Federal authorities indicted eight business people in a sweeping case of alleged Medicare and Medicaid fraud involving a genetic testing firm and three marketing companies.
A federal grand jury in Nashville returned a 40-count superseding indictment against the individuals on Monday, said Mark H. Wildasin, US Attorney for the Middle District of Tennessee. A superseding indictment is an indictment that replaces a previous indictment.
Three of the eight individuals were arrested previously following earlier indictments; the remaining indictments were unsealed following the arrest of the other five.
Federal authorities say the co-conspirators entered into sham contracts and paid kickbacks in exchange for genetic testing and urinalysis samples. They targeted and recruited elderly patients who were federal healthcare program beneficiaries to obtain their genetic material for conducting genetic tests.
Frequently, the patients or their treating physicians allegedly never received the results of the tests. Although some victims were nursing home residents, the indictment announced Monday did not indicate any nursing home providers were criminally involved in the alleged fraud.
Fadel Alshalabi, 54, of Waxhaw, NC, was originally charged in July 2021, with conspiracy and violation of the Anti-Kickback Statute for his role in orchestrating the scheme, Wildasin said. Alshalabi is the owner and CEO of Crestar Labs, LLC, a series of laboratories based in Spring Hill, TN. Monday’s action charged Alshalabi and seven others with healthcare fraud, conspiracy to commit healthcare fraud, and conspiracy to violate and violations of the Anti-Kickback Statute. Alshalabi was also charged with money laundering.
The seven charged Monday included Edward D. Klapp, former vice president of sales, and Dakota White, former director of client services and vice president of operations, both at Crestar. Also, individuals from three marketing companies that contracted with Crestar: Melissa L. Chastain, owner and CEO, and Roger Allison, president, both at Genetix LLC; Robert Alan Richardson and Edward Burch, both principals at Freedom Medical Labs, LLC; and Samuel Harris, owner of Secure Health.
Edward Klapp and Lisa Chastain were originally charged in October 2021.
“Marketers, who were not healthcare professionals, obtained swabs from the mouths of the patients at nursing homes, senior health fairs, and elsewhere,” the indictment read. “The tests were then purportedly approved by telemedicine doctors who did not engage in the treatment of the patients, and often did not even speak with the patients for whom they ordered tests.”
Wildasin said Alshalabi and the co-conspirators paid illegal kickbacks and bribes in exchange for the doctor’s orders and tests, without regard to medical necessity, and during the period of 2016 to July 2021, Alshalabi and his co-conspirators billed Medicare and Medicaid over $150 million.
Genetic testing fraud rising
In 2019, the department of health and human services alerted the public on the growing incidence of fraud schemes involving genetic testing.
In December 2016, a woman pleaded guilty in a Medicare genetic testing scheme targeting seniors. In that case, a New Jersey woman invited seniors to undergo genetic testing billed to Medicare, according to Bloomberg BNA. For nearly 18 months, the woman and her partner allegedly offered free ice cream and told seniors that without the test results they would be more at risk for heart attacks, strokes, cancer or suicide, authorities said.
A year later, the Department of Justice announced that a Louisville, KY-based skilled nursing facility operator agreed to pay nearly $1 million to clear up claims related to its role in a genetic testing scheme that violated the False Claims Act. The activity allegedly involved conducting genetic tests on Medicare residents without physician orders to determine whether they were “properly metabolizing” a certain medication, authorities from the Department of Justice said at the time.
If convicted, Alshalabi faces up to 10 years on the money laundering charges, and all defendants face up to 10 years in prison on the healthcare fraud and Anti-Kickback Statute charges, and up to five years on the charge of conspiracy to violate the Anti-Kickback Statute.