Vemont Attorney General William Sorrell initiated litigation last month against the company under the Vermont False Claims Act.
Burlington Labs allegedly overbilled Medicaid by charging for more drug tests than were necessary or agreed upon, according to filings with Sorrell’s office.
The company “violated a number of Medicaid rules” regarding drug tests carried out between Jan. 1, 2015 and June 30, 2015, according to the Vermont Attorney General.
The company does not admit liability or fraud in the case, and denies having violated the Vermont False Claims Act or any other state or federal law, according to the settlement agreement.
Burlington Labs will remain a Medicaid provider even though the attorney general’s office believes the alleged violations did occur, said Vermont Assistant Attorney General Jason Turner.
“The specific requirements for when to exclude a provider were not proven in this case,” Turner said.
With a compliance agreement in place as part of the settlement, Turner said, “we believe they can be a meaningful and compliant provider in the program.”
The attorney general has given Burlington Labs seven years to pay the settlement sum.
“The extended payment terms are intended to maximize Burlington Labs’ ability to continue operations, fulfill its mission, and properly compensate the Medicaid Program,” according to a press release from the attorney general’s office.
Sorrell in a statement said the penalty results from an attempt to balance the need for continued drug testing in Vermont with the need to ensure proper billing and to safeguard government funds.
Green Mountain Care Board in August, while approving an emergency sale of the debt-burdened company, stated that Burlington Labs “serves a critical need in Vermont’s effort to combat substance abuse.”
The company currently brings in about $400,000 less each month than it spends, it is in default on a $5 million bank loan and owes nearly $4 million in trade debt, according to the Green Mountain Care Board order.
An investor group led by James Crook has expressed interest in purchasing Burlington Labs, and the Green Mountain Care Board last month permitted the sale on the condition that the attorney general’s office sign off on it.
Sorrell hasn’t said he will oppose the sale, Turner said.
Part of the settlement agreement binds any potential new owners of the company to pay what remains of the settlement amount, Turner said. Once a potential purchaser agrees to pay the company’s settlement, the attorney general will allow the sale to move forward, Turner said.
Attempts to reach Crook were not successful.
Of the $6.75 million settlement, $5 million is considered “recovered Medicaid funds.” About $2.3 million of that belongs to the federal government, the settlement agreement states.
About $1.3 million has been withheld by the Department of Vermont Health Access since the state began investigating claims against Burlington Labs, and that amount will serve as the company’s first payment.
The state’s investigation of Burlington Labs determined that the testing company took in more than $12 million from the Vermont Medicaid program in 2015 after having collected only $10 million over the previous five years. That 2015 income increase “was not proportional to an increase in patients screened by Burlington Labs during that time period,” according to a release from the attorney general’s office.
Burlington Labs must, as part of the settlement agreement, hire a compliance officer and write a code of conduct. The company’s board of directors must also meet “at least quarterly to review and oversee” its compliance program, and directors must submit signed statements with periodic reports on the program attesting to board members’ belief the company remains in compliance with the law and the settlement agreement.
Violations of these or other terms of the settlement agreement carry up to a $1,000 per day fine, according to the settlement agreement.
Michael Casarico, a former probation officer and drug court coordinator, and co-founder of Burlington Labs, referred reporters to PR representatives for comment.
Ken Liatsos, of PR firm People Making Good, sent by email a statement under Casarico’s name that said Burlington Labs has grown over the last five years, and that the company’s “procedures need to evolve as the business scales.”
Liatsos’ statement said Medicaid billing rules are complex, that Burlington Labs is evolving to meet those complexities, and the company will use “some of the most respected billing compliance attorneys and billing experts to assist us through this process.”
Burlington Labs employs nearly 140 workers and served more than 2,000 Vermonters in 2015.
