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Biodiagnostic Laboratory Services Leaders Sentenced to Prison in $100-Million Lab Test Kickback Scheme That Also Led to Convictions of 38 Physicians

Jul 30, 2018 | Laboratory Management and Operations, Laboratory News, Laboratory Pathology, Laboratory Testing, Management & Operations

DOJ says now-defunct clinical laboratory in New Jersey generated test orders by bribing physicians with cash, concert tickets, vacations, high-end automobiles, and prostitutes 

It finally happened! Two medical laboratory executives were given jail sentences for their role in the rampant fraud and abuse committed during the operation of Biodiagnostic Laboratory Services (BLS) of Parsippany, N.J. The court accepted their guilty pleas in 2015, but delayed sentencing until this year, because the two defendants cooperated with prosecutors.

Anatomic pathologists and clinical laboratory managers pushing for stronger enforcement of anti-kickback laws may have gotten their wish with the sentences announced by the federal judge. The two BLS executives admitted to bribing doctors in a $100-million kickback scheme. Thirty-eight doctors also have been convicted of criminal felony charges during the more than five-year investigation.

On June 13, the judge sentenced David Nicoll, 44, President of now-defunct BLS, to six years in federal prison. His brother Scott Nicoll, 37, a concert ticket broker who became a senior BLS employee, received a 43-month sentence. Each defendant previously had pled guilty to one count of conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of money laundering.

“Today, the president of a diagnostic lab company and his brother were sentenced for their leading roles in a scam that led to one of the largest ever prosecutions of medical professionals in a bribery case,” U.S. Attorney Craig Carpenito, JD, stated in a U.S. Attorney’s Office news release. “Medical referrals from a doctor should be based on what’s in the patient’s best interest, not on how much money the doctor is offered in kickbacks. The number of doctors and medical professionals sent to prison in this case should make that message abundantly clear.”

Hundreds of Doctors Bribed!

Prosecutors believe BLS may be one of the largest medical frauds ever prosecuted, with the federal investigation into the scheme leading to convictions of 53 defendants including:

  • BLS President David Nicoll;
  • BLS employee Scott Nicoll;
  • 38 physicians and physician assistants;
  • Three Nicoll extended-family members; and,
  • 10 others, including numerous other BLS employees.

While the brothers’ sentences were far below the 25-year combined maximum jail time they faced after pleading guilty to conspiracy to bribe doctors and money laundering, their cooperation with prosecutors led to reduced sentences.

A one-time nurse and former pharmaceutical sales representative, David Nicoll purchased BLS in 2005, which was then a failing clinical testing laboratory. In his testimony for the government prosecution, the 44-year-old Nicoll described how his company took business away from competing labs by bribing doctors to steer blood samples to BLS for testing.

Now-defunct Biodiagnostic Laboratory Services President David Nicoll (second from left) and his brother Scott Nicoll (far right) leave a Newark courthouse in 2013 accompanied by their representatives. The two New Jersey brothers, who admitted to bribing hundreds of doctors and laundering money for fraudulent blood testing services, recently were sentenced to prison for their roles in the $100-million scheme. (Photo copyright: Associated Press.)

According to the Associated Press, Nicoll changed the lab’s fortunes by signing phony leases for space in doctors’ offices. After New Jersey outlawed the practice, BLS “switched to bribing doctors with bogus consultant agreements paid for by shell corporations formed specifically for that purpose.” Nicoll testified he bribed “the large majority” of the “probably hundreds” of doctors with whom he did business.

NJ Advance Media detailed the wide-reaching bribery scheme. It included not only monthly payments to physicians to keep the blood work orders flowing, but also big ticket payoffs, according to a U.S States Attorney’s Office District of New Jersey news release. The briberies included:

  • $50,000 Audi S5 turbocharged coupe;
  • Private jet to Key West for deep-see fishing;
  • Charter flight to the Super Bowl;
  • Tickets to a Katy Perry concert; and,
  • Prostitutes provided to at least five physicians.

Nicoll is alleged to have reaped huge personal gain from the fraud, including more than $33 million in distributions from the $200 million BLS received from the testing of blood specimens and related services between 2006 and 2013. In another article NJ Advance Media outlined some of the millions Nicoll spent to enhance his lifestyle, including an $800,000 Mickey Mouse-shaped backyard pool, trips on charter jets to four Super Bowls, and a collection of classic American muscle cars.

“The president and other employees of BLS bribed physicians to refer patients to their lab and order unnecessary lab tests, reaping millions of dollars, all in the name of greed,” Shantelle P. Kitchen, Acting Special Agent in Charge, IRS Criminal Investigation/Criminal Enforcement, Newark field office, stated in the U.S. Attorney’s Office statement, released in 2013 when the Nicolls’ brothers and a third BLS employee were arrested.

“Medical tests should only be run when medically necessary, not so someone can buy exotic cars and charter private jets. This type of healthcare fraud will not be tolerated and IRS-Criminal Investigations, along with our law enforcement partners, will vigorously investigate these crimes to bring the perpetrators to justice.”

More Physicians Plead Guilty to Fraud, Money Laundering, Tax Evasion

While dozens of physicians ultimately admitted to accepting bribes to refer business to BLS, New Jersey internist Frank Santangelo, MD, may have reaped the biggest payoff. Santangelo pleaded guilty in July 2013 of accepting more than $1.8 million in bribe payments from BLS for referrals, for which the lab was paid more than $6 million by Medicare and various insurance agencies between 2006 and 2012.

According to a July 8, 2015, U.S. Department of Justice (DOJ) news release, Santangelo was sentenced to 63 months in prison, fined $6,250 and forfeited $1.8 million as part of his plea agreement for violations of the Federal Travel Act, money laundering, and failing to file tax returns.

“Santangelo admitted he violated the trust of his patients, who should be able to count on their doctors’ prescribing only tests that are necessary, and recommending providers based solely on their qualifications,” stated then-U.S. Attorney Paul J. Fishman for the District of New Jersey, in the DOJ statement.

In another highly publicized case, George Roussis, a pediatrician, and his brother Nicholas Roussis, an obstetrician-gynecologist, both with practices in Staten Island, N.Y., were convicted of accepting cash payments totaling $175,000 from BLS employees and associates between 2010 and 2013. In addition, the U.S. Attorney’s Office said in a 2017 statement that BLS paid for strip club trips for the brothers, who in return funneled $1,450,000 and $250,000 of lab business to BLS, respectively. George Roussis, 45, was sentenced to 37 months in prison, while Nicholas Roussis, 49, received a 24-month sentence.

According to the U.S. Attorney’s Office statement, the government has recovered more than $15 million through forfeiture in what is believed to be a record-setting healthcare fraud case.

Criminal prosecution by federal prosecutors of both the clinical laboratory owners and the physicians who accepted bribes and illegal inducements in return for referring medical laboratory tests is not common. That fact makes this case noteworthy. It serves as a warning to all clinical laboratory professionals and the physicians who may accept kickbacks or illegal inducements that there is a risk that they can be prosecuted for these crimes.

—Andrea Downing Peck

 

Related Information:

He Bribed Doctors with Cash and Prostitutes. Here’s How much Time He’ll Spend in Prison

President of New Jersey Clinical Laboratory and his Brother, a Senior Employee, Sentenced to Prison in $100m+ Test Referral/Bribery Scheme

Doctor Sentenced to 63 Months in Prison for Accepting $1.8 Million in Bribes for Test Referrals

Brothers Who Ran $100M Health Fraud Scam Sentenced to Prison

Strip Clubs Bribes and Blood Money: The Inside Story of a $150M Medical Fraud

New Jersey Clinical Lab at Center of Largest Physician Bribery Case Ever Prosecuted Pleads Guilty

Five Doctors Plead Guilty in Connection with Test-Referral Scheme with New Jersey Clinical Lab

CMS’s ‘Innovation Center’ May Be the Affordable Care Act’s Lasting Legacy, Particularly as It Works to Replace Fee-for-Service Payments with New Reimbursement Models

Aug 1, 2016 | Coding, Billing, and Collections, Laboratory Management and Operations, Laboratory News, Laboratory Operations, Laboratory Pathology, Management & Operations

Clinical laboratories and pathology groups feel the impact of many of the Center’s demonstration projects that move healthcare toward value-based reimbursement

One perennial criticism of this nation’s healthcare system is that it is slow to innovate. Technologies and management principals widely adopted by many industries may take a decade or longer to gain acceptance by hospitals, physicians, and clinical laboratories.

To encourage faster adoption by useful technologies and innovations by providers, the Affordable Care Act (ACA) has a section that is not well known. This part of the law, passed in 2010, created  the Center for Medicare & Medicaid Innovation.

The Innovation Center was included in the ACA legislation for the purpose of testing “innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care” for Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) beneficiaries.” (more…)

23andMe Socked with FDA Warning Letter and Class Action Lawsuit over Company’s Genetic Testing Services

Dec 11, 2013 | Compliance, Legal, and Malpractice, Digital Pathology, Instruments & Equipment, Laboratory News, Laboratory Pathology, Laboratory Sales and Marketing, Management & Operations

FDA’s assertion of power to regulate genetic tests is a familiar argument to pathologists and clinical laboratory scientists, but does create problems for 23andMe

It has been national news since November 22, when the Food and Drug Administration (FDA) sent a letter to 23andMe ordering it to stop the sale of direct-to-consumer genetic tests. The FDA said that 23andMe had failed to prove the validity of its genetic tests and gave the company 15 days to respond and  identify the steps it would take to address  FDA concerns.

This event has fulfilled the predictions of many pathologists and clinical laboratory professionals. Having dealt with the FDA throughout their careers, experienced medical laboratory scientists knew that the FDA would eventually take enforcement action against 23andMe, if the company did not provide adequate scientific information to support the clinical validity of its genetic tests. (more…)

23andMe Submits Genetic Test Applications with the FDA

Aug 6, 2012 | Digital Pathology, Instruments & Equipment, Laboratory Management and Operations, Laboratory News, Laboratory Pathology

23andMe executives want the credibility that FDA clearance provides for its DNA tests and declared their intent to eventually support more clinical laboratory test applications

Offering genetic tests directly to consumers is a controversial subject among some pathologists and healthcare ethics experts, who question both the science of these tests and whether consumers will do the right thing with the information.

Now that debate is likely to heat up, because direct-to-consumer genetic testing company 23andMe recently submitted an application to the Food & Drug Administration (FDA) to review and clear its personalized DNA test for market.

On July 30, 23andMe delivered its first round of 510(k) documentation to the FDA. This is a first for the direct-to-consumer genetic testing industry. At the same time, by seeking FDA clearance for its genetic tests, 23andMe will raise interesting issues for the traditional clinical laboratory testing profession. (more…)

Federal Government Agrees to Open Access to Medicare Data about Individual Doctors

Jan 27, 2012 | Compliance, Legal, and Malpractice, Laboratory News, Laboratory Pathology

Experts predict employers will use this data to create “report cards” on individual physicians

In a big step forward for public access to data about provider outcomes, the Department of Health and Human Services (HHS) will make its enormous Medicare claims database more broadly available to the public. Both the press and the public will be able to search for information about individual physicians. It is likely that information about pathologists will be searchable in this manner.

Specifically, Medicare will relax its restrictions on the release of information about individual doctors who participate in Medicare. This development was reported recently by The Wall Street Journal, which played a role in getting HHS to make physician data available to the public.

“This is a giant step forward in making our health care system more transparent,” stated Marilyn Tavenner, Medicare’s Acting Administrator. (more…)

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