Advanced Pain Management: Referral Shares, Director Fees and Uncustomized Confirmatory Tests

In the Advanced Pain Management laboratory settlement, the Wisconsin pain-management group agreed to pay $1 million to resolve allegations of referral kickbacks and medically unnecessary confirmatory urine drug testing. The government described three different practices: incentive shares given to referring physicians, medical-director payments tied to procedure volume, and test orders that went beyond what individual patients’ medical records supported.

The companies were headquartered in the Milwaukee area. Advanced Pain Management Holdings owned ambulatory surgery centers where nonemployee physicians from Advanced Pain Management S.C. performed pain procedures.

Referral Shares With a Future Payout

The government alleged that Advanced Pain Management Holdings gave incentive stock to nonemployee physicians as a reward for past and anticipated referrals to its surgery centers. The shares were to be redeemed when the company was sold. Their value depended on the company’s profitability, which the government said depended largely on those physicians’ referrals.

Under the alleged arrangement, physicians could send patients to a business in which they had been given a financial stake, with the expected payout tied to a future sale. The same referrals that brought procedures into the centers helped determine the value of the incentive stock.

For an insider, the useful connection is between the terms of the shares and the business the recipients brought in. We examine who received the stock, what the grant promised, how its value was determined and how the referral relationship figured into those decisions.

The Justice Department’s account of the financial arrangements explains the concern in patient terms: the Anti-Kickback Statute is intended to keep improper financial incentives from compromising medical judgment. Here, the alleged reward was built into an ownership interest. A referral could benefit the receiving business and the physician sending the patient there. The government’s concern was for patients whose care could follow those financial interests, and for taxpayers funding it.

Medical-Director Fees Tied to Procedures

The medical-director allegation concerned another way of paying nonemployee physicians. According to the government, Advanced Pain Management Holdings paid them to serve as medical directors under arrangements tied to the volume of procedures at its surgery centers.

According to the government, there were no written agreements documenting the services the directors were supposed to provide, and the physicians were not required to record or report their medical-director functions.

The alleged arrangement connected payment to procedures while leaving the work behind the director title undocumented.

We compare the compensation formula with the expected duties, activity records and procedure volumes. An employee who handled director payments may understand that connection even without working in the laboratory.

When Are Toxicology Tests Unnecessary?

In the Advanced Pain Management case, the government alleged that toxicology tests were unnecessary because providers failed to customize confirmatory orders to individual patients’ risk assessments and circumstances. For certain claims, the government said, that produced a higher level of testing than the medical record supported.

The government said Advanced Pain Management disclosed the urine drug test claims at issue to the Department of Health and Human Services.

What the Confirmatory Test Adds

Presumptive testing screens for drugs or drug classes. Definitive testing identifies particular drugs and their concentrations. The distinction matters inside a pain practice because the next test should answer a clinical question about that patient.

The 2014 Pain Physician paper Ethical Perspectives on Urine Drug Screening for Pain Physicians explains how drug-detection windows and the testing method affect results. It describes quantitative testing that can distinguish particular opioids and identify metabolites, helping a physician interpret what the initial screen means.

The paper explains the clinical work that individualized selection requires. A patient’s medication history, the drugs the test can detect and the question raised by the result all matter. The Advanced Pain Management allegation was that certain confirmatory orders outran the individualized assessment supporting them.

The payment system gives test selection financial weight. An HHS inspector general audit explains that Medicare’s clinical laboratory fee schedule pays definitive testing in tiers based on the number of drug classes tested, with higher payments for broader tiers. The audit reported approximately $3 billion in Medicare Part B payments for definitive testing from 2016 through 2020. Most of those services went to beneficiaries receiving pain-management treatment.

In the separate Logan Laboratories case, the government alleged automatic presumptive and definitive urine drug testing for every patient at every visit, without an individualized decision that either test was medically necessary.

The Records Behind the Order and the Payment

For Advanced Pain Management, we examine the patient’s risk assessment, the incentive-share terms and the expected medical-director duties. This is where someone who knows how the clinic actually worked can explain a discrepancy that a billing record alone leaves unanswered.

See laboratory documentation and recurring versus conditional test orders for the broader rules.

A Whistleblower Case and a Self-Disclosed Testing Problem

The Advanced Pain Management settlement resolved allegations brought in a whistleblower’s qui tam case in the Eastern District of Wisconsin.

The Justice Department’s October 1, 2020 announcement put the payment to the United States at $885,452. The district announcement the following day reported the broader $1 million settlement, which included that federal payment and also resolved state-law claims. The government said the federal payment reflected the companies’ ability to pay.

The department also said the whistleblower would receive a share of the federal recovery. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What Drove the Testing

If you saw how a clinic selected confirmatory tests or rewarded the physicians sending it business, talk with our whistleblower experts about the orders and payments you know. We work alongside you to build the case from that inside knowledge and bring in laboratory fraud whistleblower lawyers who understand testing decisions and referral compensation. From the first call through the case, we stay at your side to build your strongest laboratory fraud whistleblower case.