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Healthcare Fraud

Does North Texas Have a Lab Fraud Problem?

A recent guilty plea for fraudulently charging COVID tests to payers may be the tip of the iceberg for bad actors in the region.
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This all started with a passionate letter. As a journalist, I get plenty of interesting snail mail. I have received everything from a beef tenderloin to a lawsuit written by an imprisoned physician, so I try to take the letters I get with a grain of salt—but this one caught my eye.

Chuck Pratt, who lives in Carmel, Indiana, wrote to tell me he was not happy with a Dallas-based company called Medshield Labs. According to an explanation of benefits document he received from Medicare that he sent me, Medshield Labs had billed Medicare for a self-administered COVID-19 test in his name. The document said that Medshield charged CMS $120.00 for the test, of which Medicare paid $94.08.

There was only one problem. Pratt, who is 85, didn’t order any COVID-19 tests. I would learn that he was far from alone and that North Texas is home to several organizations charging Medicare for COVID-19 tests recipients say they never ordered.

Most people would probably make sure they weren’t being charged anything (Pratt didn’t owe anything) and move on, but Pratt took it upon himself to contact media members about what was happening. He received EOBs about Medshield’s charges and another lab from Indiana that had charged tests using his Medicare information. His attempts to contact the labs were unsuccessful.

I read the letter and then Googled Medshield Labs. Several others reported similar events on the Better Business Review website and the company’s Google reviews. The company, they wrote, had charged COVID tests to their Medicare account that they never ordered. I reached out to several people who left reviews and connected with a woman in South Carolina who helped me understand the scope of what was happening in North Texas.

Ladonne O’Connor also received an EOB from Medicare about how Medshield Labs billed Medicare for a COVID test she says she never ordered. O’Connor, who has a degree in health information management and worked as a billing manager for several healthcare providers, kept track of every EOB she received and dutifully called Medicare’s fraud line to report what was happening. She received several EOBs for tests and monitors she never ordered that were being charged to Medicare with her information. She left reviews online for the businesses.

O’Connor, who sent her EOB forms to me, found that Medicare didn’t always pay for the test. She received an EOB that a Plano-based company called Lone Star Medlab had billed $120.00 for a COVID test to Medicare but that Medicare didn’t pay for it. But at least half the time, the company billed for the test got most of the money they charged to Medicare.

Curiously, several of the labs that billed her in South Carolina had North Texas addresses. In addition to Medshield (Irving/Flower Mound) and Lone Star Medlab (Plano), she received EOBs for companies called Sval (McKinney) and Immaculate Conception Health Services (Plano). As I was in the thick of learning about all these labs, a guilty plea from a case out of the Dallas U.S. Attorney’s Office would shed more light on the situation.

Lab Fraud in North Texas

In December, a Plano lab owner pled guilty to running a fraudulent scheme to get $1.7 million from Medicare. According to the USAO, Damon Heath Roberts owned JDS labs, which partnered with providers and others to access and share Medicare beneficiary information so that JDS could bill Medicare for over-the-counter COVID-19 tests. Roberts would then pay a kickback based on the reimbursement from Medicare to the medical providers or others who helped him obtain the Medicare information.

Roberts charged $4 million in claims to Medicare and received $1.7 million, while paying $149,066 in bribes in kickbacks to providers for supplying the information.

The scheme is similar to what seemed to be happening to Pratt and O’Connor. While the kickbacks and sharing of Medicare information can’t be confirmed, someone was using their Medicare number to bill federal payers for tests and other equipment they said they never ordered. O’Connor and Pratt said they received COVID tests they didn’t order from several North Texas labs, but this activity is happening nationwide.

The Federal Trade Commission has been sounding the alarm about stolen Medicare information being used to order COVID tests. When the health emergency ended last year, Medicare was less likely to pay for these tests, and some recipients were being stuck with the bill for a test they never ordered. The FTC advised the recipients not to pay and to report the fraud if they received a test they didn’t order. Pratt and O’Connor say they received tests from some companies, while at other times, they never received a test and were only aware of what was happening when the document said Medicare had been billed.

According to U.S. Attorney for the Northern District of Texas Chad Meacham, Medicare information is often obtained from the companies’ past work with the patients. Other times, marketers will sell the information to the companies and offer kickbacks.

Because of the massive number of claims submitted to Medicare and other insurers, insurance companies can’t look at every claim closely enough. “Most companies pay first and ask questions later,” Meacham says, especially if they have the patients’ information. “It’s a trust-based system.”

Investigations can arise from a report by a provider or patient who notices fraudulent activity. The USAO could not confirm if any of the labs that billed O’Connor or Pratt were under investigation.

Meacham says that North Texas does not have any more of this type of fraud than other regions, but anywhere with large numbers of elderly patients is a likely target. He says there are all conceivable combinations of fraudulent schemes. Some are real labs with actual patients that bill for work they never did or that do the work and some send a test no one ordered. Other organizations are not labs and have no actual patients; they obtain the Medicare information and bill accordingly.

“It is a new national issue because of the money being spent on testing,” Meacham says. “The money brings out people who want to exploit the system.”

We can’t confirm that Medshield, Lone Star, Sval, and Immaculate Conception did the same fraudulent activity as organizations like JDS, but I wanted to learn more. After my calls to the listed numbers at these organizations went unanswered, I visited the addresses I could find for them.

Finding the Labs

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North Texas Labs

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I started with Medshield Labs, which has an online listed address in Irving, but the EOB form listed another address for the lab: a residential home in Flower Mound. According to the Denton County Appraisal District, the house is owned by Usman Ahmed and Dr. Huda Arif, a nephrologist at Texas Health Resources. I reached out to Texas Health and learned that Medshield used to be owned by Arif’s brother-in-law, but Arif wasn’t involved in the lab. Her brother-in-law sold the business last February. The EOBs I saw were from March 2023 or later but still listed the Flower Mound address. Calls and messages to contact information listed for the company went unanswered.

The other local addresses for the labs were similarly unsuccessful. Medshield Labs has another address in Irving in an older office building that also houses the Honduran Consulate. Many of the floors were completely dark, but the employees at the consulate had never heard of Medshield Labs.

The address for Lone Star Medlab in Plano was in a strip center on Spring Valley. It had numerous sticky notes indicating attempted package deliveries but was locked and empty inside. Curiously, Immaculate Conception Health Services’ address was across the street on Spring Valley, but the address is now a salon. Nearby employees I spoke with had a vague memory of Immaculate Conception but could not provide additional information. Sval’s address in McKinney is no longer a lab either. Calls to the numbers I could find for these companies went unanswered, and trying to make contact with the names listed on ownership pages proved unfruitful.

In the end, none of the North Texas labs in question were still at their listed addresses by the end of the year. Patients like Pratt and O’Connor are frustrated that they cannot contact these companies, and it is disconcerting to know their Medicare number is being used for what they say are fraudulent billing schemes. But getting a new number can be a hassle, and there could be a coverage gap, especially if they have ongoing medical needs.

O’Connor said she hasn’t received any other products or tests for things she never asked for, but knowing it was stolen is enough to encourage her to get a new Medicare card and number. Pratt, though, is hoping for justice. He writes, “I am 85 years old and these fraud claims have me livid!…I hope they get sued and lose big time.”

Author

Will Maddox

Will Maddox

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Will is the senior editor for D CEO magazine and the editor of D CEO Healthcare. He's written about healthcare…

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