with appellate ruling on pathologist’s expert witness testimony



Attorneys Mr. David Bernstein and Mr. Nathan Schachtman recently wrote about the decision by the Eleventh Circuit Court of Appeals to reverse a lower court’s exclusion of expert testimony provided by cytopathologist Dr. Dorothy Rosenthal in Adams v. Laboratory Corporation of America.  They characterize the Eleventh Circuit’s ruling as “regrettable”, “disturbing on many levels”, and “a model of conceptual confusion”.

My thanks to attorney Dr. Steven Erickson, who made me aware of these articles.


Mr. Bernstein is a law professor at George Mason University who is a “nationally recognized expert on […] the admissibility of expert testimony”, and Mr. Schachtman writes a blog that focuses on expert witness testimony.

I have written about Adams v. LabCorp before (here and here), so I will only briefly summarize what has transpired so far.

Mrs. 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.

Mrs. Adams was diagnosed with cervical cancer in August 2009 and 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.”

They hired Dr. Dorothy Rosenthal, a pathologist at Johns Hopkins University, as their expert witness.  Dr. Rosenthal 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.

It is important to note Dr. Rosenthal, after fully being made aware that the patient had cervical cancer, went to the defendant’s lab and reviewed only the Pap tests the plaintiffs alleged contained dysplastic cells that were missed by the cytotechs and defendant pathologist, and nothing more.

LabCorp filed a motion to exclude Dr. Rosenthal’s testimony on the basis her review was “tainted by an unreliable methodology”, and also asked for summary judgment if her testimony was excluded.

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Jury awards $1.7 million for brain tumor misdiagnosis


A jury awarded the estate of Daniel Gapinski and his wife, Rebecca Gapinski, $1,727,410 for pain and suffering, and wrongful death due to the 2007 misdiagnosis of Mr. Gapinski’s brain tumor.

Case Details

LaSalle County Illinois does not make its court documents available online, so unfortunately all I have to go on is an article from an attorney’s medical malpractice blog.

Mr. Gapinski underwent resection of a sellar mass in 2007 at OSF St. Francis Medical Center in Peoria Illinois when he was 42 years old.  Pathologist Dr. Meena Gujrati diagnosed the tumor as a meningioma, and as a result, Mr. Gapinski subsequently received radiotherapy to “debulk the benign tumor”.

Approximately a year and a half later, Mr. Gapinski began experiencing the same signs/symptoms he had when he originally presented, and returned to St. Francis for assessment and also went to the Mayo Clinic for a second opinion.  It is unclear whether his pathology slides were reviewed at Mayo at that time.

In 2009, Mr. Gapinski underwent a two-stage neurosurgical resection of his sellar mass at the University of Pittsburgh and pathologists there diagnosed the tumor as metastatic renal cell carcinoma.  Following surgery, Mr. Gapinski transferred his care to the University of Chicago, which requested the pathology slides from his original 2007 surgery.  A pathologist there determined the tumor was not a meningioma and was in fact renal cell carcinoma.

Mr. Gapinski filed a lawsuit in 2011 and claimed Dr. Gujrati’s misdiagnosis caused him to go approximately two years without appropriate therapy for his renal cell carcinoma.  Mr. Gapinski unfortunately died in May 2014 at the age of 49, and the lawsuit was continued by his estate.

At trial, Dr. Gujrati argued Mr. Gapinski already had Stage IV renal cell carcinoma at the time of his original surgery and this constituted a “death sentence”.  Mr. Gapinski’s oncologist, however, testified Mr. Gapinski would have had “an opportunity for life-term survival with a good quality of life, if not a potential for cure” had he been correctly diagnosed in 2007.

Ultimately, the jury found in favor of the plaintiffs and awarded the following:

  • $250,000 for pain and suffering
  • $225,00 for loss of normal life
  • $252,410 for medical expenses
  • $300,000 for lost earnings
  • $50,000 for loss of consortium for Mr. Gapinski’s wife
  • $200,000 for loss of money, benefits and services
  • $200,000 for loss of society
  • $250,000 for grief and sorrow


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Dominion Pathology Laboratories sues Anthem Health Plans of Virginia for breach of contract

Dominion Pathology Labs logo

Dominion Pathology Laboratories, a three-man dermatopathology practice in Norfolk Virginia, has sued Anthem Health Plans of Virginia for breach of contract.  This case came to my attention after a US District Court judge in Virginia recently granted Dominion’s motion to remand the case back to Circuit Court for the City of Norfolk, Virginia.


The issue that led to this David v. Goliath suit will sadly be very familiar to physicians everywhere.

Dominion has been a provider in Anthem’s preferred provider network for about 12 years.  On January 1, 2014, Anthem informed Dominion it was reducing its reimbursement rates by about 18%.  Then, on October 15th of that same year, Anthem notified Dominion it was unilaterally reducing its reimbursement “by nearly sixty percent” effective February 2, 2015.

Dominion filed a lawsuit against Anthem on March 10, 2015 and alleged the insurer breached its contract.  Dominion also sought declarations that Anthem violated both § 2706 of the federal Affordable Care Act (ACA) and § 38.2-3407 of the Virginia Code.  The following month, Anthem filed a motion to remove the case to federal court based on the federal question raised by Dominion.

Dominion opposed Anthem’s motion, and asked for the case to be remanded back to a Virginia court.


According to the judge, only state court actions that could have been filed in a federal court may be removed to federal court, and the burden of establishing whether a federal court has jurisdiction over this case rests on Anthem, since it is the party that is asking for the case to be removed to federal court.

Because of concerns over the federal government exerting too much power over states, federal judges are required to be very conservative in determining which cases are taken from the states and argued in federal court.

A federal court would have jurisdiction over a civil case if a federal law creates the cause of action being asserted by a plaintiff, but a federal court can also have jurisdiction over cases that arise under state law.

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Pathologist’s discrimination and retaliation lawsuit so far unsuccessful

Scales of Justice

Dr. Jotica Talwar filed a lawsuit against Staten Island University Hospital (SIUH), Anthony Ferreri, SIUH’s President and CEO, and Dr. Henry Simpkins, chair of SIUH’s pathology department, that alleged discrimination and retaliation under federal, state and municipal law.  So far, all but the municipal claims have been dismissed.


The background information I provide here is contained in the District court’s Memorandum and Order on the defendant’s motion for summary judgment, as I do not have Dr. Talwar’s original or amended complaints.

Dr. Talwar came to the US from India in 1992 and completed an AP/CP residency at Brown University and a hematopathology fellowship at Temple University.  Dr. Talwar was hired in 1999 by South Shore Pathology, which contracted with SIUH, and obtained an O-1 visa (employer-sponsored work authorization) with the help of Dr. Simpkins, who wrote a letter in support of her visa petition.

In 2006, SIUH hired a number of South Shore pathologists and made them attending pathologists, including Drs. Talwar and Simpkins, who was named Chair of the department.  SIUH allowed Dr. Talwar, who was not a US citizen nor a permanent resident, to amend her employment contract to reflect the fact she did not have an “unlimited” license to practice medicine in New York state.

SIUH submitted visa extension applications for Dr. Talwar, which included letters of support from Dr. Simpkins, in 2007, 2008, and 2009.  Sometime in 2008, Dr. Talwar told department leaders her limited medical license was set to expire in September 2008 and that she was ineligible under state law for an extension. In late July, however, the state law was changed and she received a three year extension of her limited medical license.

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Millennium Health may pay $250 million to settle whistleblower allegations

Millennium Health logo

Urine drug toxicology giant Millennium Health (MH) is reportedly negotiating a settlement with the federal government for as much as $250 million according to the Wall Street Journal.  In addition, another outlet has reported MH is meeting with restructuring consultants and bracing for potential additional lawsuits from its lenders and private payors.

A source told me about a month ago that MH and the federal government were working on a settlement that could reach $250 million, but I was unable to obtain independent confirmation, so I did not proceed with an article at that time.

What did Millennium allegedly do?

I was able to get ahold of a Civil Investigative Demand (CID) letter the Department of Justice (DOJ) sent to a physician back in August 2014 that required the physician to “provide documents and testimony to the Federal Government, and to answer the attached interrogatories.”

The CID stated the DOJ was investigating allegations that the physician “… and/or [MH] submitted, or caused to be submitted, false claims to federal health care payors […] for medically unnecessary urine drug testing (“UDT”)” and that MH “provided kickbacks or other forms of unlawful remuneration to health care providers […] in order to induce UDT referrals to [MH]”.

The DOJ told the physician its primary areas of inquiry were:

  1. Submission of claims for UDT services and reimbursement for those claims;
  2. Medical necessity of UDT generally and for specific patients;
  3. Ordering of UDT, including, but not limited to, the documents and forms used to order UDT;
  4. Sales practices concerning UDT directed towards you or the entities for which you work, including, but not limited to, promises or provision of free goods and services; and
  5. Remuneration by urine drug laboratories to you or the entities for which you work

The documents requested and interrogatories also provide additional insight into the government’s investigation.  Among the documents requested were:

  • All contracts and agreements including custom profiles and/or standing orders
  • All documents concerning payments or other remuneration (including meals, staffing assistance, discounted equipment, assistance with CLIA certifications and electronic medical records, and speaker fees)
  • All documents concerning waiver of co-pays by MH
  • All documents submitted to MH including requisition forms, custom profiles, and standing orders
  • All documents concerning medical necessity of UDT, including confirmatory or quantitative testing of negative UDT screen results performed at the point-of-care
  • All patient records and billing files for eleven patients listed

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