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Qui Tam Case Settles for $7 Million

McCabe Rabin, P.A. announces the settlement of a laboratory billing fraud case for approximately $7 million, pending in the Western District of North Carolina. The case involved a now defunct diagnostic laboratory based in Rockville, South Carolina, known as Physicians Choice Laboratory Services (“PCLS”).

The suit alleged that PCLS violated the Anti-Kickback Statute by engaging in a variety of schemes to induce the referral of patient samples to the laboratory for drug testing. Under the False Claims Act, any claims tainted by a violation of the Anti-Kickback Statute are deemed “false” under the law. Among other claims, the suit alleged that PCLS submitted false claims to the Medicare program as a result of various kickback schemes, including (1) the provision of free drug testing equipment to physicians in exchange for referrals; (2) the payment of illegal volume-based commissions to salespeople; and (3) the provision of cash loans to physicians in exchange for referrals.

PCLS went out of business and became defunct prior to the end of the case. Nevertheless, the United States Attorney’s office continued to pursue the case against the company’s owners, Douglas Smith, Phillip McHugh, and Manoj Kumar. The government eventually reached settlements with these owners, totaling a little over $7 million.

Our law firm originally filed this case in the Middle District of Florida, but it was subsequently transferred to the Western District of North Carolina to be consolidated with another case pending against PCLS.

Firm partner Ryon McCabe thanks the United States Attorney’s Office in the Western District of North Carolina as well as the dedicated agents of HHS-OIG for their outstanding work in this case.

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