A Diagnostics & Imaging Week

The operator of a chain of medical imaging centers in southern Florida agreed to pay $7 million to settle charges it billed for CT scans that were never performed, and also offering payments to doctors to send patients to its facilities.

The centers are owned by Boca Raton radiologist Fred Steinberg, MD, and operate under the umbrella of University MRI & Diagnostic Imaging Centers. The U.S. Attorney in Miami began investigating Steinberg after a radiologist who used to work at the centers filed a whistleblower lawsuit in 2002 alleging fraud.

The action against Steinberg comes as regulators have begun to more closely scrutinize the relationships between physicians who order scans for their patients and the centers that perform that work. As spending on medical imaging has boomed in recent years, doctors in many specialties have looked to cash in on the lucrative work by buying their own equipment or entering into deals with imaging centers that allow them to share in the profits.

In the settlement, a number of inducements were used to generate referrals, according to the whistleblower lawsuit and federal prosecutors. The imaging centers deny that any of the financial relationships with physicians were illegal or improper. In addition, the settlement allows the facilities to continue doing business with Medicare. Federal law prohibits healthcare providers from offering payments in exchange for referrals.

One arrangement referenced by the government and the whistleblower was "lease agreements" in which local doctors contracted with University MRI to scan their patients.

Other inducements offered to physicians for referrals included "medical director" positions for referring physicians and payments for clinical research, according to the U.S. Attorney's office. The whistleblower complaint charges that those arrangements required little or no work and were instead a way to pay doctors for referrals. The complaint names 11 physicians who allegedly participated in those arrangements, which paid as much as $6,000 a month.

The facilities also did CT scans and ultrasound exams that were not ordered by physicians and weren't medically necessary, according to the government.

In other legalities:

• The law firm Coughlin Stoia Geller Rudman & Robbins reported a class action filed in the U.S. District Court for the District of Massachusetts on behalf of investors who bought common stock in Inverness Medical Innovations' (IMI; Waltham, Massachusetts) secondary public offering late last year.

In November IMI reported selling 13,634,302 shares at $61.49 a share, raising about $806.4 million in net proceeds. The total number of shares included 1.8 million shares sold to the underwriters to cover over-allotments. Certain selling stockholders of IMI also sold 165,698 shares in the offering.

According to the complaint, the registration statement "negligently failed to disclose the significant and severe integration issues that Inverness Medical was then experiencing and which were then impacting the company's continued operations."

• Federal court Judge Thomas Whelan last week approved Hooper, Lundy & Bookman's request for a preliminary injunction on behalf of Sharp HealthCare (San Diego), Scripps Health (San Diego) and Internist Laboratory of Oceanside (Oceanside, California) in their complaint against the federal Health and Human Services Agency. The complaint targets the government's attempted imposition of a flawed bidding process for clinical laboratory services, according to the law firm.

Patric Hooper, plaintiffs' lead counsel, welcomed the court's decision and characterized it as an important ruling for all providers and beneficiaries of the Medicare program.

HHS will now be required to go through a formal rulemaking process, with adequate provider, laboratory and input, prior to implementing a future bidding process.

The injunction was the result of a complaint seeking to halt a competitive bidding process imposed on clinical labs serving Medicare beneficiaries in the San Diego, Carlsbad, and San Marcos communities.

In issuing the injunction, the court found that the secretary of HHS had failed to comply with required federal rulemaking procedures and that unless the project was enjoined immediately irreparable harm would be suffered by plaintiffs and third parties, including Medicare patients. The project is enjoined until further notice of the court.

The plaintiffs filed suit on Jan. 29, 2008, to halt a Medicare Demonstration Project slated for the San Diego-Carlsbad-San Marcos region. The demonstration project, according to the complaint, "threatens to irreparably harm vital laboratory testing services for thousands of Medicare beneficiaries if it is allowed to move forward as expected on Feb. 15, 2008.