Omni Healthcare Ordered to Pay Attorney Fees for Vexatious FCA Litigation

Omni Healthcare Ordered to Pay Attorney Fees for Vexatious FCA Litigation

On September 5, the US District Court for the District of Massachusetts ordered Omni Healthcare, Inc., a Florida-based medical provider, to pay defendants’ legal fees in a whistleblower-initiated False Claims Act (FCA) case, agreeing with the defendants that Omni’s claims were “clearly vexatious and brought primarily for purposes of harassment.”

The FCA litigation arose from Omni’s allegations that MD Labs, a medical laboratory, and its owners violated the FCA and Anti-Kickback Statute (AKS) by submitting false claims for urinary tract infection (UTI) tests “resulting from” illegal kickbacks and making commission-based payments to independent-contractor sales representatives to promote MD Labs’ services and influence health care providers’ decisions, resulting in the submission of false claims for UTI tests. On January 6, the court granted summary judgment to the defendants, based in part on a lack of evidence that the alleged kickbacks caused the submission of false or fraudulent claims. We previously covered the Massachusetts federal court’s decision here.

Following the summary judgment decision, the defendants requested attorney’s fees for the vexatious litigation. The court found that the relator’s conduct was troubling, emphasizing that Omni knowingly ordered medically unnecessary tests to manufacture false claims in support of its FCA suit. The court concluded that this conduct constituted a misuse of the FCA’s whistleblower provision, stating, “[k]nowingly causing the submission of false claims for payment in order to substantiate an FCA suit is a misuse of the statute’s relator provision.”

The court directed the parties to await the outcome of the relator’s appeal to the First Circuit before submitting a report that either sets forth the agreed-upon amount of attorney’s fees or provides a briefing schedule to determine the appropriate amount of attorney’s fees to be awarded.

The case is Omni Healthcare, Inc., et al. v. MD Spine Solutions LLC, et al., No. 18-cv-12558-PBS, in the US District Court for the District of Massachusetts.

Federal Court Quashes DOJ Subpoena for Gender-Affirming Care Records at Boston Children’s Hospital

On September 9, a Massachusetts federal judge issued an order quashing a subpoena from the US Department of Justice (DOJ) that sought extensive records from Boston Children’s Hospital (BCH) related to gender-affirming care (GAC). The court found the subpoena to be overbroad and concluded that its true purpose was to “interfere with the Commonwealth of Massachusetts’ right to protect GAC within its borders, to harass and intimidate BCH to stop providing such care, and to dissuade patients from seeking such care.”

The subpoena demanded a wide range of documents, including billing records for GAC provided to minors, all medical records and personal information of patients who have been provided with GAC, including their social security numbers and home addresses, and communications with pharmaceutical manufacturers and medical science liaisons regarding the use of puberty blockers and hormones and treatment of gender dysphoria. The subpoena purported to investigate BCH’s unlawful off-label promotion of puberty blockers and cross-sex hormones in violation of the Food, Drug, and Cosmetic Act and allegedly false claims that may have been submitted to federal health care programs in violation of the FCA.

The court acknowledged that while the requirements for enforcing administrative subpoenas are “not onerous,” the DOJ must prove that the subpoena was issued for a congressionally authorized purpose, the information sought is relevant to the authorized purpose and adequately described, and the proper procedures were employed in issuing the subpoena.

The court found that the DOJ’s subpoena was issued for an improper purpose, and that the subpoena was “astonishingly broad” and “virtually unlimited in scope.” The court further held that the DOJ sought an expansive number of records without “offering an iota of suspicion” of BCH’s allegedly fraudulent billing practices or off-label promotion.

In finding that the DOJ issued the subpoena for an improper purpose, the court noted the statements by the Trump Administration and Attorney General Pamela Bondi detailing the Administration’s goal of ending GAC. In particular, the DOJ’s Civil Division issued a memorandum on the same day it issued the subpoena announcing the Division’s priority in investigating medical institutions and providers to “hold accountable those who mutilate [children] under the guise of care.” Memorandum from Attorney General, Preventing the Mutilation of American Children, Office of the Attorney General, at 3-4 (April 22, 2025). Such public statements, without any attempt to substantiate an investigation into BCH’s allegedly fraudulent conduct, doomed the subpoena.

The court’s decision is In re: Administrative Subpoena, No. 1:25-mc-91324 (D. Mass.).

Laboratory CEO, Physicians, and Marketers Agree to Over $6 Million Settlement in Laboratory Kickback Scheme

On September 8, the DOJ announced settlements with a former CEO, two physicians, and seven marketers to resolve allegations of illegal kickbacks related to laboratory testing referrals. The settlement payments total over $6 million to resolve allegations of violations of the AKS and FCA.

The DOJ alleged that Christopher Grottenthaler, the former CEO of True Health Diagnostics, LLC, facilitated a scheme in which marketers and laboratory employees paid kickbacks to physicians disguised as managed service organization (MSO) distributions. These payments were allegedly intended to induce referrals for laboratory testing services reimbursed by Medicare, Medicaid, and TRICARE. Grottenthaler also allegedly continued the scheme by arranging for True Health to pay kickbacks disguised as consulting fees, processing and handling fees, and waivers of copayments and deductibles. Grottenthaler agreed to pay $4.25 million to resolve the government’s claims that he caused the submission of false claims for laboratory testing from January 2015 to May 2018.

In addition, two physicians, Dr. Hong Davis and Dr. Elizabeth Seymour, agreed to pay $124,627 and $234,215, respectively, to resolve allegations that they accepted kickbacks from purported MSOs in exchange for laboratory test referrals to various laboratories and hospitals.

Seven marketers and their associated entities also agreed to pay a combined $1,459,620 to resolve allegations that they paid kickbacks disguised as MSO payments to induce laboratory referrals. The settlement amounts for certain individuals were based on their ability to pay and are in addition to amounts ordered in related criminal proceedings.

While the individuals faced criminal proceedings and some paid criminal fines associated with those charges, the claims resolved are allegations, and there was no determination of civil liability.

Read the DOJ’s press release here.

Individual Sentenced to 24 Months for Laundering Proceeds of Health Care Fraud Scheme

On September 9, Thomas Farese was sentenced to 24 months in prison for laundering proceeds from a health care fraud and kickback scheme involving durable medical equipment (DME) that resulted in millions of dollars in losses to Medicare and other insurers. In addition to the prison term, the defendant was ordered to serve six months of home confinement as part of a three-year term of supervised release, pay $1,314,000 in restitution to victims, and forfeit $495,000 in proceeds traceable to the offense.

Farese pled guilty to one count of money laundering based on claims that he engaged in monetary transactions from criminally derived proceeds. According to the government, Farese invested in a DME supply company operated by individuals who orchestrated a large-scale scheme to bill Medicare and other insurers for orthotic braces and other equipment that patients did not want or need. After learning of the arrests of the company’s operators in April 2019, the defendant communicated with a business partner about the fraudulent conduct and subsequently received $495,000 in proceeds from the scheme into his bank account.

Read the US Attorney’s Office for the District of New Jersey’s press release here.