Osceola Laboratory Agrees to Pay $8.5 Million to Resolve False Billing Case

Osceola Laboratory Agrees to Pay $8.5 Million to Resolve False Billing Case

MADISON, WIS. — John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Pharmasan Labs, Inc. and NeuroScience, Inc., and  Gottfried Kellermann, 74, and Mieke Kellermann, 68, both of Osceola, Wis., have agreed to pay $8.5 million to the United States to resolve False Claims Act allegations.

The settlement resolves allegations that Pharmasan submitted false information for laboratory services billed to Medicare, and allegations that it violated Medicare rules pertaining to services referred by non-physician practitioners.  Pharmasan is a laboratory located in Osceola, and NeuroScience is a related corporation that bills Medicare for Pharmasan’s services.  The Kellermanns founded both corporations.

As part of the agreement, Pharmasan agreed that the United States could prove that: Pharmasan falsely billed Medicare for ineligible food sensitivity testing for nearly five years; Pharmasan employees knew that Medicare prohibited payment for food sensitivity testing; and Pharmasan employees submitted false information to Medicare disguising the type of test that Pharmasan was performing so that Medicare would pay for the services.

Pharmasan also agreed that the United States could prove that it knowingly submitted claims for laboratory services that violated Medicare billing rules.  Pharmasan knew that Medicare billing rules prohibit payment for laboratory services referred to a laboratory by non-physician practitioners, with few exceptions for mid-level practitioners.  A large portion of Pharmasan’s referrals for laboratory services came from non-physician practitioners that were not eligible to refer Medicare paid services.  Pharmasan employees nevertheless billed Medicare for these services for nearly five years.

Under the terms of the agreement, Pharmasan, NeuroScience, and the Kellermanns agreed to the forfeiture of $2,852,015.81 seized by federal agents on March 12, 2014.  They also agreed to pay an additional $5,669,837.58 to the United States.  Pharmasan, NeuroScience, and the Kellermanns separately executed a five-year

Corporate Integrity Agreement with the U.S. Department of Health and Human Services’ Office of Inspector General relating to the resolved allegations.  The Corporate Integrity Agreement requires Pharmasan, NeuroScience and the Kellermanns to implement a comprehensive compliance program, including an annual claims review that must be conducted by an independent review organization.  The agreement also requires implementation of a centralized annual risk assessment and review process designed to identify and address risks associated with submission of Medicare and Medicaid claims.   Finally, senior executives and employees must annually certify compliance with applicable Federal health care program requirements and the Corporate Integrity Agreement.

“As this settlement demonstrates, health care fraud will be aggressively pursued in Wisconsin,” said United States Attorney Vaudreuil.  “We will continue to work with our law enforcement partners to ensure that health care providers who lie to the United States, and place profits ahead of their legal and ethical responsibilities, are held accountable.”

The United States’ investigation stems from a whistleblower action filed under the qui tam provisions of the False Claims Act.  The whistleblower will receive $1,129,145 as part of this resolution.

This resolution was the result of an investigation conducted by the US. Department of Health and Human Services’ Office of Inspector General; Internal Revenue Service Criminal Investigation; Federal Bureau of Investigation; and the Department of Defense Office of the Inspector General – Defense Criminal Investigative Service.  The prosecution of this case was handled by Assistant U.S. Attorneys Antonio M. Trillo and Daniel H. Fruchter.

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