Two medical laboratories from Wisconsin and their founding entities have agreed to pay $8.5 million to settle a whistleblower lawsuit.

The amount is meant to resolve False Claims Act allegations over Medicare fraud, with complaints stemming from the U.S. Department of Justice.

Medicare fraud occurs when a company bills the government for services that were never given to the Medicare patient and can be committed by a number of different entities in the healthcare industry.

Pharmasan Labs Inc. and NeuroScience Inc. laboratories and founders Gottfried Kellerman and Mieke Kellerman, have agreed to the terms of the settlement that allowed federal agents to seize $2.8 million in March 2014. The laboratories have been accused of billing Medicare for ineligible food sensitivity testing and other reasons.

The companies also agreed to pay $5.7 million to the United States, which settles the Medicare fraud allegations. For his role in defrauding his employer, Whistleblower Richard F. will receive $1.1 million as part of the companies’ agreement.

Whistleblowers are individuals who report fraud to the government when their employers are witnessed committing acts of fraud involving federal programs. Along with being essential for defrauding the federal government of substantial losses, a whistleblower is often rewarded 15% to 30% of what is recovered from the fraud lawsuit.

Whistleblowers are also protected against retaliation from the companies in question, which prevents them from being demoted or terminated from their job.

Overview of Whistleblower Lawsuit Settlement

Parties named as plaintiffs include: the U.S. Department of Justice, the state of Wisconsin, and the state of Minnesota. Legal representatives of Wisconsin state that Medicare fraud will be heavily pursued, and will hopefully encourage healthcare providers to behave within the law.

Pharmasan Labs and NeuroScience both admitted that federal investigators could prove that they had committed medicare fraud, and that they have been practicing it for five years. Pharmasan Labs is located near the border between Minnesota and Wisconsin, with NeuroScience as its middleman for Medicare billing.

Additionally Pharmasan Labs stated that federal government could also prove that its employees were aware of the Medicare fraud, pointing out that the government program did not cover food sensitivity testing.

The Medicare billing was often disguised as lab testing expenses, which was performed to spur Medicare to fund the testing.

As part of the settlement agreement, the defendants had signed their own respective five-year corporate integrity agreement with the United States Department of Health and Human Services.

Under the terms of the agreement the laboratories must install a comprehensive compliance program that includes an annual claims review, which must be done by an independent organization.

The laboratories must also implement a central risk assessment and review process, which will help identify and resolve the risks associated with submitting Medicare and Medicaid claims.

Lastly all senior executives and employees must annually certify their compliance with their appropriate federal healthcare program.

The Whistleblower Lawsuit is United States of America, et al., v. NeuroScience Inc., et al., Case No. 3:13-cv-00350, in the U.S. District Court of Western Wisconsin.