Alpharetta doctor sentenced to 3 years in federal prison

The owner of a chain of Atlanta-area medical clinics has been sentenced to 36 months in federal prison for a scheme in which former state insurance commissioner John Oxendine also has been indicted.

Alpharetta-based physician Jeffrey Gallups had ordered doctors who worked at his Ear, Nose & Throat Institute clinics to require unnecessary lab tests for patients. All the while, he had a secret arrangement with a Texas lab company to split the money generated by the tests, prosecutors said.

The scheme stuck patients with lab bills for thousands of dollars and defrauded insurance companies. Gallups pleaded guilty in October to submitting fraudulent insurance claims, and last week, as part of his sentence, he was ordered to pay more than $700,000 in restitution. He also was fined $25,000.

In a separate civil case, Gallups and his company, Milton Hall Surgical Associates, in December agreed to pay about $3 million to settle a federal whistleblower lawsuit alleging the scheme bilked government health care programs.

A May indictment against Oxendine alleges that he was a middleman in the scheme.

According to federal prosecutors, the lab company paid kickbacks to Gallups through the former insurance commissioner, who also took a cut of the proceeds. Prosecutors also accuse Oxendine of helping to pressure doctors in Gallups’ clinics to order the tests.

Gallups had told the doctors to order toxicology and genetic screens for every patient 12 and older who was going to have surgery and every patient who got a prescription of any kind, court records show. According to the indictment, in a meeting at the Ritz-Carlton hotel in Buckhead in September 2015, Oxendine gave a speech where he told the doctors that they needed to order the testing.

Oxendine has pleaded not guilty to charges of conspiracy to commit health care fraud and money laundering. He is free on a $100,000 signature bond.

The lab test scheme involved a Texas company, Next Health, which owns labs, pharmacies and other companies. It is also a target of a federal lawsuit by insurer United Healthcare alleging that Next Health and its subsidiaries paid bribes and kickbacks to physicians and others in exchange for lab tests and compound pharmaceutical orders. Since the lawsuit was filed in 2018, the company’s labs have had their licenses revoked, according to court records. In addition, two of Next Health’s owners pleaded guilty to using it to launder money derived from health care fraud.

The United Healthcare lawsuit alleges that a company Oxendine created, International Medical Research, took part in the scheme, offering $100 kickbacks per specimen sent to Next Health for lab testing. To justify the kickbacks, the suit alleges, IMR said the payments were in exchange for medical providers’ participation in a medical study. The suit doesn’t name IMR as a defendant, and Oxendine has said that claims about its involvement are unfounded.

A date hasn’t been set for Gallups to report to prison. He remains actively licensed as a physician in Georgia, according to the Georgia Composite Medical Board, and has no disciplinary record.