Feds Say Bankrupt Drug Lab Paid Millions in Kickbacks

By Pat Anson, Editor

A bankrupt drug testing lab with a checkered history has been linked to a large money laundering and pill mill operation in Tennessee.

According to an updated indictment in U.S. District Court in Knoxville, Confirmatrix Laboratory in Georgia and Sterling Laboratories in Seattle paid nearly $3 million in illegal kickbacks to have thousands of urine drug test samples sent to them from patients at the Knoxville Hope Clinic (KHC). In return, the labs submitted false claims for "unnecessary" drug tests to Medicare and TennCare, Tennesee’s Medicaid program.

“Confirmatrix, by and through its principals and agents, paid bribes and kickbacks to defendants Clyde Christopher Tipton and Maynard Alvarez in return for causing Medicare and TennCare beneficiaries from KHC to be referred to Confirmatrix for medically unnecessary drug screenings,” the indictment alleges.

“Medical providers at KHC prescribed opioids and other controlled substances to thousands of purported pain patients in exchange for grossly excessive fees. The vast majority of the prescriptions were unreasonable and medically unnecessary. Patients were required to keep follow-up appointments every 28 days to continue receiving their prescriptions. Providers at KHC ordered medically unnecessary Drug Screenings for every patient every 28 days.”

Tipton, Alvarez and six other defendants are accused of drug trafficking and money laundering in the long-running investigation of Tennessee pill mills. The ringleader of the pill mill scheme, a 53-year old grandmother named Sylvia Hofstetter, allegedly made millions of dollars while running clinics that prescribed 12 million opioid prescriptions. Prosecutors have alleged that at least nine patients at the clinics died from drug overdoses.

No one affiliated with Confirmatrix or Sterling Laboratories has been indicted so far in the case. Prosecutors say the   alleged kickbacks were paid from August 2013 to July 2016.

As PNN has reported, Confirmatrix filed for Chapter 11 bankruptcy last November, just two days after its headquarters near Atlanta was raided by FBI agents.  The company was founded by Khalid Satary, a convicted felon and Palestinian national that the federal government has been trying to deport for years.

A 2013 study by the Centers for Medicare and Medicaid Services (CMS) listed Confirmatrix as the most expensive drug lab in the country, collecting an average of $2,406 from Medicare for each patient tested, compared to the national average of $751. The bills from Confirmatrix were high because the company ran an average of nearly 120 different drug screens on each patient, far more than any other drug lab.

These and other abusive billing practices finally caused Medicare to lower its reimbursement rates for drug testing, which led to Confirmatrix’s financial problems.

Although it filed for Chapter 11 bankruptcy nine months ago, Confirmatrix remains in business and continues to bill patients and insurance companies for costly drug screens.

Some current and former patients at the Benefis Pain Management Center, a pain clinic in Great Falls, Montana, have received bills from a collection agency seeking well over $1,000 for drug screens that normally cost a few hundred dollars.

“Confirmatrix is out of network, hence I am stuck with the bill unless Benefis writes it off,” one patient told PNN. “I spoke to my insurance about it and they told me that there are labs in Montana that could have done the same thing and would have been covered by my insurance. She asked me, why they would go to a Georgia lab?”

In a statement to PNN in May, a Benefis official defended the clinic’s continued use of Confirmatrix, saying the company performs a valuable service and “waives many costs.”

“The company we have partnered with has an extensive patient assistance program, which is part of the reason they were selected. That company was selected two years ago because it was one of the few labs nationwide that offered quantitative and qualitative testing AND patient assistant programs,” said Kathy Hill, Chief Operating Officer at Benefis Medical Group.

Confirmatrix’s laboratory, office and warehouse space were recently put up for auction by the bankruptcy court under sealed bid.

Genetic Testing Company Raided by FBI

By Pat Anson, Editor

FBI agents have raided the headquarters of Proove Biosciences, a controversial genetic testing company that claims its DNA tests can improve the effectiveness of pain management and determine whether a patient is at risk of opioid addiction.

Over two dozen FBI agents appeared at Proove offices in Irvine, California Wednesday as part of a healthcare fraud investigation. They were later seen carrying dozens of boxes out of two buildings

“It is an ongoing investigation out of our San Diego office. It involves healthcare fraud. And unfortunately we are unable to say anything more about it at this time. The affidavit supporting the search warrant is under seal,” Cathy Kramer, an FBI special agent, told KABC-TV.

STAT News reported in February that the FBI and the Inspector General for the Department of Health and Human Services (HHS) were investigating possible criminal activity at Proove.

Former and current employees who were interviewed by the FBI told STAT the agents were focused on possible kickbacks to doctors who encouraged patients to take Proove’s DNA tests. Physicians reportedly could make $144,000 a year in kickbacks that were called “research fees.”

The HHS Inspector General issued a Special Fraud Alert in 2014 warning physicians that any payments, referrals, rent or reimbursements from lab testing companies could be seen as violations of anti-kickback laws.

Proove promotes itself as the “leader in personalized pain medicine” and claims its genetic tests can identify medications that would be most effective at treating pain. The company recently claimed that 94% of patients experienced significant pain relief within 60 days of treatment changes recommended by Proove. Critics say most Proove studies are not peer-reviewed and one genetic expert has called them “hogwash.”

According to STAT, doctors affiliated with Proove in California, Florida and Kentucky were also raided by the FBI. Proove said it was cooperating with the investigation, and that no arrests or charges have been made.

"Proove has been subject to a handful of inaccurate stories initiated by STAT News that we believe have contributed to this latest action," the company said in a statement. "While we originally chose not to dignify these outlandish accusations with a response, we now understand that we can no longer ignore these false stories based on unreliable sources, and filled with erroneous accusations... spread by a few disgruntled former employees and consultants.  Proove is confident that the facts supported by verifiable and reliable sources will clearly restore our reputation."

Proove Linked to Montana Pain Clinic

Proove is the second laboratory testing company raided by the FBI that has been linked to Benefis Pain Management Center, a pain clinic in Great Falls, Montana. 

As PNN has reported, FBI agents last November raided the offices of Confirmatrix Laboratories near Atlanta. Two days later, the company filed for Chapter 11 bankruptcy protection. Confirmatrix was founded by Khalid Satary, a convicted felon and Palestinian national that the federal government has been trying to deport for years.

In 2013, Medicare identified Confirmatrix as the most expensive urine drug testing lab in the country, charging an average of $2,406 for each Medicare patient.

Benefis has continued to send urine drug samples to Confirmatrix for testing even after the company filed for bankruptcy. Some Benefis patients have recently been contacted by collection agencies seeking payment for urine tests costing well over $1,000 that their insurance refused to pay for. Similar tests by other labs cost only a few hundred dollars.

According to its bankruptcy filing, Confirmatrix has 152 employees in 15 different states, including one employee in Montana who apparently works on site at the Benefis pain clinic. PNN has also learned that Proove Biosciences has had employees working at the clinic. A Proove “patient engagement representative” was employed there as early as May 2016.

“We had a meeting one day and here are these people from Proove Biosciences. They told us they were doing a research project,” says Rodney Lutes, a physician assistant (PA) who was later fired by Benefis. “They wanted to come to Benefis, into the pain department, and test our patients.  We were told this would be at no cost to the patient. My understanding was that they weren’t going to charge anybody, but I found out afterwards they were charging insurance companies.

“They said providers who participated in this would get some form of payment for participating in the program and for filling out all the paperwork.  What they did is they had a technician there in the department and every day I would get a list from that technician of patients that they would like to try to include in the program.”

Lutes says he recommended the DNA test to many of his patients, but never received any money from Proove. He says some of his patients later complained that their insurance was billed for the DNA test.

“One of the things that bothered me was that I signed a lot of the papers, but they also had my supervising doc on all of those papers,” Lutes told PNN. “I also felt like she was the one that brought them (Proove) in there.”

Lutes is referring to Katrina Lewis, MD, a pain management specialist at Benefis who is listed as a member of Proove’s Medical Advisory Board.  Lewis plays a significant role at the pain clinic even though she only works there part time. 

“Dr. Lewis works for Benefis one week a month and has been instrumental in the development of our multidisciplinary approach and current protocols,” said Keri Garman, Director of Corporate Communications at Benefis.

In a statement emailed to PNN last month, Lewis said regular urine drug testing was necessary to ensure that “appropriate levels” of medication are present. Current clinic policy is that “high risk” patients should have a urine test at least once every two months.

“Presence of too high of a level of opioids or other substances in the urine can make it inappropriate and unsafe to continue prescribing opioids.  Presence of none of the prescribed opioids in the urine indicates the care plan is not being followed and further prescribing is medically unnecessary,” Lewis said.

Benefis: No Kickbacks from Testing Labs

PNN has made repeated requests to Benefis to clarify its relationship with Confirmatrix and Proove, and whether Lewis or any other Benefis employees were receiving compensation from the laboratories for referring business to them. 

“Benefis and its employees, including Dr. Katrina Lewis, do not receive kickbacks from Confirmatrix or Proove. As for any questions you have regarding the lab business practices of these facilities, these would be best answered by the companies directly,” Benefis spokesman Ben Buckridge said in a statement emailed to PNN last week. 

“We take these accusations and defamatory statements against our organization and staff seriously. We appreciate your diligence on this issue.” 

In an earlier statement, a Benefis official said the DNA tests are voluntary and only done on patients if they are appropriate.

“Patients have the option to decline this testing, however, it proves to be very helpful in determining treatment plans for our patients in many cases. This testing has not been readily available until recently,” said Kathy Hills, Chief Operating Officer of Benefis Medical Group.

“Genetic testing allows us to see if the patient is appropriately synthesizing specific medications and can drastically alter treatment plans, showing us that sometimes the medications are not effectively metabolizing and therefore not as effective, which is why some patients have needed high doses. Our partners in this have an extensive patient assistance program that waives many costs, and patients are not penalized or removed from opioids if they refuse to have a genetic test performed.”

But a recent copy of the clinic’s opioid policy obtained by PNN says the tests are not voluntary for everyone. 

“All patients on dosing levels at or higher than the maximum policy dose MUST be submitted for genetic testing,” the policy states. The word "must" is capitalized in the document. 

One Benefis patient who took the DNA test said Lutes recommended it.

“He said everyone was doing it and that the insurance would be billed, but if they did not pay for it then Benefis would. I think he said something about it being a $6,000 test,” she told PNN.  “To me it was a waste of time and money. The meds it said I should be taking either didn’t work, stopped working, or made me sick. And the meds I should not be taking I do just fine on.”

It is not clear whether the pain clinic's association with Proove or Confirmatrix had anything to do with Lutes’ firing in March. The 68-year old Lutes treated several hundred pain patients and was popular with many of them. 

Lutes was discharged for violating Benefis policy about record keeping, opioid dosage and urine drug testing, but feels he was “written up for violations that do not exist.” His supervising physician – Katrina Lewis – also requested removal from that role, meaning Lutes could no longer practice at Benefis as a physician assistant.

Since his dismissal, many of Lutes former patients who were on relatively high doses of opioids say their medication has been reduced or stopped entirely. One patient, whose opioid dose was cut significantly, committed suicide. Still others complain they were labeled and treated as addicts by clinic doctors and staff, and now have trouble finding new physicians in the Great Falls area. The ones who remain at Benefis say they are being told to take new tests and exams. 

Benefis says it cannot comment on the accusations because of patient and employee privacy rights.

“Unless Rodney Lutes, PA, or the patients with whom you are speaking will sign written releases allowing us to comment fully on the facts of their employment or their care, respectively, we are simply unable to engage in any further back and forth discussions.  We have provided all the information we are able given the legal limitations governing our industry,” Buckridge said.

Montana Urine Tests Sent to Bankrupt Drug Lab

By Pat Anson, Editor

Imagine getting an unexpected medical bill for over $1,500 that your insurance won’t cover. You can’t afford to pay it, have already missed several weeks of work due to chronic back pain, and you’re worried about losing your job.

That’s the dilemma faced by a Montana woman, one of the patients at a Great Falls pain clinic who are getting unusually large bills for urine drug testing at a laboratory over 2,000 miles away in Georgia. 

“I spoke to my insurance about it and they told me that there are labs in Montana that could have done the same thing and would have been covered by my insurance. She asked me, why they would go to a Georgia lab?” said the patient, who asked that we not reveal her identity.

The lab in question is Confirmatrix Laboratory, a financially troubled company near Atlanta that specializes in urine drug testing.

For the last two years, Confirmatrix has conducted drug screens for the Benefis Pain Management Center, which is part of Benefis Health System, a non-profit community-based health organization that operates a hospital and provides other medical services in Great Falls.

As PNN has reported, some current and former patients at the Benefis pain clinic believe they are being unfairly labeled and treated as addicts. Many are having their opioid doses reduced or stopped completely. All are required to take regular drug tests to prove they’re not abusing their pain medication.

“For the safety of our patients, regular urine drug screens are conducted to ensure the appropriate levels of prescribed medications, and only those medications, are present,” says Katrina Lewis, MD, a pain management specialist at Benefis.  “Presence of too high of a level of opioids or other substances in the urine can make it inappropriate and unsafe to continue prescribing opioids.  Presence of none of the prescribed opioids in the urine indicates the care plan is not being followed and further prescribing is medically unnecessary.”

Urine drug testing is not uncommon at pain clinics, but the selection of Confirmatrix is. The company was founded by Khalid Satary, a convicted felon and Palestinian national that the federal government has been trying to deport for years.

Satary was arrested in 2001 and served more than three years in federal prison after pleading guilty to running a counterfeit CD operation in the Atlanta area valued at $50 million. At the time, it was the largest counterfeit music case in U.S. history, according to the Atlanta Journal Constitution.

Khalid and jordan satary (instagram photo)

Shortly after his release from prison, Satary founded Confirmatrix, Nue Medical Consulting and GNOS Medical, a medical billing firm, and then transferred his interests in the companies over to his son Jordan, a recent high school graduate.

The Journal Constitution reported in 2014 that Satary was subject to a federal deportation order, but immigration officials were unable to find a country willing to accept him. He still apparently lives in the U.S.

On November 2nd of last year, the FBI and the Georgia Department of Health and Human Services served search warrants at Confirmatrix and GNOS Medical, and agents removed documents from both facilities.

The agencies have not said what prompted the raids and no charges have been filed against either company.

Just two days after the search warrants were served, Confirmatrix filed for Chapter 11 federal bankruptcy protection, with Satary’s son Jordan the largest shareholder to sign the petition in the Northern District Court of Georgia. GNOS Medical is listed as one of the creditors that Confirmatrix owes money to.

“Although historically very profitable,” Confirmatrix CEO Ann Durham told the court the company “began experiencing financial troubles when recent changes to Medicare’s reimbursement rates resulted in a decrease (in) revenue from its toxicology business.”

Drug testing has indeed been a very profitable business for Confirmatrix and other drug labs. A 2013 study by the Centers for Medicare and Medicaid Services (CMS) listed Confirmatrix as the most expensive drug lab in the country, collecting an average of $2,406 from Medicare for each patient tested, compared to the national average of $751. The bills from Confirmatrix were high because the company ran an average of nearly 120 different drug screens on each patient, far more than any other drug lab.

These and other abusive billing practices, not only by Confirmatrix but other drug labs such as Millennium Health, finally caused Medicare to lower its reimbursement rates for drug testing.

Millennium filed for Chapter 11 bankruptcy in 2015, soon after paying a $256 million dollar fine to settle fraud and kickback charges, and to reimburse the government for unnecessary urine and genetic tests.

Under its Chapter 11 filing, Confirmatrix is still able to conduct business and perform lab tests, but it is exploring options for a possible sale of the company or a restructuring “to focus its operations on the blood testing business.” 

The company said it has 152 employees in 15 different states, including one employee in Montana who apparently works at the Benefis pain clinic in Great Falls.

“They had a gal who was there every day, I assume working there full time, and she was responsible for collecting the samples, processing them, and shipping them off to the lab,” said Rodney Lutes, a physician assistant who was discharged by Benefis in March. 

Benefis did not respond to inquiries from PNN about whether a Confirmatrix employee works at the pain clinic or if Benefis receives a commission or compensation from Confirmatrix for doing business with the company. According to clinic policy, patients on high doses of opioids "should have a minimum of one urine drug test every two months."

In a statement, a Benefis official said Confirmatrix performs a valuable service and “waives many costs.”

“The company we have partnered with has an extensive patient assistance program, which is part of the reason they were selected. That company was selected two years ago because it was one of the few labs nationwide that offered quantitative and qualitative testing AND patient assistant programs. This company does not send its patients to collections for an inability to pay a bill,” said Kathy Hill, Chief Operating Officer at Benefis Medical Group.

But some Benefis patients are getting letters from collection agencies demanding payment for Confirmatrix drug screens that cost well over $1,000, the same tests that Medicare is charged about $150 for under its new reimbursement rates. A call to Confirmatrix for comment was not returned.

Other patients say they are getting bills for drug tests they’ve already paid for, and that Benefis has lost some of their billing and medical records. Still other patients are surprised to learn they may be legally responsible for drug tests that their insurance company refused to pay for.  

“Confirmatrix is out of network, hence I am stuck with the bill unless Benefis writes it off,” said one woman, a chronic pain sufferer for over 30 years, whose opioid dose was recently reduced substantially. “In the last 6 weeks I have been dropped to one third of the dosage I was on with intentions that I will be dropped even more. I have no desire to live, because this is not living.”

In April, a suicidal patient at Benefis Health System burned down his doctor's home and killed himself during a standoff with police. David Herron was not a patient at the Benefis pain clinic, but suffered from chronic back pain and apparently had a long-standing grievance with his doctor, an orthopedic surgeon.

The incident prompted Benefis to upgrade security procedures at its facilities, including training employees to handle active shooter situations, according to the Great Falls Tribune, which reported that "danger presents itself in the form of patients who are drug addicted looking for an early prescription."