Lab Owner Fights His Insurer, And Now a Federal Fraud Case

After a three-year battle with an insurance company, a Sebastian County man who owns several testing laboratories has another legal foe, the United States government.

Billy Joe Taylor, 42, of Lavaca has spent about $2 million in legal fees over the last three years pressing legal action over allegations of unpaid insurance claims by Highmark Blue Cross Blue Shield of West Virginia, where he has a facility. In May, a criminal complaint was filed against Taylor in U.S. District Court in Fort Smith, alleging a multimillion-dollar health care fraud. As of last week, Taylor hadn’t been indicted. A spokesman for the U.S. Attorney’s Office for the Western District of Arkansas told Arkansas Business via email last week that Taylor’s case has not gone before a grand jury, and the spokesman didn’t know why it hadn’t or when it will.

Taylor, who owns Vitas Laboratories LLC of Edmond, Oklahoma, and Beach Tox LLC of Torrance, California, is accused of participating in a scheme to defraud the federal government out of more than $88 million. In a May news release, the U.S. Department of Justice says he used access to patient and medical provider information to file bogus claims for tests, including COVID-19 tests, that were never given.

“The complaint also alleges that hundreds of claims were submitted for beneficiaries after they had died or otherwise ceased providing samples,” the department said.

Taylor, speaking to Arkansas Business last week, called it a “sensationalism-type claim” by the government, “completely erroneous and false.”

Highmark has asked another one of Taylor’s lab companies, MedTest Laboratories LLC of Hurricane, West Virginia, for a refund of $6 million for payments on claims. MedTest denied that it owes Highmark the money. MedTest filed a counterclaim in 2018, saying the insurer had stopped paying claims and that it now owes “millions” to MedTest, which closed its doors a few months ago, Taylor said.

One of MedTest’s attorneys, Patrick Sheehan of Whatley Kallas LLP of New York, declined to comment on the case. But he said provider disputes with insurance carriers are common, and that Whatley Kallas represents providers in fights with insurance companies “pretty much on a full-time basis.”

Meanwhile, Taylor said he also is fighting federal attempts to seize his home and other properties that the government says were bought with the proceeds of the alleged crimes.

Taylor called the civil forfeiture practice “sickening.”

“If the government just alleges that you did something, they have the ability to come to your house and to take everything that they want from you,” Taylor said. He also is fighting the lawsuits in those cases.

In interviews with Arkansas Business, Taylor said he is innocent of wrongdoing and has nothing to hide. “I’m not going to hide through attorneys. This is very much an easy situation here from my end,” he said. “I’m being attacked by an insurance company across the country since I filed a massive lawsuit against them.”

A spokesman for Highmark Blue Cross Blue Shield said the company does not comment on pending litigation.

Getting His Start

Growing up in Oklahoma, Taylor began taking concurrent college classes at Carl Albert State College of Poteau while he was in high school and planned to go into the laboratory field. He also began volunteering at a hospital in his hometown of Stigler, Oklahoma.

The hospital later hired him, and Taylor learned how to draw blood, run tests and keep data for inspections and quality control.

“I enjoy the laboratory side, and I enjoy the research and development,” he said. “I got into this business to help people. I’m very passionate about patient care.”

Taylor worked in several hospitals, including Mercy Hospital Fort Smith, before getting into a partnership in 2009 to start Advanced Laboratory Services of Oklahoma City.

But just as he was starting to build ALS, Taylor had a stroke and a pulmonary embolism in 2010. He was 31.

“It took me a year to learn to walk and talk and everything all over again,” Taylor said. “The company was taking off without me while I was recuperating at home.” At one point ALS was testing 15,000 to 25,000 samples a month from all over the country, Taylor said.

He returned to the company as a paid consultant. In 2012, Taylor’s ALS business partner announced that he was going to sell the company.

So that year, Taylor formed another laboratory testing company. “I was approached by two people out of Tulsa to start a laboratory because they knew of my experience with ALS,” Taylor said. “A lot of the staff are still with me to this day.”

In 2014, Taylor sold his interest in his lab company and planned to retire while he was still in his 30s. He wanted to spend time with his children, “because I missed a lot of their life growing up,” Taylor said.

His retirement lasted about a year. He said he became bored and went back to work in 2016 when he and his other business partners acquired MedTest and created Vitas in early 2017. Taylor said his companies planned to compete with national laboratories. He said the average revenue was between $1 million and $2 million a month.

“We began in West Virginia with a company there that had nationwide contracts with Blue Cross Blue Shield,” he said. “Everything was going great. Then they quit paying their bills.”

Highmark Blue Cross Blue Shield West Virginia has a different view.

Lawsuit

Highmark sued MedTest in 2018 in West Virginia state court for damages in an alleged “billing scheme.” In the lawsuit, Highmark said that doctors would refer patients to MedTest for laboratory and diagnostic services. But “MedTest is a non-functioning laboratory and ‘front’ for a billing scheme devised and carried-out by the MedTest Defendants.”

Highmark named Taylor in the lawsuit along with the other owners, Brice Taylor and James Taylor Jr. of Edmond, Oklahoma, who are brothers and not related to Billy Joe Taylor. Vitas was also named as a defendant.

“The MedTest Defendants billed Highmark WV for independent laboratory and diagnostic services that MedTest did not perform,” the lawsuit said. It also alleged that MedTest submitted “false, misleading, and fraudulent claims for processing and reimbursement to Highmark WV.”

Highmark said it paid the defendants more than $6 million for the claims. Highmark alleged that “a substantial majority of these claims stem from opioid recovery centers” that didn’t have a network agreement with Highmark.

In court filings, the defendants denied the allegations and filed a counterclaim against Highmark for not paying claims to MedTest.

In its court filings, MedTest described itself as a nationwide provider of laboratory testing services, with sites in West Virginia, Arkansas and North Carolina. It said it handled testing for Blue Cross Blue Shield members in nearly every state, either under its name or by referring testing services to be performed by its affiliate, Vitas Laboratory, which was permitted under the network agreement with Highmark. But Highland rejected the claims for those services too, prompting MedTest to accuse Highmark of breaching the network agreement.

Highmark’s “breaches of contract have caused MedTest millions of dollars in damages,” the filing said. MedTest is seeking an unspecified amount of damages.

Taylor said that of the labs he has ownership interest in, only one — National Toxicology Laboratories Inc., of Bakersfield, California — continues to offer testing. It has government contracts and provides tests for between 200 and 300 people a day, he said.

Criminal Charges

As that lawsuit was pending in West Virginia, Taylor was accused by the Justice Department of being involved in a scheme to defraud the federal government of more than $88 million.

Investigators named two labs in the criminal complaint: Vitas and Beach Tox. At the end of February 2020, Taylor and an unidentified “individual A” acquired ownership and control of Beach Tox, according to FBI Special Agent Matthew Ferguson, in an affidavit in support of the May 21 criminal complaint.

Taylor “and his accomplices used Vitas and Beach Tox to submit false and fraudulent laboratory testing services that were often never provided, and not ordered by the rendering doctors on the claims,” Ferguson wrote. Taylor and his accomplices, who weren’t named in the filing, allegedly used their access to beneficiary and medical provider information from prior lab testing orders to “submit false and fraudulent claims for urine drug tests and other laboratory tests to Medicare, … including hundreds of claims submitted for beneficiaries after they died or ceased providing urine samples.”

Ferguson said the scheme worked this way: Taylor would establish or acquire control of clinical labs, allowing him and unidentified co-conspirators to get information about medical providers, patients and lab tests. They would then use that information to file Medicare claims for tests that were never done.

Ferguson wrote that both labs filed false claims to Medicare with dates of service that were after the beneficiary had died. The two labs filed more than 200 claims for dead beneficiaries that totaled $1.3 million, the filing said.

Ferguson’s affidavit also said that more than $42 million in false and fraudulent claims came during the pandemic, through which the testing company reaped more than $11 million.

Taylor told Arkansas Business that allegations that his companies billed for dead patients was “absurd. It’s crazy to me. “We too are trying to get to the bottom of any allegation that’s put out there against us,” he said. He denied that his companies did improper billing on dead patients or COVID patients.

The federal government also wants to seize several pieces of property it says were paid for with the proceeds of Taylor’s crimes, filing several civil lawsuits in May in federal court in Fort Smith to have the properties forfeited.

The properties include a 2,861-SF home at 201 Hwy. 255 in Lavaca. In court documents filed in that civil case, the federal government said that between June 18 and Aug. 10, 2020, Taylor paid nearly $165,000 from his bank account to the mortgage company for the property, which is in the name of his wife, Jennifer Taylor.

“Based on my investigation, I believe this transaction constitutes a violation of Money Laundering,” Ferguson, the FBI agent, said in the civil court filing.

Sebastian County property records show Jennifer Humphrey bought the house in 2016 for $399,900.

Taylor also is fighting the civil asset forfeiture lawsuits. “That’s why the government is so highly effective at what they do because they want to come in and cripple the person that they’re attacking,” Taylor said. “You should not be able to come into a person’s home without convicting that person and taking assets.”

Taylor said he wants a decision in his criminal case.

He said it’s been about five month since the criminal complaint was filed, which allowed the arrest warrant to be issued.

“If they want to indict me, I welcome an indictment,” Taylor said. “I welcome my moment in court. I just wish that the government would make up its mind on what it wants to do, so that I can proceed accordingly.”