A national medical billing company with an office in Duluth has agreed to pay $1.95 million for allegedly defrauding the Medicare and Medicaid systems, federal authorities announced.

Medical Business Service Inc., whose local office is on Koger Boulevard near Ferguson Elementary School, was accused of violating the False Claims Act by fraudulently changing diagnosis codes on claims to get rejected claims paid on behalf of radiologists.

“Billing companies provide a key check-point to combat medical billing fraud. Consequently, they will be examined with the same scrutiny as healthcare providers,” U.S. Attorney Sally Quillian Yates said in a news release announcing the settlement.

Derrick L. Jackson, special agent in charge of the Office of Inspector General in Atlanta, said the health care providers the firm processed fraudulent claims on behalf of were put at risk by the practice.

“The health care providers who contracted with MBS placed their trust in the company to correctly process claims and not submit fraudulent information to the Medicare and Medicaid programs,” Jackson said in the news release. “Billing services such as MBS have no less of a duty to ensure truthful information on claims than do the providers who use these services.”

The company, based in Florida, also faced accusations of fraudulent practices in Florida, New York, Tennessee and Texas. The settlement, Yates said, brings the federal investigation to a close.

Federal authorities allege that MBS improperly coded and billed claims by radiologists between 2008 and 2010, when the company falsified diagnoses after Medicare and Medicaid rejected claims. The company also faced a whistle-blower lawsuit, which is resolved by the settlement as well.

The federal government will receive the bulk of the settlement, while Florida, Georgia, New York, Texas and the whistle blower will divvy up the rest.

J. Britt Johnson, the Federal Bureau of Investigation’s special agent in charge in Atlanta, said his agency, which investigated the case, will remain vigilant.

“Federal funds designated for use through the Medicare and Medicaid programs are much needed but limited. When those funds are not used as intended, the system does not work as intended and people suffer,” Johnson said in the news release.

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