PROMED: A Physician-Marketer Bribe Scheme the Labs Did Not Know About

PROMED laboratory kickbacks involved cash payments to a Toms River, New Jersey osteopathic physician for blood and DNA testing referrals, according to the Justice Department’s account of his guilty plea. The marketers counted the patients he sent, then paid him. The laboratories whose tests they sold knew nothing about the bribes.

The people buying the physician’s referrals were the two sales representatives who ran PROMED.

Do Doctors Get Kickbacks for Ordering Tests?

Yes. In the PROMED case, a physician admitted accepting cash kickbacks for sending patient laboratory work to the companies the marketers represented. PROMED was a marketing and sales company specializing in blood-testing laboratories and DNA laboratory-testing companies. The two sales representatives were partners operating that business.

According to the criminal plea announcement, the arrangement ran from March 2014 through May 2015. One laboratory performed blood testing and the other performed DNA testing. Both paid the marketers monthly commissions for referrals. After the checks arrived, the marketers identified how many patients the physician had referred and paid him cash based on those patients.

The February 11, 2016 indictment announcement supplies the financial detail. Prosecutors alleged that the marketers’ commissions were 10% of the reimbursements the laboratories received from payers, including Medicare. They alleged that the physician received approximately $25,000 in cash bribes for his referrals.

A patient referral had become something the doctor could sell.

Who Is Committing Healthcare Fraud?

In this criminal case, the physician admitted accepting bribes and the two PROMED marketers admitted conspiring to bribe him.

On June 23, 2016, the physician pleaded guilty to conspiring to accept cash bribes. The announcement also reported that both marketers had pleaded guilty to conspiring to bribe a physician.

The same announcement called the blood-testing laboratory Company 1 and the DNA-testing laboratory Company 2. It then said:

The laboratories paid for marketing. Their representatives then used the referral business to buy the physician’s cooperation. The government traced that second transaction to the marketers and the doctor.

The Order, the Test and the Referral Payment

Laboratory work separates the person choosing the test from the business performing and billing for it. The treating clinician orders the test and holds the medical record supporting its need. The laboratory performs the service, reports the result and submits the claim. Under the Medicare law, Medicare generally pays the performing laboratory directly.

That division gives each participant a different view of the same referral. The physician knows the patient and the reason for the order. Laboratory personnel see the requested testing and the work performed. Billing staff see the claim and reimbursement. A sales representative may see which practice generated the business and how that business affects a commission.

The physician’s criminal plea announcement shows the sales representatives using that last piece of information to pay the doctor. They received the commission checks and identified his referred patients before paying him. The referral count connected the medical practice to the cash.

The distinction matters to a health care insider who sees only one part of the business. A requisition identifies the testing requested. A commission schedule explains how the representative gets paid. The account of the cash arrangement explains why the physician sent the work. Together, those facts tell a story that the test result alone cannot tell.

When the Laboratory Was Part of the Arrangement

Other laboratory referral cases place the laboratory itself inside the payment scheme. Biodiagnostic Laboratory Services, another New Jersey laboratory, pleaded guilty in its own criminal case. The government’s account described bribes routed through sham leases, service agreements, consulting agreements and third-party businesses.

That comparison makes PROMED’s arrangement easier to understand. In the Biodiagnostic case, the laboratory itself pleaded guilty. In the PROMED case, the government identified a physician and marketers taking part in an arrangement the receiving laboratories did not know about. Following the payment means following the decisions at each business, too.

How a Referral Count Became a Cash Payment

For referral-payment fraud, we connect what happened in the medical practice with the laboratory orders, the sales compensation and the payments to the referral source. PROMED shows why the relationship between those records matters: the marketers used the physician’s patient referrals to determine his cash payments.

A laboratory employee may know the commission arrangement while someone at the practice knows what the doctor was offered. A marketer may understand how a referral count became a payment. Sales representatives, billing staff, phlebotomists, laboratory personnel and practice employees can each hold a different part of that account. Our work with an insider is to connect those parts to the people making the decisions and the government money involved.

PROMED’s case raises the question: after a laboratory paid its marketers, what did those marketers pay the physician to do?

Laboratory Fraud and Whistleblower Rewards

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

You Know What Bought the Referrals

If you know how laboratory commissions became payments or benefits for a referring practice, speak to one of our Whistleblower Experts about who paid for those referrals. We build the case with you, bring in laboratory fraud whistleblower lawyers who understand referral payments and Medicare claims, and stay beside you throughout the case.