The United States has filed a complaint under the False Claims Act against Daniel McCollum, a chiropractor based in Greenville, South Carolina, and pain management clinics and urine drug testing laboratories that McCollum owned or managed for engaging in illegal financial relationships and providing medically unnecessary services and items, including urine drug testing and steroid injections and prescriptions for opioids and lidocaine ointment, the Department of Justice announced today. The entities named as defendants in connection with McCollum’s schemes are FirstChoice Healthcare P.C.; Labsource LLC; Oaktree Medical Centre P.C.; Pain Management Associates of the Carolinas LLC; Pain Management Associates of North Carolina P.C.; and ProLab LLC. The United States’ complaint also names as a defendant ProCare Counseling Center LLC, a substance abuse counseling center located in Greenville, South Carolina, that the government contends referred medically unnecessary urine drug tests to ProLab, which it co-owned with McCollum.

“Individuals and entities that participate in federal health care programs must comply with the rules intended to safeguard the integrity of those programs,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “We will not tolerate practices such as the ordering of unnecessary items or services and providing illegal inducements to physicians that lead to excessive costs being imposed upon our nation’s health care programs.”

“The U.S. Attorney’s Office for the District of South Carolina will not tolerate health care fraud, which victimizes both patients and taxpayers,” said Sherri Lydon, United States Attorney for the District of South Carolina. “We are committed to protecting taxpayer dollars from fraudulent billing practices and to holding accountable those in the medical community who have fueled the opioid crisis through abusive prescribing habits. Through False Claims Act cases like this one, we will continue to bring these bad actors to justice.”

The United States’ complaint alleges that from at least Jan. 1, 2011 through Dec. 31, 2018, McCollum and his pain management clinics paid bonuses to physicians and other health care providers that included amounts based directly on their referrals of urine drug testing to McCollum’s laboratories, in violation of the Stark Law and the Anti-Kickback Statute. The United States also alleges that McCollum and Labsource violated the Anti-Kickback Statute by entering into “direct bill” agreements with physicians and other providers around the country that entitled those providers, after paying Labsource a set fee to run the test panels they ordered, to bill private insurance companies directly for those tests – and generally for much more than they had paid Labsource. The United States contends in its complaint that McCollum and Labsource offered providers the opportunity to profit in this manner to induce them to refer their tests for Medicare, Medicaid, and TRICARE patients to Labsource.

Congress passed the Stark Law and Anti-Kickback Statute to prevent financial incentives from improperly influencing medical decision-making, which can lead to excessive and unnecessary tests and services, as well as patient harm. Among other things, the Stark Law prohibits billing Medicare for laboratory testing services referred by a physician who stands to profit directly from those referrals. The Anti‑Kickback Statute, in relevant part, prohibits offering or paying anything of value to encourage the referral of items or services covered by federal health care programs, including laboratory testing services.

The United States’ complaint also alleges that McCollum and the other defendants, including ProCare, directed or encouraged providers to use “standing orders” of laboratory tests across all or most of their patients without regard for individual patient need – which caused Medicare, Medicaid, and TRICARE to pay for medically unnecessary tests. Finally, the complaint alleges that McCollum and his pain management clinics caused these federal health care programs to pay for excessive and unnecessary steroid injections and unnecessary prescriptions for opioids and lidocaine ointment.

The United States filed its complaint in three consolidated lawsuits pending in the United States District Court for the District of South Carolina under the qui tam, or whistleblower, provisions of the False Claims Act. Under the Act, a private citizen can sue on behalf of the government and share in any recovery. The United States also is entitled to intervene in the lawsuits, as it did in these cases on March 1.

This matter was investigated by the Commercial Litigation Branch of the Department of Justice’s Civil Division, the U.S. Attorney’s Office for the District of South Carolina, the FBI, the Department of Health and Human Service’s Office of Inspector General, the South Carolina Attorney General’s Office, and the Defense Criminal Investigative Service. The claims asserted in this action are allegations only, and there has been no determination of liability.

The consolidated civil cases are United States ex rel. Rauch, et al. v. Oaktree Medical Centre, P.C., et al., No. 6:15-cv-01589-DCC (D.S.C.); United States ex rel. Mathewson v. Dr. Daniel A. McCollum, et al., No. 6:17-CV-01190-DCC (D.S.C.); and United States ex rel. Hawkins v. Pain Management Associates of the Carolinas, LLC, et al., No. 8:18-cv-02952-DCC (D.S.C.).