LEXINGTON, KY (Friday, February 16, 2024) – The U.S. Attorney's Office, Eastern District of Kentucky reports that a Lexington toxicology lab, LabTox, LLC, its owner, Ronald Coburn, 76, and its compliance officer, Erica Baker, 31, agreed to civil judgments totaling $10,458,933 in favor of the United States, holding LabTox, Coburn, and Baker liable for submitting false claims for urine drug testing services to the Medicare and Kentucky Medicaid programs.
The agreed judgments, entered Thursday by Chief U.S. District Court Judge Danny C. Reeves, follow Coburn’s and Baker’s criminal convictions for health care fraud. In December 2023, Judge Reeves sentenced Coburn to 46 months in prison, and Baker to 6 months in prison, followed by 6 months of home confinement; both are required to report to Bureau of Prisons’ custody today.
Coburn owned and operated LabTox, LLC, a clinical laboratory that performed urine drug tests and billed them to Medicare and Kentucky Medicaid. Baker was LabTox’s director of operations and compliance officer. Both knew that Medicare and Kentucky Medicaid only pay for urine drug tests that are medically necessary. In his plea agreement, Coburn also admitted knowing that urine drug tests ordered by courts for use in judicial proceedings are not medically necessary, and thus not payable by Medicare or Kentucky Medicaid. With Coburn’s knowledge and approval, however, Baker recruited a company called Blue Waters Assessment and Testing Services to refer court-ordered urine drug tests to LabTox. Coburn knew this was not medical testing, but caused LabTox to bill the tests to Medicare and Kentucky Medicaid anyway, resulting in fraudulently-obtained payments of $1,864,429 between June 2019 and March 2021. Submission of these false claims for court-ordered urine drug tests constituted criminal health care fraud and also violated the False Claims Act, triggering additional civil penalties. Coburn and LabTox’s agreed civil judgment holds them liable for $5,593,287, because under the False Claims Act, losses to the Medicare and Kentucky Medicaid programs are mandatorily trebled.
Erica Baker’s sentence and False Claims Act judgment resulted from a similar fraud scheme. According to her plea agreement, she participated in a health care fraud conspiracy with Coburn between January 2019 and January 2021. Specifically, 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. Baker knew that urine drug tests for these programs’ clients were not performed for any medical reason, as would be required before Medicare or Kentucky Medicaid would pay for the tests. As part of the scheme, Baker misled sober home directors, and induced the facilities to send LabTox more tests by putting facility staff on LabTox’s payroll and compensating them based on the number of urine drug tests sent to the lab. Despite knowing that this testing was not for medical purposes, Baker and Coburn agreed to cause LabTox to bill Medicare and Kentucky Medicaid for urine drug tests referred by these non-medical programs, resulting in fraudulently obtained payments of $1,621,882. Submission of these false claims for medically unnecessary urine drug tests constituted criminal health care fraud and violations of the False Claims Act, triggering additional civil penalties. Baker and LabTox’s agreed civil judgments hold them liable for $4,865,646, as mandatorily trebled damages.
“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. We will continue to do our part to prevent this destructive fraud, and to return these critical funds to their intended purpose.”
“Health care providers who cause the submission of Medicare claims for medically unnecessary services pose a significant risk to the program and the patients who rely on it,” stated Special Agent in Charge Tamala Miles of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “In this case, the two health care executives and LabTox will be excluded from participating in federal health care programs for 19- and 20-years as result of the threat they posed to the integrity of those programs by their desire to enrich themselves. Our agency will continue to work diligently with our law enforcement partners to investigate such health care fraud schemes.”
“This investigation revealed the subjects bilked American taxpayers for years by lining their pockets with millions of dollars of fraudulently obtained funds,” said FBI Louisville Special Agent in Charge Michael E. Stansbury. “This case demonstrates the commitment of the FBI, HHS-OIG, IRS, and the United States Attorney’s Office to rooting out fraud and ensuring the critical healthcare funds go where they are needed most – to the health and welfare of patients.”
The agreed civil judgments resolve a lawsuit brought by a private citizen under the qui tam provisions of the False Claims Act. Under those provisions, a private party can file a civil action on behalf of the United States, thereby bringing allegations of fraud to the Government’s attention, and share in any financial recovery. As part of this resolution, the individual who filed the qui tam complaint will receive a portion of the settlement proceeds. The civil case is captioned United States ex rel. Caitlin Secamiglio v. LabTox, LLC, et al., Case No. 5:20-CV-00305-DCR.
United States Attorney Shier; Michael E. Stansbury, Special Agent in Charge, FBI, Louisville Field Office; Special Agent in Charge Miles; and Karen Wingerd, Acting Special Agent in Charge, Internal Revenue Service, Criminal Investigation, Cincinnati Field Office, jointly announced the sentences and agreed judgments.
The investigation was conducted by the FBI, HHS-OIG, IRS, and investigators from the United States Attorney’s Office. Support was provided by the Kentucky Attorney General’s Office and the West Virginia Attorney General’s Office. The United States was represented in the criminal case by Assistant U.S. Attorneys Andrea Mattingly-Williams and Paul McCaffrey, and in the civil case by Assistant U.S. Attorney Christine Corndorf.
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