By: Christopher A. Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, Ma.
A Health Law Defense and Compliance Firm

In the intricate world of healthcare law and compliance, the recent civil false claims settlement between Pacific Toxicology Laboratories (PacTox) and the United States Department of Justice serves as a significant case study. This settlement sheds light on the importance of regulatory adherence and the potential repercussions of failing to meet stringent healthcare standards.

Background and the Qui Tam Actions
PacTox, a toxicology laboratory based in Chatsworth, California, found itself at the center of legal scrutiny due to its billing practices related to urine drug testing (UDT). The issue came to light when Elizabeth Buonauro, a relator, filed a qui tam action under the False Claims Act, alleging that PacTox submitted false claims to Medicare for confirmatory UDT services. This action was filed in the United States District Court for the District of Massachusetts. Simultaneously, another qui tam action by Yvonne Huemoeller was filed in the Central District of California, targeting similar practices.

The Allegations
The core of the allegations revolved around PacTox’s billing practices from January 1, 2020, to March 31, 2023. During this period, Medicare had established a bundled payment rate for Opioid Treatment Programs (OTPs) which included UDT as part of the comprehensive care package. However, PacTox allegedly billed Medicare separately for these UDT services, using Common Procedural Terminology Codes G0480-83, thereby circumventing the bundled payment system. This practice was deemed a violation of Medicare’s regulations, leading to substantial civil claims against PacTox.

Settlement Agreement Terms
The settlement agreement, meticulously negotiated, requires PacTox to make significant financial concessions. The primary terms include:

Initial and Annual Payments: PacTox is mandated to make an initial payment of $250,000 followed by annual payments of $150,000 over five years.

Ordinary Business Income (OBI) Payments: In addition to the initial and annual payments, PacTox must also pay 25% of its Ordinary Business Income annually for five years.

Proceeds from Asset Sales: If PacTox or its assets are sold for amounts exceeding certain thresholds within five years, additional payments of 50% of net proceeds (for sales between $5 million and $10 million) or 20% of proceeds (for sales exceeding $10 million) are required.

Cumulative Cap and Penalties: The combined total payments are capped at $5 million, with potential additional penalties for non-disclosure of assets or false statements in financial disclosures.

Implications for Healthcare Providers
The PacTox settlement serves as a cautionary tale for healthcare providers about the importance of regulatory compliance and the potential consequences of deviation. It also highlights the role of qui tam actions in uncovering fraudulent practices within the healthcare industry. As healthcare regulations continue to evolve, providers must remain vigilant and proactive in maintaining compliance to safeguard their operations and reputation.

For further inquiries or assistance with healthcare compliance and legal matters including whistleblower cases, feel free to contact Parrella Health Law at 857.328.0382 or email me directly at cparrella@parrellahealthlaw.com. We’re here to help you navigate the complexities of healthcare law and ensure your practices are in full compliance with regulatory standards.

Christopher Parrella, ESQ, CPC, CHC, CPCO, is the founding partner of Parrella Health Law in Boston, Mass. The firm focuses exclusively on healthcare defense and compliance matters. Chris also travels the country on behalf of a wide range of healthcare organizations, lecturing on a variety of health care enforcement and compliance topics. Chris is one of a handful of health care attorney’s that are also Certified Professional Coders (CPC) and is a member of the AAPC’s National Legal Advisory Board and Ethics Committee.  He is also a Certified Professional Compliance Officer (CPCO) and Certified in Health Care Compliance (CHC.)