Appeals court revives suit alleging radiology practice used nonmedical-grade monitors to submit $6M in false claims

An Arizona appeals court has revived a lawsuit alleging a radiology practice used nonmedical-grade computer monitors to submit some $6 million in false claims to the Medicare program.

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

Radiology Limited defeated the lawsuit in September 2022, with an Arizona district court ruling that Stenson failed to prove that use of inferior monitors rendered its services as “not reasonable and necessary.” However, an appeals court on April 26 partially overruled the suit’s dismissal and is now allowing the case to continue.

“If the Dell monitors are as inadequate as Stenson alleges, it seems likely that CMS would deny Radiology Limited’s claims for at least some diagnostic readings,” according to the ruling. “In the context of radiological diagnostic readings, the display technology used is ‘so central’ to the medical service provided that conducting a reading on wholly inadequate technology is effectively the same as not providing the service at all.”

Radiology Limited was founded in 1933, employs 45 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 previously investigated the complaint and declined to intervene, with Stenson opting to proceed independently. The plaintiff also “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.”

The appeals court will now give Stenson and his attorneys time to amend his complaint again, after a lower court denied this opportunity. Bloomberg Law first reported news of the reversal on Friday.

Marty Stempniak

Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic. 

Trimed Popup
Trimed Popup