Court lets lawsuit, alleging radiology group used inferior computer monitors to submit $6M in false claims, continue

A district court is allowing a years-old lawsuit—alleging a radiology practice used nonmedical grade monitors to submit $6 million in false claims—to continue. 

The case dates to June 2019 when whistleblower and Arizona-based IT executive Eric Stenson filed suit against Radiology Limited. He alleged the Tucson medical practice submitted claims to Medicare for readings that did not qualify for reimbursement because of poor-quality equipment.

In recent court action, Radiology Limited had sought to have the case dismissed, believing its arguments are without merit. However, Chief Judge Jennifer G. Zipps, of the U.S. District Court for the District of Arizona, rejected this request on Monday, allowing the case to continue. 

“If the monitors used by [Radiology Limited] ‘were not generally recognized by the medical community as effective for primary diagnostic read[ing]s,’ then it is plausible that defendant, a large and sophisticated radiology practice, was aware of a substantial and unjustifiable risk that using the monitors for that purpose fell below minimum efficacy standards,” the Jan. 13 decision states. 

Radiology Limited previously defeated the lawsuit in September 2022, with an Arizona district court ruling that Stenson failed to prove that use of inferior monitors rendered services as “not reasonable and necessary.” However, an appeals court on April 26, 2024, partially overruled the suit’s dismissal and allowed it to continue, eventually leading to this latest ruling. 

Radiology Limited was founded in 1933, employs over 50 physicians, operates 11 imaging centers, and is an affiliate of private equity-backed US Radiology Specialists. Attorneys for the practice have attempted to poke holes in Stenson’s arguments, according to previous filings. Federal authorities investigated the complaint and declined to intervene, with Stenson opting to proceed independently. The plaintiff “knows nothing” about the practice, defense attorneys charge, nor its physicians, operations or practices and has “no plausible basis to allege fraud.”

Stenson’s “sole insight” into Radiology Limited’s operations was allegedly from a phishing email he sent to the practice’s director of technology. He never worked at the organization and claims to be an IT executive for radiology practices in Idaho who was “informally collaborating with defendant regarding overlapping technology initiatives.”

“Here, we have an outsider whose only knowledge of defendant’s practices comes from an email that nullifies a necessary element of his claim (but which he shields from the court),” attorneys with Alston & Bird LLP wrote in 2022 prior to the dismissal. “The remainder of the amended complaint is a hodgepodge of admitted speculation and outright misstatements of the law. The amended complaint is frivolous, it should be dismissed, and Radiology Limited should be awarded its fees in defending against it.”

However, Judge Zipps rejected these assertions this week, believing Stenson has adequate grounds to argue his case. 

“Taking the [second amended complaint’s] allegations as true and viewing them in the light most favorable to plaintiff, the SAC sufficiently pleads that [Radiology Limited] was aware of a substantial and unjustifiable risk that diagnostic readings performed on the consumer grade monitors fell below minimum efficacy standards but submitted claims for those readings anyway,” the order states. 

The practice now has 14 days to file a response. Bloomberg Law first reported news of this latest decision on Wednesday.