Whistleblower Allegations Against Toxicology Lab Lead to $10.4 Million Settlement


On February 16, the United States Attorney for the Eastern District of Kentucky announced that a Lexington toxicology lab, LabTox, LLC, as well as its owner and compliance officer agreed to pay over $10.4 million to settle whistleblower allegations that they violated the False Claims Act (FCA) by billing Medicare and Kentucky Medicaid programs for medically unnecessary urine tests.

According to the government, LabTox’s owner Ronald Coburn and its compliance officer Erica Baker engaged in fraud schemes where they solicited medically unnecessary urine drug tests and then billed Medicare and Kentucky Medicaid for the tests despite knowing that these programs only pay for urine drug tests that are medically necessary.

For example, the government alleges that “with Coburn’s knowledge and approval… Baker recruited a company called Blue Waters Assessment and Testing Services to refer court-ordered urine drug tests to LabTox.” According to the government, “Coburn knew this was not medical testing, but caused LabTox to bill the tests to Medicare and Kentucky Medicaid anyway.”

Likewise, the government alleges that “at Coburn’s direction, Baker solicited urine drug tests from substance abuse recovery programs that did not provide medical treatment—typically faith-based residential programs or homeless shelters.” Coburn and Baker allegedly led LabTox to bill Medicare and Kentucky Medicaid for these tests.

“Medicare and Medicaid are meant to fund medically necessary health care benefits to millions of eligible Americans,” said Carlton S. Shier, IV, United States Attorney for the Eastern District of Kentucky. “When the limited resources of these programs are depleted by fraud, it defeats their purpose and diminishes their viability and effectiveness, deeply affecting us all.”

The allegations against LabTox, Coburn and Baker stem from a qui tam whistleblower lawsuit. Under the FCA’s qui tam provisions, whistleblowers with knowledge of government contracting fraud may file lawsuits on behalf of the U.S. government. In successful suits, qui tam whistleblowers are entitled to 15-30% of the government’s recoveries.

On July 25, a bipartisan group of senators introduced the False Claims Amendments Act of 2023, which address a few technical loopholes undermining the success of the FCA. The bill is widely supported by whistleblower advocates.

“The False Claims Act is America’s number one fraud-fighting law,” said whistleblower attorney Stephen M. Kohn. “These amendments are urgently needed to ensure that whistleblowers can continue to play their key role in protecting taxpayers from corporate criminals.”

Kohn sees the passage of the False Claims Amendments Act as one of the seven most urgently needed whistleblower reformsNational Whistleblower Center (NWC), where Kohn serves as Chairman of the Board, has issued an Action Alert calling on Congress to pass the bill.

Join NWC in Taking Action:

Demand that Congress strengthen the False Claims Act

Further Reading:

Lexington Lab Agrees to $10.4 Million in Civil Judgments to Resolve False Claims Act Allegations; Owner and Lab Officer Sentenced to Prison

Bipartisan Legislation Unveiled to Strengthen False Claims Act

More False Claims Act Whistleblower News

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