Covered conduct includes billing for unnecessary respiratory pathogen panels with routine COVID tests

capstone diagnostics fraud

Bracker & Marcus LLC is excited to announce that the United States has intervened and settled one of its False Claims Act cases for more than $14.3 million. The defendants—Capstone Diagnostics, LLC d/b/a Capstone Healthcare, and its owner and CEO Drew Maloney—are settling allegations that they billed the federal government and state Medicaid programs for medically unnecessary testing and violations of the Anti-Kickback Statute.

Our client, a former employee of Capstone, will receive a 20% relator’s share from the False Claims Act settlement. Few whistleblowers have been more deserving. He has requested that we limit publicizing his identity so that we won’t give details about his role with the company, but his story is too incredible not to share.

COVID-19 created a Huge Opportunity for Fraud

Instead of “miraculously going away” by April 2020, as some had predicted, COVID-19 shut down the country.

By that month, more than 1 million confirmed cases had been reported worldwide, a ten-fold increase from the prior month. Widespread testing became key to understanding and stopping the wave of positive diagnoses, with an average of 146,000 people per day getting tested.

One of the laboratories conducting the tests was Atlanta-based Capstone Healthcare. CEO and owner Drew Maloney visited local news stations to tout Capstone’s COVID-19 testing efforts. Maloney even claimed the company was losing money by performing COVID testing to paint Capstone as a pandemic hero.

Capstone was a Pandemic Profiteer

Our whistleblower alleged that Capstone was taking advantage of the pandemic to bill the Government for millions of dollars in unnecessary additional testing called respiratory pathogen panels or “RPP.” An RPP is an expensive panel that tests for many different respiratory pathogens, some of which are very rare, do not cause overlapping clinical syndromes, and are found only in specific patient populations.

Moreover, in many cases, the treating physicians—who were often only interested in testing for COVID—did not order the RPP. Capstone, it is alleged, forged physician signatures and added sham diagnosis codes to qualify the patients for the additional testing.

Capstone was also alleged to have paid independent marketers a volume-based commission for referring orders of RPP, violating the federal Anti-Kickback Statute.

Capstone also took Advantage of High School Children on Medicaid

This was not Capstone’s only scheme, however. Our whistleblower also alleged that Capstone hired independent marketers to arrange for the ordering of toxicology (drug) testing on children participating in an after-school and youth mentoring program known as Do It 4 The Hood.

Our whistleblower alleged that Do It 4 The Hood went to high schools in impoverished, high-Medicaid areas and threw pizza parties with rappers. The price of admission was one drug test, usually billed to Medicaid.

These tests were medically unnecessary since they were not ordered or used by physicians; they were simply disregarded, whether the beneficiary tested positive or negative. Sometimes the tests were resubmitted and rebilled multiple times.

Drew Maloney and other co-conspirators of Do It 4 The Hood have since pled guilty to criminal charges relating to their actions.

Billing Company Implicated in Capstone Fraud

Investigations into our client’s allegations also resulted in a $300,000 False Claims Act settlement with Capstone’s billing company, VitalAxis. According to the DOJ press release, published while the Capstone matter was still under a sealed investigation, “a diagnostic laboratory in Atlanta” directed VitalAxis to bill Medicare for RPP purportedly ordered by a physician who had not ordered the tests and who was ineligible to treat Medicare beneficiaries. So VitalAxis billed the tests under a different physician’s name.

Our Client is a Bona Fide Hero

We don’t throw words like “hero” around haphazardly. Many of our whistleblower clients face risks in bringing their cases forward. But few have had to go through what our client did.

Our client moved his family to Atlanta, knowing nobody was here, just to take the job at Capstone, a failing company at the time. He turned the company around, making it increasingly profitable.

Benefit of the Doubt

This is when management started to get greedy and the fraud allegedly began. Our client initially thought what he saw must have been a mistake, so he objected and tried to explain that certain things they were doing were illegal. Soon, however, he realized they knew exactly what they were doing.

He resigned after the company asked our client to engage in illegal activities. Recognizing that he was a potential whistleblower, Capstone immediately retaliated against him to keep him quiet.

Standing His Ground

Two days after his resignation, someone hacked into his personal email and deleted much of its contents, including evidence he had gathered about Capstone’s fraud. Then, Capstone sued our client on frivolous grounds, aiming to get him to settle away his ability to report their wrongdoing.

Little did they know of our client’s integrity. He spent his savings defending himself and by the end, he was more emboldened to report Capstone to the Government.

While he was careful to maintain the seal, it came out in a deposition that he had witnessed numerous instances of fraud and retained Bracker & Marcus to represent him. A quick Google search informed Capstone’s counsel that we were whistleblower attorneys. After that revelation, our client saw Maloney speaking frantically on the phone.

Our client knew what certain individuals related to Capstone were capable of, so he asked some friends to watch over his house that night. They camped around his property just to keep an eye on things.

Later that night, a car full of men drove slowly down the street, shining a flashlight on the house numbers. When they came to our client’s house, the car stopped and pulled into the driveway. My client’s friends appeared as they exited the car and scared the men off. We hate to think what might have happened that night had he not been prepared for the worst.

When Capstone reached the end of discovery without evidence of wrongdoing, it finally dismissed the lawsuit. Still, because my client could not defend himself while our case remained sealed, he continued to have his good name dragged through the mud.

Today, our client is vindicated. He can begin his life anew.

It Takes a Village

This case took a long time to come to fruition because of the complexities, evolving schemes, and turnover among the Government attorneys. We are grateful to each attorney who took this case from one step to the next: former AUSAs Paris Wynn and Mellori Lumpkin-Dawson, criminal AUSA Alex Sistla, Northern District of Georgia Civil Chief Neeli Ben-David, Georgia AAGs Jim Mooney and Rick Tangum, and especially to DOJ Deputy Director Paul Perkins, who brought this settlement home.

The Department of Justice press release can be viewed here.