Trustee For Zombie Lab Sues Thousands Of Doctors And Dozens Of Nonprofits

–The suits unveil the scope and sordid details of the massive kickback scheme.

Thousands of doctors are being sued by the trustee representing the creditors of Health Diagnostic Laboratory (HDL), the bankrupt laboratory company. The trustee is demanding that the doctors repay thousands of dollars in illegal processing and handling (P&H) fees, a key part of the elaborate illegal scheme that fueled the company’s explosive growth and ultimately led to its bankruptcy and demise. These P&H fees have been deemed to be kickbacks by the US government and others. The trustee is also demanding the return of payments to doctors who served as consultants and speakers for the company. In addition, the trustee is suing dozens of nonprofit organizations, including nearly one million dollars from the American Heart Association, asking them to return donations paid to them by HDL in the company’s heyday.

In all, according to Richard Kanowitz, the liquidating trustee, the company is seeking to recoup about $41 million in P&H fees from about 3,000 practices and several million dollars from charities.

HDL was the billion dollar lab company with a meteoric rise and an even more spectacular fall. A key ingredient to the company’s success was the use of kickbacks— in the form of excessive process and handling fees— to doctors who ordered the company’s expensive panel of cardiovascular and metabolic risk factor tests. In 2015 the company declared bankruptcy and went out of business after being sued by the government and private insurance companies for fraud involving these kickbacks.

Last year, as previously reported, the HDL trustee sent letters to physicians offering the physicians a settlement of the “Fraudulent Transfers received… in an effort to quickly and amicably resolve the claim against Recipient without the need for time-consuming and expensive litigation.” It now appears that several thousand physicians have not paid and are the targets of the new lawsuits. The suits against the doctors range in size from a few thousand dollars to hundreds of thousands of dollars, mostly covering the years 2011 through 2014 when HDL was most active.

The new move to collect from doctors follows an earlier effort in which the trustee authorized collections agencies to send threatening letters to patients seeking payment for unpaid bills. As has been widely documented, HDL patients had been told by their doctors, and assured by HDL, that they would never be billed for the tests. The letters provoked considerable anxiety and concern, particularly since many of the patients had no idea that they were going to receive bills, often for many thousands of dollars.

Details from the lawsuits offer a fascinating glimpse into the relationship between HDL and its physician accomplices. Most of the suits (which can be downloaded here) list the monthly payments paid to the doctors. Typical entries include Stephen Miller (Intermountain Heart Center, Utah) who received $80,100 in P&H fees from HDL and Sandeep Khurana (Healthy Heart Cardiology, Michigan) who received $44,240.

The HDL Whales

But there’s another much smaller group of doctors who consulted for and spoke on behalf of HDL. These doctors had an intimate relationship with HDL, and many received staggering amounts of money from the company. Inside HDL these doctors were known as “whales.”

Thomas Dayspring is a well known “lipidologist” who has received the President’s Service Award from the National Lipid Association (which itself has many deep ties to industry). According to the lawsuit, Dayspring and his partner received more than $100,000 in P&H fees, while Dayspring alone received more than $371,000 in consulting and speaking fees. The suit includes an invoice sent by Dayspring to HDL CEO Tonya Mallory for $4,000 for two speaking engagements in one day. The talks were apparently arranged by Jeffrey “Boomer” Cornwell. Cornwell was a top salesman at BlueWave, HDL’s outside sales arm. BlueWave has been deeply implicated in the HDL scandal. Dayspring is now the “Chief Academic Officer” of True Health Diagnostics, which, as I have reported, purchased the assets of HDL and which many believe has adopted and updated the sales and marketing strategies of HDL. (Cornwell also moved to True Health Diagnostics after the collapse of HDL.)

The biggest fish of all in the HDL sea, apparently, was Charles” Sam” Fillingane, a DO from Mississippi who has been prominently mentioned in news reports about HDL. Fillingane was deeply involved with HDL from the beginning and received the staggering sum of $1,176,609.56 from HDL. In addition to all the money he earned he also received a $100,000 loan from the company. The loan was never repaid. By the time HDL was disintegrating Fillingane stopped receiving payments from HDL and he stopped payments on the loan. The lawsuit includes a letter from Fillingane to the new CEO of HDL. Fillingane recommends that HDL not pursue the loan while he, Fillingane, won’t pursue all the money they owe him since HDL has ceased sponsoring all the talks Fillingane used to give and is no longer doling out the P&H fees. The letter also suggests that both Fillingane and HDL are better off not raising issues that might expose illegal behavior. Here are excerpts from the letter:

• “Sometimes it’s easier to just move on when coexisting issues like this exist, as technically this could get into legal issues that only make the lawyers benefit. Turning something like this into a legal issue with business amongst “friends” makes no sense. There have been some issues on both ends that have been left undone but I would prefer to take the high road and move past all the issues, leaving no hard feelings in the journey. I value my working relationships and friendships with HDL employees, including yourself, too much to pursue anything like the above and hope you feel the same way.”
• “I have been a loyal supporter of HDL in the past and I have helped HDL literally hundreds of times when called upon, whether I got paid for the assistance or not. Quite often I did things for the company that I did not ask for or expect to be paid for, but I would expect some good will that would forego any legal collection process that would ever potentially put us at opposite ends of a legal dispute.”

Fillingane, like Dayspring, was also at some point employed by True Health Diagnostics.

Another well known “lipidologist” is Tara Dall, from Wisconsin. She had a $4,000 per month consulting agreement with HDL and received more than $350,000 in total from the company.

Alam Tauqueer’s Keowee Primary Care and Internal Medicine practice in South Carolina received more than $465,000 from HDL. The lawsuit also contains the summary of an internal interview the company conducted with Tauquer, apparently as part of its marketing research. The unsigned summary of the interview offers insight into the operation of medical practices where testing becomes an opportunity for profit:

• “Dr. Alam’s practice is unusual in that it provides so many diagnostic testing options under one roof. Dr. Alam can offer bone density scans, stress tests, nuclear stress tests, ECG, labs, CTAs, bladder screening, vascular screenings, and allergy testing, all in the office. For allergy testing, he can bill about $2200 per patient a year if they are getting shots. The initial allergy test itself is in the $400 range for reimbursement.”
• “Dr. Alam orders HDL tests for any of his patients over 50, and anyone with risk factors, including if they voice concern about heart disease. He likes that HDL allows him to designate risk stratification. Also likes genetics, especially the Factor 5 and the coagulants. Said that is a differentiator with Berkeley.”
• “Dr. Alam does not think that HDL should be targeting employed physicians at practices or hospitals. He said that the learning curve is too steep and that they will have to invest too much time in learning it.”
• “For patients with high risk factors, he repeats every 3-4 months. If they are managing their risk factors well, he may cut down to once every 6 months.”

Bent Tree Family Physicians, which is located in Frisco, Texas, the same town where True Health Diagnostics is headquartered, received more than $418,000 from HDL. A unique feature of this lawsuit is the publication in the complaint of a lengthy correspondence between Bent Tree, HDL CEO Tonya Mallory, BlueWave’s Boomer Cornwell, and BlueWave’s owners, Floyd Calhoun Dent and J. Bradley Johnson. The correspondence revolves around office space that HDL rented within the Bent Tree offices. Two big problems emerge in the correspondence. First, HDL objects that it is paying far more than the market value for its square footage. But HDL backs down, because, as it is made clear, Bent Tree brings an enormous amount of business to HDL, and the doctor representing Bent Tree in the correspondence threatens to take their business to another company. More importantly, the correspondence indicates that Mallory and others are concerned about the Stark Law, the rule forbidding self-referral for doctors in Medicare cases. “Please don’t fall upon the irrelevant excuse of Stark, when much of the success you are experiencing comes from your ability to be creative,” writes Bent Tree’s Michael Payne.

Nonprofits Under Fire

Several dozen nonprofits are also targets of the trustee. Two of the largest claims are against the American Heart Association and Virginia Commonwealth University and the Medical College of Virginia:

• American Heart Association: $816,690
• Virginia Commonwealth University and the Medical College of Virginia: $940,000
• The FH (Familial Hypercholesterolemia) Foundation: $300,000
• American Diabetes Association $143,822
• American Cancer Society $26,575 (7 payments between 2011 and 2014)
• Children’s Hospital and Research Center (Oakland CA): $34,770.25
• Greater Richmond Aquatics Partnership: $30,000
• Middle School Renaissance: $100,000
• Preventive Cardiovascular Nurses Association: $258,872.72
• Richmond Ballet: $54,405
• Utah Foundation for Biomedical Research: $69,000
• Virginia Biotechnology Association: $179,000
• National Multiple Sclerosis Society: $20,000
• James Madison University: $27,500
• Notre Dame University: $7,500
• Washington and Lee University: $10,000
• University of North Carolina: $7,500
• New York University: $26,000

HDL also gave $319,000 to Benedictine College Preparatory school in Richmond, Virginia. It should be noted that one of HDL CEO Tonya Mallory’s sons attended the school. Another son, according to Virginia Business, worked at HDL as a personal trainer in the employee gym.

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