September 25, 2019

By: Third Circuit Rejects Doctor’s Claim That Payments From Lab Were Rent, Not Bribes, in $100 Million Referral Scheme

Yesterday, the Third Circuit affirmed a doctor’s conviction for accepting bribes in exchange for referrals to New Jersey based lab Biodiagnostic Laboratory Services (BLS).  U.S. v. Thomas V. Savino, No. 18-2223 (3d Cir. 2019).  Doctor Thomas Savino allowed BLS to set up a blood drawing station in his solo medical practice in Staten Island, New York.  BLS paid Savino approximately $25,000 over the course of the arrangement, which lasted from August 2012 to April 2013.

The government, with the assistance of a BLS recruiter-turned-cooperating witness, alleged that those payments were bribes for Savino’s referrals to BLS for testing services.  Savino argued at trial that the money was rent payment for using his space, not bribes.  The jury didn’t buy it and convicted Savino in October 2017 of 10 counts relating to the scheme, including violations of the federal Anti-Kickback Statute, Travel Act Bribery, Honest Services Fraud, and related conspiracies.

On September 24, the Third Circuit agreed.  The Anti-Kickback Statute in 42 U.S.C. § 1320a-7b(b)(1)(A), it explained, required proof that that Savino (1) knowingly and willfully; (2) solicited or received any remuneration; (3) in return for referring any individual to a person for the furnishing of any item or service for which payment may be made in turn or in part under the Federal health care program.  The Court rejected Savino’s claim that evidence was insufficient to show that the payments were for referrals rather than rent.  It noted the “ample circumstantial evidence” the government presented at trial showing that Savino intended to accept bribes from BLS, including that:

• Savino allowed BLS to operate the lab in his office without a written agreement in return for cash payments;
• The lab had no public entrance – patients could only access the area where blood was drawn through Savino’s office;
• In recorded conversations with the BLS recruiter, Savino “haggled over the payment scheme with a new potential lab, explaining that he had ‘good volume’ and could send them certain urine testing ‘that pa[id] tremendously well;’”
• Savino accepted a $1,500 cash payment ostensibly from the new lab and offered to split monthly cash payments with the BLS recruiter if he could convince the company to do urine testing.

The Third Circuit rejected Savino’s other arguments as well, namely that as a New York doctor he shouldn’t have been convicted in connection with the New Jersey bribery statute.  The Court countered that the scheme clearly had detrimental effects in New Jersey, as BLS was based there, the blood was shipped to and tested there, and the payments Savino received came from the state.

Dozens of other individuals have already been convicted in connection with this scheme, which led to approximately $375,000 in business for BLS and more than $10 million charged to Medicare and private insurers.  BLS pled guilty in 2016 to an information charging conspiracy to violate the Anti-Kickback Statute and the Federal Travel Act and one count of conspiracy to commit money laundering.