Oaktree: Referral Bonuses, Blanket Testing and Default Judgments

The Oaktree laboratory fraud judgments totaled $140 million against companies the government said paid for urine drug test referrals and billed federal health care programs for unnecessary testing. Former clinic employees brought the qui tam cases, and the government joined them. The court entered the judgments after the companies failed to defend the case.

Oaktree Medical Centre was part of a network owned or operated by a Greenville, South Carolina chiropractor. The alleged incentive went beyond a bonus for ordering another test: Labsource offered providers a way to profit from privately insured testing in return for their Medicare, Medicaid and TRICARE referrals.

The Oaktree Default Judgments Were Against the Companies

The Oaktree default judgments were against the corporate defendants. When the Department of Justice announced them in September 2021, the owner had answered the government’s complaint and was still litigating his case. His separate civil resolution followed that November.

The court entered the first default judgment on July 20, 2020, against ProLab and ProCare Counseling Center, for $4,269,084.

On September 2, 2021, the court entered a further $136,025,077 judgment against Oaktree Medical Centre, FirstChoice Healthcare, Labsource, Pain Management Associates of the Carolinas and Pain Management Associates of North Carolina.

The Counseling Center That Co-Owned the Lab It Fed

The government’s complaint announcement named the clinic companies alongside Labsource and ProLab. ProCare was a substance abuse counseling center in Greenville, South Carolina. The government alleged that it sent medically unnecessary urine drug tests to ProLab, which it co-owned with the chiropractor.

That relationship put the counseling center on both sides of the referral: it sent the tests and held an ownership interest in the laboratory receiving them. Labsource’s separate arrangement reached physicians and other providers around the country.

The network joined pain treatment, urine drug testing and substance abuse counseling. Its chiropractor owner operated pain management clinics in South Carolina, North Carolina and Tennessee, doing business collectively as Pain Management Associates. He also owned and operated laboratories and a pharmacy in South Carolina.

Do Doctors Get Kickbacks for Ordering Tests?

In the Oaktree case, the government alleged that physicians and other providers received bonuses based directly on their urine drug test referrals. The alleged bonus arrangements ran from at least January 1, 2011, through December 31, 2018.

Labsource’s direct-bill program offered a different financial benefit. According to the government’s complaint announcement, a provider paid Labsource a set fee to run the ordered test panels, then billed the patient’s private insurer directly. The provider generally billed much more than it paid the laboratory. The opportunity to keep that difference was the alleged inducement to send Medicare, Medicaid and TRICARE testing to Labsource.

The private-insurance business supplied the reward for sending the government-insured business. That is why the commercial agreement mattered to a False Claims Act case about federal payments. The money reaching the referring practice could take the form of profit on a laboratory bill, as well as a referral bonus.

For someone inside a practice, the connection may sit in compensation terms and referral totals. For someone inside the laboratory, it may sit in the direct-bill agreement and the split between commercial and federally insured patients. We examine those relationships together because the price offered on one set of tests can explain where another set went.

When Are Toxicology Tests Unnecessary?

In Oaktree’s case, the government alleged that providers used standing orders across all or most patients without regard to individual need. The defendants allegedly directed or encouraged that practice, causing Medicare, Medicaid and TRICARE to pay for medically unnecessary tests. The same order could keep producing laboratory work without a fresh assessment of what each patient needed. Taxpayers funded tests the government said patients did not need.

The clinical literature puts the patient’s circumstances back into that decision. The Journal of Family Practice’s 2021 review, Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, describes an ongoing assessment that incorporates the patient’s history, toxicology results, behavior and prescription monitoring. In addiction treatment settings, it describes a decision that happens after collection:

Collecting a specimen and sending it for testing are separate decisions. The review also identifies excessive frequency, large expensive panels and unnecessary confirmatory testing as practices associated with financially driven overtesting. Those distinctions give clinical staff something specific to recognize: a test menu or schedule that keeps expanding while the patient’s reasons for testing stay the same.

The Oaktree complaint also reached treatment decisions. It alleged excessive and unnecessary steroid injections and unnecessary opioid and lidocaine prescriptions. The referral and testing allegations sat inside a pain-management business whose treatment choices were also under scrutiny.

Genotox Laboratories admitted offering custom profiles that let providers preselect tests for all or nearly all their patients.

The Owner’s Separate Judgment and Admissions

The court entered a $9 million civil judgment against the owner in November 2021, far less than the judgments against his companies. The Department of Justice’s announcement later that month describes admissions made in resolving the civil allegations. He admitted providing kickbacks through Labsource’s direct-bill program, giving providers revenue from commercially insured referrals to induce them to send all their federally insured urine drug testing patients to Labsource.

The civil resolution also addressed medically unnecessary pain-cream prescriptions, often issued without the knowledge or approval of the patients’ healthcare providers and regardless of medical purpose. The owner admitted that the described conduct involved deception intended to cause the United States to pay false claims.

The criminal case supplied a separate admission. According to the same announcement, the criminal information and plea agreement recorded his admission to a conspiracy to pay illegal kickbacks and defraud healthcare programs by billing for unnecessary medical services.

What Clinic and Laboratory Employees Can See

Clinic and laboratory employees can see how orders and financial incentives fit together. That access matters because the order, the reason for the test and the financial incentive can sit in different places.

The laboratory workflow explains that separation. The treating practitioner orders the test and retains the medical-necessity documentation. The laboratory performs the service, reports the result and submits the claim. An order form shows what was requested. The clinical record supplies the patient’s reason for testing. A bonus formula or direct-bill agreement shows what the referral was worth to the provider.

Our work connects those pieces: which patients went to which laboratory, which tests were selected, what the clinical record supported and how the referring practice benefited. Someone who knows the ordering routine or the compensation arrangement can explain a connection that a paid claim alone does not show.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Tests Were Chosen

If you saw referral bonuses, profitable direct-bill agreements or the same test panel ordered across a practice, speak to one of our whistleblower experts about how the arrangement worked. We build the case with you and bring in laboratory fraud whistleblower lawyers who understand referral payments and unnecessary testing. You have a partner from the first account of the clinic’s business through the pursuit of a recovery.