LITTLE ROCK, AR (KATV) — A North Little Rock pathology lab and several of its current and former owners are paying $30 million to settle federal allegations that the company used unlawful kickbacks and ordered testing that wasn’t medically necessary.

Advanced Pathology Solutions PLLC, formerly known as Advanced Pathology Solutions LLC, and its management services organization, APS MSO LLC — together referred to as APS — agreed to the settlement with the United States. The agreement also includes current and former owners Kevin Hannah, Donell Burkett and Daniel Hunter Pledger.

“Healthcare referrals must be based on the best decision for patients, not the influence of kickbacks,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “This settlement demonstrates the Department’s commitment to hold accountable both corporations and individuals who profit from improper kickback arrangements and who burden federal healthcare programs with claims for medically unnecessary services.”

The settlement resolves allegations laid out in a federal complaint filed April 8 in the U.S. District Court for the Eastern District of Arkansas. The United States alleged that from 2015 through July 2022, APS and its owners violated the False Claims Act by providing unlawful kickbacks to gastroenterology practices to induce referrals of pathology testing to APS, resulting in false claims to federal health care programs.

According to the complaint, APS and its owners developed a business model that involved setting up and managing limited-purpose laboratories — known as “lean labs” — inside gastroenterology practices nationwide. Those practices could bill for preparing and staining biopsy specimen slides, while the slides were then shipped to APS’s lab in North Little Rock for pathologist interpretation and review. Federal officials alleged that in exchange for various benefits furnished by APS, the gastroenterology practices agreed to exclusively refer their patients to APS, creating improper financial relationships that amounted to kickbacks.

“Fraud against the taxpayer is rampant and insidious and when discovered must be held accountable. Engineering kickbacks to result in unnecessary medical testing which is then paid for by the United States taxpayer is unacceptable and once discovered as with APS, will result in lengthy investigation and review, and ultimately a significant settlement amount as demonstrated by this settlement,” said U.S. Attorney Jonathan D. Ross for the Eastern District of Arkansas. “Our office will continue to work with Main Justice to detect and deter any similar schemes and then hold the wrongdoers accountable under the law.”

The United States also alleged APS and its owners submitted — and caused the submission of — claims to federal health care programs for unnecessary testing. Specifically, the government said APS directed lean lab personnel to automatically order certain special tests, called “special stains,” before a pathologist reviewed a routine test, a hematoxylin and eosin stain, to determine whether additional testing was needed. The complaint alleged the protocol led to special stains that were not medically reasonable and necessary and were ineligible for Medicare coverage or reimbursement. In many cases, the government said APS also ordered additional “confirmatory” immunohistochemical testing that was not medically necessary.

“Kickbacks and medically unnecessary testing don’t just violate the law — they endanger patients and drain critical federal health care funds,” said Acting Deputy Inspector General for Investigations Scott J. Lampert of the U.S. Department of Health and Human Services Office of Inspector General. “Schemes like this erode trust in the health care system and divert resources away from those who truly need care. HHSOIG will move swiftly and aggressively with our law enforcement partners to uncover these abuses and hold every responsible party accountable.”

In addition to the allegations in the April 8 complaint, the settlement also resolves claims that from Nov. 1, 2018, to Nov. 30, 2020, APS and CEO Kevin Hannah knowingly and willfully provided unlawful kickbacks to Richard Sorgnard through volume-based commission payments to induce referrals for epidermal nerve fiber density testing. The United States contends APS paid Sorgnard 4% of all payments APS collected for ENFD testing he referred, and that the arrangement violated the Anti-Kickback Statute and resulted in false claims under the False Claims Act. Sorgnard previously entered into a settlement with the government to resolve related claims.

“Any entity that participates in health care and reaps illicit profits by taking advantage of and violating the trust given by Medicare and Medicaid programs must be held accountable,” said U.S. Attorney Troy Rivetti for the Western District of Pennsylvania. “This settlement is notice that such illegal conduct simply will not be tolerated.”

As part of the resolution, APS entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General. The agreement requires APS to implement auditing and accountability provisions, including a compliance program, training and education requirements, and a review of physician referral relationships.

The complaint followed three lawsuits originally filed under the whistleblower provisions of the False Claims Act, which allows private parties to sue on behalf of the United States and potentially receive a portion of the recovery. The consolidated cases are United States ex rel. Watkins v. Advanced Pathology Solutions, No. 4:20-cv-1110 (E.D. Ark.); United States ex rel. Aucoin v. Advanced Pathology Solutions, No. 4:21-cv-277 (E.D. Ark.); and United States ex rel. Paulsen v. Advanced Pathology Solutions, LLC, No. 3:22-cv-00652-JPG (E.D. Ark.).

The settlement comes after a $4.75 million settlement reached earlier this year with Atlanta Gastroenterology Associates, a former APS client.

The Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Eastern District of Arkansas are handling the matter, along with the U.S. Attorney’s Office for the Western District of Pennsylvania. The matter was handled by Fraud Section attorneys Evan Ballan, Jeff McSorley and Kelley Hauser, Assistant U.S. Attorney Jamie Goss Dempsey for the Eastern District of Arkansas, and Assistant U.S. Attorney Paul Skirtich for the Western District of Pennsylvania.

Officials also pointed to broader federal efforts to combat health care fraud, noting that tips about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

LITTLE ROCK, Ark. – New updates from the Arkansas Department of Agriculture are now giving Arkansas residents an option to take preventative action against New World Screwworm.

Though no detections have been reported in Arkansas, livestock and animal owners can now submit suspected reports of New World Screwworm using the department’s online reporting form.

Users will be able to upload photos and location information. After submission, staff will follow up with instructions for next steps. Suspect cases may also be reported through a veterinarian or by calling the Arkansas Department of Agriculture.

Department officials recommend isolating affected animals and avoid moving any animals off the premises if New World Screwworm is suspected.

The department also updated animal entry requirements in Arkansas, requiring all warm-blooded animals entering the state from an infested state to be accompanied by an Interstate Certificate of Veterinary Inspection dated within seven days of entry.

Officials said the certificate must include the statement: “All animals in shipment were inspected and found free of evidence of NWS infestation.”

The department encourages animal owners to watch for wounds that fail to heal, foul-smelling discharge, tissue damage or visible maggots in or around a wound.

Livestock animals are also encouraged to get a valid Premises Identification Number (PIN). It is required for interstate and intrastate animal movement from a New World Screwworm Infested Zone.