Fort Worth brothers admit role in $36 million lab test kickback scheme
By KEVIN KRAUSE | The Dallas Morning News | Published: August 12, 2017
DALLAS, Texas (Tribune News Service) — Two Fort Worth men pleaded guilty Friday afternoon to playing a role in an alleged $36 million fraud scheme involving unnecessary lab tests of saliva and urine that were billed to the U.S. military's health care system.
Matthew and Britt Hawrylak, who are brothers, entered their pleas and left the courthouse.
They are scheduled to be sentenced on the same day in November.
Two Travis County men, Erik Bugen and Jody Sheffield, were also charged last month in the alleged scheme, which ran from May 2014 to about July 2017, according to a criminal filing. They have pleaded not guilty in the case. Their attorneys could not be reached Friday for comment.
The criminal filing says soldiers were given Wal-Mart gift cards in exchange for their participation in the drug toxicology and DNA cancer screening tests that were not needed and were "the product of kickbacks" to physicians. Tricare, the military's health care system, paid for the tests, the filing said.
"The doctors never saw the patients and had no doctor-patient relationship with the patients," the criminal filing says.
The Tricare beneficiaries never received the test results, according to the criminal filing.
The defendants, who are charged with conspiracy to commit health care fraud, each face up to five years in prison and a maximum fine of $250,000 if convicted in the lab test case, according to the criminal filing.
An attorney for the brothers declined to comment after Friday's hearing.
The Hawrylak brothers were marketers for ADAR Group – an outpatient toxicology testing lab in Killeen, where Fort Hood is located – as well as Xpress Laboratories of Fort Worth and Progen Lab Systems in Dallas, the criminal filing said.
Bugen was an owner of ADAR Group and Sheffield was its operations manager, the criminal filing said. The company name is an acronym for Alcoholism & Drug Addiction Recovery, according to the filing.
Bugen, Sheffield and the Hawrylak brothers operated ADAR Group solely to profit by submitting bogus health care claims, according to the criminal filing. Tricare paid almost $5 million for the claims, the criminal filing said.
Xpress Laboratories and Progen Lab paid the Hawrylaks for lab test referrals, and they split the payments with Bugen and Sheffield, according to the criminal filing.
Samples were collected from as many as 200 people per day, regardless of whether they had a history of drug or alcohol use, the filing said.
Bugen and Sheffield disguised the Wal-Mart gift card scheme as a "food assistance program for low-income beneficiaries," the criminal filing said. They also paid physicians a "flat fee per month" to sign orders for the toxicology and cancer screening tests, according to the criminal filing.
In addition, ADAR Group employees used the doctors' signature stamps on testing orders before sending the forms to the Xpress and Progen labs, the filing said. The employees put "false diagnosis codes" such as alcohol abuse on the Tricare claims to insure they would be paid, the criminal filing said.
The labs used the Tricare provider number and lab license of Cockerell Dermatopathology in Dallas to bill Tricare, according to the criminal filing.
Dr. Clay Cockerell, of Cockerell Dermatopathology, said he is glad the Hawrylak brothers have admitted their guilt and will be brought to justice.
"We have always behaved ethically and were the innocent targets of unethical individuals who used our business for nefarious means," he said. "We look forward to putting this entire episode behind us so that we can continue to provide high-quality patient care without further distractions."
Michael Elliott, an attorney for Progen, has said the company fired the four defendants last year and is making payments to the government to repay the money that was lost. He said Friday that Xpress Laboratories was a marketing arm of Progen that is no longer operating.
The government is seeking the forfeiture of a 2000 Ferrari 360 Modena from Bugen, according to the criminal filing. Prosecutors also are seeking the forfeiture of more than $900,000 from the Hawrylak brothers as well as several Rolex watches and two all-terrain vehicles, according to court records in the case.
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