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United States v. Snap Diagnostics LLC

United States District Court, N.D. Illinois, Eastern Division

June 5, 2018

SNAP DIAGNOSTICS, LLC, et al., Defendants.



         On May 29, 2014, Plaintiff Christopher Piacentile ("Plaintiff) filed his complaint, on behalf of the United States of America and California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas. Virginia, Washington, Wisconsin, and the District of Columbia, pursuant to the qui tarn provisions of the False Claims Act, as codified by 31 U.S.C. § 3730(b)(2). Plaintiffs complaint alleges that Defendants Snap Diagnostics LLC ("Snap"), Gil Raviv, Ph.D. ("Raviv"), Stephen Burton. ("Burton"), Leslie Gardea ("Gardea"), Apria Healthcare Group, Inc., Lincare Holdings, Inc., DME Does, Physician Does (collectively, "Defendants") were involved in a scheme to, inter alia, defraud the United States through the filing of false and fraudulent Medicare and Medicaid claims.

         Following a years long investigation into Plaintiffs allegations, the United States filed its Complaint in Intervention of the United States of America (the "Complaint") on December 18, 2017. The civil Complaint alleges: Defendants filed false claims with Medicate for payments of federal funds, Count I; made false statements to agents of the United States in connection with their claims for payment of federal funds, Count II; and paid illegal kickbacks, bribes, or rebates to treating physicians and independent sales representatives to induce patient referrals, Count III, in violation of the False Claims Act, as codified at 31 U.S.C. § 3729. Before the Court is Defendants' motion to dismiss the Government's Complaint. For the following reasons, the motion is denied.


         Snap is a provider of home sleep diagnostic testing. Their product, in conjunction with an evaluation by a medical professional, is used in the diagnosis of Obstructive Sleep Apnea ("Sleep Apnea"). Snap, following a physician's order and referral, would ship a proprietary Type 3[1] sleep machine to the patient who would be trained by a Territory Manager, the referring physician, or a member of his staff on the machines use. After the taking the test, the patient or physician would return the data cartridge(s) to Snap for analysis. Snap would then analyze and process the data, interpret the results, and generate a report for the referring physician.

         The Scheme

         In an effort to drive up profits, Defendants orchestrated a scheme where they would deploy their product and conduct multiple nights of Sleep Apnea tests-where only one night was required. Moreover, Defendants allowed the prescribing physicians to bill their patient's insurance a carrier for the professional components of the tests, necessary and unnecessary.

         False Claims

         Founded in 1994, Snap provides home sleep tests to individuals to diagnose Sleep Apnea. In 2009, following lobbying from Raviv, Medicare began to cover the cost of home sleep tests for the diagnosis of Sleep Apnea. In a letter Raviv sent to Medicare, he indicated that it was routine practice for patients to undergo only a single night of home sleep testing to diagnose Sleep Apnea. Indeed, Snap's promotional documents aver that a diagnosis can almost always be made in a single session. Compl. In Intervention of the United States of America [hereinafter, "Compl."], ¶ 71. However, the Complaint alleges that in an effort to drive up profits Snap began conducting two nights of testing per patient-allowing them to bill the patient and the patients insurance twice. Compl. ¶ 80-82.

         Snap's new procedure of analyzing both nights of data was not a blanket policy. Instead Snap's procedure was to analyze and bill for both nights of testing, only when the patient was either covered by Medicare or self-pay. The decision to analyze and bill both nights of data was not based on a clinical determination of the specific patient's needs-i.e. whether multiple nights of testing were medically necessary. The Complaint alleges that since October 2010, Snap has and continues to analyze and bill two or more data sets to Medicare while analyzing only a single night's test when a patient has private insurance. Compl. ¶ 87.

         Burton herself stated: "For the vast majority of patients releasing all three nights would not provide any more clinical value than one night... Sometimes there are important differences that force the release of multiple reports. Yet, often there is no value to releasing multiple nights as the data are consistent. It would simply cost more." Compl. ¶ 111. The Complaint provides six examples of patients who were double billed (individually and to Medicare) for multiple nights of unnecessary and duplicative testing. Compl. ¶¶ 114-119.


         The Complaint alleges that the most egregious violation of the anti-kickback provision of the False Claims Act was Snap's "offering and encouraging referring physicians to bill for the professional component[2] of the test, although SNAP physicians were performing the professional component." Compl. ¶ 122. The Complaint further alleges that Territory Managers would highlight the opportunity to bill private insurers for the professional component of the test because typically private insurers would not have educational or certification requirements for evaluating home sleep tests. The Complaint details conversations and correspondence between the individual defendants discussing this business model and the anticipated increase in volume of physician referrals.

         The Complaint also alleges that the Defendants' false claims were driven, at least in part, by the inducements and commissions paid to their Territory Managers. The Complaint is replete with allegations that Raviv and Defendants constructed a sales program that encouraged Territory Managers to push medically unnecessary procedures to generate commissions and win "challenges" where they would be rewarded for clients completing additional nights of testing. The Complaint argues that because Territory Managers were paid on a ...

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