WASHINGTON – The Justice Department amended its complaint in a laboratory testing fraud case to add six physicians in Texas. The suit alleges False Claims Act violations based on patient referrals in violation of the Anti-Kickback Statute and the Stark Law. The amended complaint further alleges that the six physicians improperly billed claims to federal health care programs for medically unnecessary laboratory testing.

According to the United States’ complaint, the six physician defendants received thousands of dollars in kickbacks in return for their referrals to laboratory testing. The complaint alleges that laboratories True Health Diagnostics LLC (THD) and Boston Heart Diagnostics Corporation (BHD) conspired with small Texas hospitals. They included Rockdale Hospital dba Little River Healthcare (LRH), to pay physicians to induce referrals to the hospitals for laboratory testing, which then they perform THD or BHD. As alleged in the complaint, the hospitals paid a portion of their laboratory profits to recruiters, who kicked back those funds to the referring physicians.

The recruiters allegedly set up companies known as management service organizations (MSOs) to make payments to referring physicians disguised as investment returns but were based on and offered in exchange for the physicians’ referrals. The complaint alleges that laboratory tests billed resulting from this referral scheme to various federal health care programs. However, improper inducements tainted the claims and, in many cases, involved tests that were not reasonable and necessary.

“The Department of Justice is committed to holding accountable health care providers, including physicians, who commit fraud,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Improper financial arrangements involving physicians and laboratories can distort physicians’ medical judgments, waste taxpayer dollars, and subject patients to unnecessary testing or other services.”

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded programs. In addition, the Stark Law forbids a hospital or laboratory from billing Medicare for certain services referred by physicians that have a financial relationship with the hospital or laboratory. Finally, the Anti-Kickback Statute and the Stark Law limit judgment compromise and improper financial incentives based on the best interests of their patients.

The United States’ amended complaint alleges that, in addition to the previously named defendants, the following six physicians received kickbacks from MSOs in return for their laboratory testing referrals:

• Doyce Cartrett, Jr., M.D., of Silsbee, Texas, allegedly received over $320,000 from LRH and two MSOs, Ascend MSO of TX LLC (Ascend) and Eridanus MG LLC (Eridanus), in return for his referrals.
• Elizabeth Seymour, M.D., of Corinth, Texas, allegedly received over $280,000 from two MSOs, Ascend and Eridanus, in return for her referrals.
• Emanuel Paul “E.P.” Descant, II, M.D., of Spring, Texas, allegedly received over $125,000 from two MSOs, North Houston MSO, and Tomball Medical Management Inc., in return for his referrals.
• In return for his referrals, Frederick Brown, M.D., of Missouri City, Texas, allegedly received over $190,000 from two MSOs, Ascend and Indus MG LLC (Indus).
• Heriberto Salinas, M.D., of Cleburne, Texas, allegedly received over $75,000 from two MSOs, Ascend and Herculis MG LLC (Herculis), in return for his referrals.
• In return for her referrals, Hong Davis, M.D., of Lewisville, Texas, allegedly received over $70,000 from two MSOs, Ascend and Herculis.

“Schemes that funnel health care referrals do not work without the participation of physicians,” said U.S. Attorney Brit Featherston for the Eastern District of Texas. “They are not merely passive players in these elaborate schemes, but an integral part, without which the scheme could not exist. Our office is committed to rooting out health care fraud by pursuing all players involved in the scheme, from the laboratories and their leaders to the marketers and the physicians who make it all possible. Naming these physicians in the complaint is evidence of that commitment.”

“Patients deserve reasonable and necessary care from providers without improper motivations,” said Special Agent in Charge Miranda L. Bennett of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Collaborating with our law enforcement partners, we will continue to investigate and hold accountable physicians are accepting payments for referrals.”

“The Department of Defense Office of Inspector General’s Defense Criminal Investigative Service (DCIS) is committed to rooting out fraud schemes that waste taxpayer resources. But, unfortunately, they also impact mission readiness,” said Acting Special Agent in Charge Gregory P. Shilling of the DCIS Southwest Field Office. “DCIS will continue to work with our partners to hold those accountable who undermine the integrity of the health care system that supports our nation’s service members, retirees, and their families.”

They filed the United States’ amended complaint in connection with a lawsuit initially filed under the qui tam or whistleblower provisions of the False Claims Act by STF LLC. The latter members are Felice Gersh, M.D., and Chris Riedel. The United States intervened in the qui tam action in December 2021 and filed a complaint under the False Claims Act in January 2022 against former THD CEO Christopher Grottenthaler and former BHD CEO Susan Hertzberg former LRH CEO Jeffrey Madison, and others. Under the False Claims Act, a private party can file an action on behalf of the United States and receive a portion of the recovery. The Act permits the United States to intervene in such lawsuits and add claims and defendants, as it has done here. The qui tam case is captioned the United States et al. ex rel. STF, LLC v. True Health Diagnostics, LLC, et al., No. 4:16-cv-547 (E.D. Tex.). If a defendant is found liable for violating the Act, the United States may recover three times the amount of its losses plus applicable penalties.

Attorneys Christopher Terranova and Gavin Thole in the Civil Division’s Commercial Litigation Branch (Fraud Section) and Assistant U.S. Attorneys James Gillingham, Adrian Garcia, and Betty Young in the U.S. Attorney’s Office for the Eastern District of Texas handled the case. In addition, HHS-OIG and DCIS gave investigative support. As a result of its efforts, the United States has already recovered more than $31 million relating to conduct involving BHD, THD, and LRH, including False Claims Act settlements with 29 physicians, two health care executives, and a laboratory company.

The United States’ pursuit of this lawsuit illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. You can report your tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement to the Department of Health and Human Services at 800‑HHS‑TIPS (800-447-8477).

The claims in the complaint are allegations only, and there has been no determination of liability.