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California mobile PET scan provider Modern Nuclear Inc. has agreed to pay over $8.3 million to resolve allegations of healthcare fraud involving illegal kickback payments to referring physicians, the U.S. Department of Justice announced Thursday.
The settlement, which includes additional contingent payments based on future revenues, addresses claims that the La Habra-based company violated the False Claims Act by paying cardiologists excessive fees for supervising PET scans for patients they had referred, effectively creating an illegal referral scheme that generated fraudulent claims to federal healthcare programs.
Federal prosecutors allege that between September 2016 and January 2025, Modern Nuclear knowingly submitted false claims to Medicare and TRICARE that stemmed from violations of the Anti-Kickback Statute. The company allegedly compensated cardiologists at above-market rates for scan supervision, including paying them for time spent treating other patients, periods when doctors weren’t physically present, and for services that were rarely or never actually provided.
“Financial arrangements that exceed fair market value can distort medical decision-making and drive up costs for federal healthcare programs,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to pursue healthcare providers who pay kickbacks to induce patient referrals.”
The government also contends that an attorney opinion letter on fair market value, which the company claimed to rely on for its payment structure, contained fundamental inaccuracies and was eventually withdrawn by the consultant who issued it.
The diagnostic imaging sector has faced increasing scrutiny in recent years, as mobile healthcare services expand to meet patient needs in underserved areas. PET scans, which use radioactive tracers to evaluate organ and tissue functions, are particularly valuable in cardiac care but are also among the more expensive diagnostic procedures covered by federal healthcare programs.
As part of the resolution, Modern Nuclear has entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. The agreement mandates the company implement comprehensive compliance measures, including procedures to ensure arrangements with referring physicians adhere to the Anti-Kickback Statute, the establishment of a formal compliance program, and the retention of an Independent Compliance Expert to monitor program effectiveness.
“When healthcare providers make medical decisions based on financial incentives rather than patient needs, they threaten the integrity of federal healthcare programs,” said Tamala E. Miles, Special Agent in Charge with the HHS Office of Inspector General. “Our agency is committed to holding accountable those who attempt to exploit these vital programs.”
The settlement resolves a qui tam, or whistleblower, lawsuit filed by Matt Lieberman and James Whitney under provisions of the False Claims Act that allow private citizens to sue on behalf of the government for false claims and share in any recovery. As relators in the case, Lieberman and Whitney will receive 16 percent of the proceeds from the settlement.
The case, filed in U.S. District Court for the Central District of California as United States ex rel. Lieberman v. Modern Nuclear, Inc., et al., was handled through a coordinated effort involving the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, the U.S. Attorney’s Office for the Central District of California, HHS-OIG and the Defense Health Agency Office of Inspector General.
This resolution comes amid intensified healthcare fraud enforcement on the West Coast. Earlier this year, the Justice Department expanded its Health Care Fraud Strike Force to cover California, Arizona, and Nevada, adding federal prosecutors specifically focused on investigating and prosecuting healthcare fraud schemes in the region.
The settlement amount of $8,334,350.71 was based on Modern Nuclear’s ability to pay, according to the Justice Department. The agency emphasized that the claims resolved by the settlement remain allegations only, with no determination of liability.
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8 Comments
While the details of this specific case are troubling, I’m encouraged to see the DOJ taking an active role in policing fraud in the medical industry. Holding companies accountable is crucial for maintaining trust in our healthcare system.
Paying doctors inflated fees to drive up referrals is a clear conflict of interest that compromises patient care. I’m glad the government was able to uncover and resolve this fraudulent scheme.
You’re right, these kinds of kickback arrangements distort medical decision-making and drive up costs for everyone. Cracking down on this type of fraud is important for ensuring the integrity of our healthcare system.
The government’s pursuit of this case is a positive step, but I’m concerned about the broader issue of healthcare fraud and its impact on patients and taxpayers. What more can be done to root out these kinds of abuses across the system?
An $8.3 million settlement is a substantial penalty, but I wonder if it’s enough to truly deter this type of behavior in the future. Do you think the government should have pursued criminal charges as well?
This is a serious allegation of healthcare fraud involving illegal kickback payments. It’s good to see the DOJ taking action to hold companies accountable and protect taxpayer-funded programs like Medicare and TRICARE from abuse.
This case highlights the need for stronger safeguards and transparency around physician compensation arrangements, particularly in the medical imaging industry. What policy changes could help prevent similar fraud in the future?
I’m curious to learn more about the details of this case and how Modern Nuclear was able to carry out this alleged scheme for so long. What oversight failures allowed it to go undetected for nearly a decade?