U.S. Justice Department secures over $2 million kickback settlement in lab referral case

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Justice lab kickback settlement

Highlights

Former Boston Heart Diagnostics CEO Susan Hertzberg and ex-VP Matthew Theiler agreed to pay $1.2 million to resolve False Claims Act litigation over alleged illegal lab referral kickbacks.
Physician Frederick Brown and six marketers will pay a combined $859,055 to settle allegations of soliciting and providing kickbacks disguised as managed service organization payments to induce Medicare, Medicaid and TRICARE lab referrals from 2015 to 2017.
The Justice Department has now secured over $61 million in civil False Claims Act settlements since 2019 linked to healthcare provider kickbacks disguised as MSO investment distributions, involving more than 50 physicians.

Settlement terms and alleged referral scheme

As reported by the U.S. Department of Justice, former Boston Heart Diagnostics CEO Susan Hertzberg and former vice president of sales Matthew Theiler have agreed to pay $1.2 million to resolve False Claims Act litigation over alleged illegal payments to doctors for laboratory referrals in violation of the Anti-Kickback Statute.

The department says one physician, Frederick Brown, and six marketers, Thomas Gray Hardaway, William Todd Hickman, Ginny Jacobs, Scott Jacobs, S&G Staffing LLC and Jacobs Marketing Inc., have agreed to pay another $859,055 in the same case.

Prosecutors allege Hertzberg and Theiler helped drive false claims for laboratory testing submitted to Medicare, Medicaid and TRICARE from 2015 to 2017. The government says the kickback arrangement used payments presented as managed service organization distributions to induce doctors to send testing to Texas hospitals for work performed by Boston Heart, including allegedly medically unnecessary testing.

Brown agreed to pay $309,055 to settle allegations that from November 2015 to November 2017 he solicited and received kickbacks from two purported MSOs, Ascend MSO of TX LLC and Indus MG LLC, in exchange for ordering lab tests from Little River Healthcare in Rockdale, Texas, and True Health Diagnostics LLC in Frisco, Texas. Hickman, Hardaway, Ginny Jacobs, Scott Jacobs and their related entities agreed to pay a combined $550,000 to resolve allegations that they paid doctors kickbacks disguised as MSO payments, while Hickman's civil settlement amount was based on his ability to pay.

The Justice Department adds that several of the civil settlement amounts are on top of sums already ordered in a related criminal proceeding in the Eastern District of Texas. It also says the settlements resolve allegations only and do not constitute a determination of civil liability.

Healthcare fraud enforcement expands across federal programs

The case adds to a broader federal enforcement effort aimed at laboratory kickbacks and healthcare fraud involving Medicare, Medicaid and TRICARE. With these agreements, the Justice Department says it has secured more than $61 million in civil False Claims Act settlements since 2019 tied to kickbacks to healthcare providers disguised as MSO investment distributions, including recoveries from more than 50 physicians.

Justice Department, HHS Office of Inspector General and Department of Defense investigators say such arrangements can distort medical judgment, expose patients to unnecessary treatment and waste taxpayer funds. The Anti-Kickback Statute bars offering, paying, soliciting or receiving remuneration to generate referrals for items or services covered by federally funded healthcare programs.

The settlements stem from work by the Civil Division's Commercial Litigation Branch, Fraud Section, and the U.S. Attorney's Office for the Eastern District of Texas, with assistance from HHS-OIG and the Defense Criminal Investigative Service. The department says the matter reflects the administration's wider push against fraud, waste and abuse in federal programs through the Task Force to Eliminate Fraud and the National Fraud Enforcement Division.

Our earlier article examined rising concerns about corruption in U.S. politics and how they may erode economic confidence, tax compliance, and the country’s institutional appeal. It also outlined how a potential post-midterm shift in Congress could open the door to legal reforms—ranging from corporate and antitrust rules to administrative and political process law—aimed at curbing abuses and restoring trust in Washington.

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