Calloway to pay $20M to settle urine test dispute

Bryan Cohen Apr. 2, 2012, 1:53pm


WOBURN, Mass. (Legal Newsline) - Massachusetts Attorney General Martha Coakley announced a $20 million settlement on Friday with Calloway Laboratories resolving allegations that the medical testing company gave unnecessary urine drug tests.

Calloway Laboratories Inc., Arthur Levitan, the company's chief executive officer, Patrick Cavanaugh, its chief operating officer, and two employees of a sober house were indicted on 42 counts on July 2, 2010, by a Middlesex Grand Jury. The company allegedly engaged in a kickback scheme involving two straw companies funneling monetary incentives to employees at a medical office and multiple sober houses to illegally obtain urine drug screening business paid for by MassHealth, the Massachusetts Medicaid program.

"We allege that this kickback scheme was one of the most egregious abuses of the Medicaid program our office has handled," Coakley said. "This agreement allows us to return significant and much needed funding to MassHealth and to taxpayers. We will continue to prosecute the individuals we believe were responsible for carrying out these serious allegations."

Calloway Laboratories also allegedly billed MassHealth falsely for urine screening services that were not ordered by a doctor or authorized prescribers for a medically necessary purpose as is required by state law. The settlement agreement resolves the 21 corporate indictments that were brought against the company. Coakley's office will continue the prosecution of the remaining 21 indictments against the individuals named in the case.

Under the terms of the agreement, Calloway Laboratories agreed that Cavanaugh and Levitan will no longer be employed by or consult with the company or any entity controlled or owned by the company in any way. The company will take part in a comprehensive three year monitoring and compliance program with an independent compliance reviewer, in addition to annual site and record audits.

The agreement with Calloway Laboratories is the seventh resulting from an ongoing industry-wide focus by Coakley's Medicaid Fraud Division into urine drug tests billed to the state Medicaid program by independent clinical laboratories. To date, the focus on the sector has returned approximately $30 million to MassHealth and has resulted in multiple criminal indictments.

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