Former laboratory CEO Susan Hertzberg, of New York, and former laboratory sales executive Matthew Theiler, of Pinehurst, North Carolina, have agreed to pay $1.2 million to resolve False Claims Act litigation with the United States alleging illegal payments to doctors for laboratory referrals in violation of the Anti-Kickback Statute.
One doctor — Frederick Brown, of Missouri City, Texas — and six marketers — Thomas Gray Hardaway, of San Antonio, Texas; William Todd Hickman, of Anna, Texas; and Ginny Jacobs, Scott Jacobs, S&G Staffing LLC, and Jacobs Marketing Inc., all of Magnolia, Texas — have agreed to pay an additional $859,055 to settle the United States’ laboratory kickback allegations against them in the case.
With these settlements, the Department of Justice has secured over $61 million in civil False Claims Act settlements since 2019 for kickbacks to healthcare providers disguised as managed service organization (MSO) investment distributions, including recoveries from over 50 physicians.
“The Department of Justice is committed to rooting out fraud, waste, and abuse in federally funded healthcare programs,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “Kickback schemes can waste taxpayer dollars, erode healthcare providers’ medical judgment, and result in patients being subjected to unnecessary medical treatments.”
“Nearly every working American took time recently to pay their federal taxes. As we did so, we all hoped that our money was being used wisely, and we trusted that systems were in place to prevent the types of fraud and kickback schemes that this case uncovered,” said U.S. Attorney Jay R. Combs for the Eastern District of Texas. “In the Eastern District of Texas, we mean to deliver on the promise of the President, the Vice President, and Acting Attorney General to aggressively combat the fraudulent use of tax dollars. The settlements today, along with the criminal convictions in the related case, show that we are delivering on that promise.”
“This settlement demonstrates that violations of the Anti‑Kickback Statute, such as alleged here, can undermine clinical judgment and erode trust in the health care system,” said Acting Deputy Inspector General for Investigations Scott J. Lampert of the U.S. Department of Health and Human Services, Office of Inspector General (HHS‑OIG). “HHS‑OIG will continue working with our law enforcement partners to make sure that anyone who uses kickbacks to compromise the integrity of medical decision‑making and generate unnecessary services is held accountable.”
“By disrupting fraud and misconduct of this nature, we help to ensure TRICARE, the uniformed services’ primary health care program, is better positioned to deliver critical care to the warfighter,” said Special Agent in Charge Chad Gosch of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS) Southwest Field Office. “This result demonstrates the commitment of DCIS and our investigative partners to aggressively pursue those who seek to betray the American taxpayer and undermine our military’s healthcare system.”
The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded healthcare programs. It seeks to ensure that medical providers’ judgments are not compromised by improper financial incentives and are instead based on the best interests of their patients.
Susan Hertzberg — the former CEO of Boston Heart Diagnostics Corporation (Boston Heart), a laboratory in Framingham, Massachusetts — agreed to pay $600,000 to resolve allegations that she caused false claims for laboratory testing to Medicare, Medicaid, and TRICARE from 2015 to 2017. Likewise, Theiler, Boston Heart’s former VP of Sales, also agreed to pay $600,000 to resolve allegations that he caused false claims for laboratory testing to Medicare, Medicaid, and TRICARE from 2015 to 2017. Hertzberg and Theiler allegedly agreed to a kickback scheme in which marketers, including Boston Heart’s own employees, offered and paid doctors kickbacks disguised as MSO distributions to induce the doctors’ referrals to Texas hospitals for laboratory testing performed by Boston Heart, including medically unnecessary testing. Hertzberg and Theiler allegedly knew that marketers using MSOs were recruiting doctors to order testing performed by Boston Heart for a hospital in Texas and were given a “strong recommendation” to “reel this in” and “stand down on all hospitals,” particularly in Texas. Nevertheless, Hertzberg allegedly approved, and Theiler allegedly implemented, an expansion of the Texas hospital arrangement to another hospital to continue working with many of the same marketers.
In addition, the settlements announced today resolve the United States’ allegations in the lawsuit that Dr. Brown solicited and received kickbacks in violation of the Anti-Kickback Statute from laboratory marketers’ purported MSOs in return for laboratory testing referrals. Dr. Brown agreed to pay $309,055 to resolve allegations that from November 2015 to November 2017, he received thousands of dollars in payments from two purported MSOs, Ascend MSO of TX LLC and Indus MG LLC, in return for ordering laboratory tests from Little River Healthcare, a critical access hospital in Rockdale, Texas, and True Health Diagnostics LLC, a clinical laboratory in Frisco, Texas.
Lastly, the following marketers and their associated entities agreed to pay a total of $550,000 to resolve the United States’ allegations in the civil litigation that they paid kickbacks disguised as MSO payments to doctors to induce the doctors’ laboratory testing referrals: Former MSO owner William Todd Hickman; Thomas Gray Hardaway, a former Boston Heart sales representative and co-owner of Texas marketing company LGRB Management Services LLC; and Ginny Jacobs and Scott Jacobs, co-owners of Texas marketing companies S&G Staffing LLC and Jacobs Marketing Inc. Hickman’s civil settlement amount was based on his ability to pay. The civil settlement amounts that Hertzberg, Theiler, Dr. Brown, Hickman, and Hardaway agreed to pay were in addition to amounts they were ordered to pay in a criminal proceeding captioned United States v. Susan Hertzberg, et al., No. 6:22-cr-3-JDK (E.D. Tex.).
The settlements announced were the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Eastern District of Texas, with assistance from HHS-OIG and DCIS. They were handled by attorneys Christopher Terranova and Gavin Thole in the Civil Division’s Commercial Litigation Branch (Fraud Section) and Assistant U.S. Attorneys James Gillingham and Betty Young in the U.S. Attorney’s Office for the Eastern District of Texas.
The government’s pursuit of these matters illustrates the government’s emphasis on combating healthcare 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 the Department of Health and Human Services, at 1-800-HHS-TIPS (800-447-8477).
This year the Administration launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division to enhance the Administration’s war on fraud, waste, and abuse in federal programs. When unscrupulous actors exploit these programs for their own financial gain, they defraud the government, harm the people these programs are designed to aid and protect, and undermine American businesses that play by the rules. The Civil Division’s FCA enforcement plays a critical role in combatting such fraudulent schemes, recovering billions of dollars for the American taxpayers, and holding wrongdoers accountable. FCA matters will continue to be on the forefront of the battle against fraud, and the Civil Division’s FCA work will support and advance the mission of the Task Force to Eliminate Fraud and the National Fraud Enforcement Division.
The claims resolved by the settlements are allegations only, and there has been no determination of civil liability.
