Precision Toxicology Agrees to Pay $27M to Resolve Allegations of Unnecessary Drug Testing and Illegal Remuneration to Physicians

Precision Toxicology, doing business as Precision Diagnostics, has agreed to pay $27 million to resolve alleged violations of the False Claims Act and similar state statutes for billing Medicare, Medicaid and other federal health care programs for medically unnecessary urine drug tests, and for providing free items to physicians who agreed to refer expensive laboratory testing business to Precision. Precision, headquartered in San Diego, is one of the nation’s largest urine drug testing laboratories.

“The Justice Department is committed to ensuring that laboratory tests are ordered based on each patient’s medical needs and not just to increase laboratory profits,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will not tolerate practices that unnecessarily increase the costs of federal health care programs and result in the misuse of taxpayer funds.”

In the settlement agreement, the United States alleged that Precision systematically billed federal health care programs for excessive and unnecessary urine drug testing from Jan. 1, 2013, through Dec. 31, 2022. In particular, the United States contended that Precision caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which were, in effect, standing orders that caused physicians to order a large number of tests without an individualized assessment of each patient’s needs. This practice violated federal health care program rules limiting payment to services that are reasonable and medically necessary for the treatment and diagnosis of an individual patient’s illness or injury.

The United States also alleged that Precision’s provision of free point of care urine drug test cups to physicians — expressly conditioned on the physicians’ agreement to return the urine specimens to Precision for additional testing — violated the Anti-Kickback Statute. The Anti-Kickback Statute generally prohibits laboratories from giving physicians anything of value in exchange for referrals of tests.

“We aggressively pursue those who defraud these critical healthcare programs and take money meant for needy patients.  Taxpayers deserve nothing less, “ said U.S. Attorney Erek L. Barron for the District of Maryland.

“When laboratories ignore medical needs and increase testing for their own profits, the Department of Justice will act to protect the taxpayers and the integrity of our vital federal health programs,” said Acting U.S. Attorney Matthew Kirsch for the District of Colorado.

In connection with the False Claims Act settlement, Precision has also entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS-OIG).

“Today’s settlement demonstrates that investigating violations of the False Claims Act is a top priority,” said Special Agent in Charge Maureen R. Dixon of HHS-OIG. “HHS-OIG will continue to work with the Department of Justice to ensure the integrity of federal health care programs.”

Of the settlement amount, $18.2 million will be paid to the United States and the remainder will be paid to the impacted states, including Maryland, Illinois, Minnesota, Virginia, Georgia and Colorado, for the states’ share of Medicaid.

The False Claims Act allegations resolved by this settlement were originally brought in three lawsuits filed by whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery. Two of the cases are captioned United States and Maryland ex rel. Hudak v. Precision Toxicology LLC, ELH-18-1510 (DMD) and United States, Illinois and Minnesota ex rel. Buonauro v. Precision Diagnostics LLC et al., ELH-21-3231 (DMD). The third qui tam case against Precision, brought in the District of Colorado, remains partially sealed.

Under the Act, the United States can elect to intervene in an action filed by a whistleblower, as it did here in part. Bryce Hudak will receive $2,743,002 from the federal False Claims Act recovery.

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 resolution obtained in this matter was the result of a coordinated effort between federal and state partners lead by the Civil Division’s Commercial Litigation Branch, Fraud Section, along with the U.S. Attorneys’ Offices for the Districts of Maryland, Colorado and Connecticut; the Department of Health and Human Services Office of Inspector General and Office of the General Counsel; the Office of Personnel Management Office of Inspector General; the Department of Veteran’s Affairs Office of Inspector General; the Defense Criminal Investigative Service; the Maryland Office of Attorney General; and the National Association of Medicaid Fraud Control Units.

Attorneys Vanessa Reed and Vince Vaccarella of the Civil Division’s Fraud Section and Assistant U.S. Attorneys Roann Nichols for the District of Maryland, David Moskowitz for the District of Colorado and Rick Molot for the District of Connecticut handled the matter, with assistance from Assistant Attorneys General Raja Mishra of the State of Maryland, and Ian Garland of the State of Florida.

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

Settlement