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Gamma Healthcare and Three of Its Owners Agree to Pay $13.6 Million for Allegedly Billing Medicare for Lab Tests That Were Not Ordered or Medically Necessary

Gamma Healthcare Inc. (Gamma), a laboratory located in Poplar Bluff, Missouri, and three of its owners, Jerry W. Murphy, Jerrod W. Murphy and Joel W. Murphy (the Murphys), have agreed to pay the United States $13,619,660.18 to resolve allegations that they violated the False Claims Act (FCA) by submitting or causing the submission of claims to Medicare for lab tests that were not ordered by health care providers and were not medically necessary. Gamma, Jerry W. Murphy and Jerrod W. Murphy also agreed to a 15-year exclusion from participating in federal health care programs.  

The settlement announced today resolves allegations that, from Jan. 1, 2020, to Oct. 31, 2020, Gamma and the Murphys submitted or caused to be submitted claims to Medicare for medically unnecessary polymerase chain reaction (PCR) urinalysis laboratory tests that were not ordered by treating physicians. When a physician ordered a urinalysis (UA) with culture and sensitivity (C&S) or just a C&S, Gamma automatically performed, and submitted claims for payment to Medicare for, a urinary tract infection (UTI) panel of tests by PCR (the UTI PCR Tests). Medicare reimbursements for the UTI PCR Tests were significantly higher than reimbursements for a UA with C&S — on average, Medicare paid approximately $11 for a UA with C&S but paid an additional $573 for a panel of UTI PCR Tests. Gamma’s requisition forms were structured in a way that did not allow physicians to opt out of the UTI PCR Tests. Physicians expressed concerns to Gamma about the UTI PCR Tests as early as March 2020, including concerns that they did not order the tests, that the tests were expensive and that they were not medically necessary.

“Laboratories are permitted to bill federal healthcare programs only for medically necessary tests that are actually ordered by physicians,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department will continue to hold accountable those who seek to misuse federal healthcare programs for their own financial gain.”

“We’d like to thank the whistleblower for bringing his concerns forward,” said U.S. Attorney Sayler A. Fleming for the Eastern District of Missouri. “As a result, Gamma and its owners who were responsible for this fraud will not be able to participate in federal health care programs for 15 years, and a large sum of money is being returned to Medicare.”

“Health care providers who cause the submission of Medicare claims for medically unnecessary services pose a significant risk to the program and the patients who rely on it,” said Special Agent in Charge Linda Hanley of the Department of Health and Human Services, Office of Inspector General (HHS-OIG). “HHS-OIG works diligently with our law enforcement partners to hold accountable individuals who, to satisfy their own greed, exploit federal health care programs.”

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Bradley Bibb M.D., a physician who owns a number of health care clinics and provided services to patients for whom Gamma performed laboratory tests. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam case is captioned United States ex rel. Bibb v. Gamma Healthcare Inc. et al., No. 1:20-cv-00250-SNLJ (E.D. Mo). Bibb will receive $2,315,342.23 of the proceeds from the settlement.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Eastern District of Missouri, with substantial assistance from HHS-OIG and FBI. Trial Attorney Elizabeth J. Kappakas of the Civil Division’s Fraud Section and Assistant U.S. Attorney Suzanne Moore for the Eastern District of Missouri handled the matter, with the assistance of Financial Analyst Sheryl Paynter of the Civil Division.  

The investigation and resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

The claims resolved by the settlement are allegations only and there has been no determination of liability.