A Chicago lab got $187 million for covid testing before the government cut it off over safety risks

But Alexander was feeling ill and desperate to make sure she didn’t pass covid-19 to her husband, a kidney transplant recipient. The rapid test came back negative that day, Dec. 23, providing temporary relief, she said.

Five days later, still sick, she went to a hospital. The test there came back positive. Her husband soon fell ill, too. He was hospitalized with covid-19 in mid-January and has remained on a ventilator since then, Alexander said.

While false negatives occur on antigen tests, Alexander now believes the first test was wholly unreliable. “I felt like the O’Hare results affected me. If I had been given real results, I could have been more cautious,” she said. “I could have done more.”

Once a small lab based out of a suburban strip mall that provided clinical tests for nursing homes and assisted-living centers near Chicago, O’Hare morphed into a testing juggernaut during the pandemic, setting up more than 100 pop-up coronavirus testing sites across the country, some little more than the shipping containers, records show.

In just 15 months, the company collected $187 million in federal money, according to government records, as it shifted its business focus and emerged as one of the nation’s largest test providers through a new program that reimbursed providers for the costs of testing the uninsured.

Last month, federal regulators suspended O’Hare’s license to operate a lab and cut off federal payments, previously unreported documents obtained by The Washington Post show. The sanction capped a string of safety concerns that date to the lab’s foray into coronavirus testing in late 2020 and, in some cases, allegedly put people at risk of serious injury or death, according to interviews and an examination of records by The Post.

O’Hare’s rise illustrates the shortcomings of the federal government’s approach to coronavirus testing and provides a portrait of a freewheeling segment of the testing industry that ballooned during the pandemic amid a massive infusion of government money.

Absent a robust public health testing infrastructure, the federal government directed billions of dollars to private health companies to provide coronavirus testing for the uninsured, creating lucrative opportunities for large, established firms as well as more obscure companies with spotty safety records.

The lab director who was responsible for attesting to O’Hare’s safety procedures and worked for O’Hare during most of the pandemic told The Post that she resigned because she had been kept in the dark about the company’s network of pop-up locations. Two other former employees said in interviews that they did not do the jobs attributed to them on documents O’Hare submitted to health regulators last year that listed the lab’s key safety personnel and their roles.

In addition to collecting samples that were sent back to O’Hare’s lab in Chicago for PCR testing, the remote sites offered free rapid antigen tests, tests that were not authorized under O’Hare’s license, records show. Patients complained repeatedly to attorneys general in multiple states that they never got their testing results from O’Hare, documents show.

One remote site in Wisconsin had no electricity or running water and only a kerosene generator for warmth despite the need to keep rapid tests at room temperature, a federal inspection shows. A federal inspection at the main O’Hare site in Chicago in December 2020 found lab workers moved back and forth between the lab and an adjacent open kitchen for breaks in their protective gear.

State health inspectors in Indiana witnessed “deficiencies in the performance of testing” at the site Alexander visited and one other, according to federal inspectors who cited the state findings — without greater detail — in a more extensive report explaining why reimbursements were stopped until O’Hare could demonstrate it had a credible plan to improve.

“O’Hare Clinical Lab made some mistakes due to the extensive and sudden demand for its services during the pandemic,” Stephen Lee, an attorney for O’Hare, said in an emailed statement in response to The Post’s findings. “O’Hare Clinical Lab has been working to address the issues raised by regulators in late 2021. O’Hare has suspended all testing until it resolves all regulatory issues.”

The lab did not address most of the detailed questions posed by The Post.

In a statement for this story, the federal agency that regulates clinical labs, the Centers for Medicare and Medicaid Services, cited its sanctions against O’Hare in February that halted further payments to the lab and suspended its license.

“Throughout the pandemic, CMS has taken swift and aggressive action to identify and investigate fraud and support law enforcement agencies,” the statement said. The agency is “committed to preventing fraud and protecting people with Medicare from falling victim to scams.”

The Post review is based on lab inspection reports and license applications, court documents, state incorporation records, consumer complaints filed in multiple states, and interviews with patients and the three former O’Hare employees.

O’Hare ranked eighth among more than 30,000 companies that have been reimbursed a total of $11.3 billion for providing testing to the uninsured, according to a government database. Most of the other top 10 companies are well-established, publicly traded commercial labs, such as Quest Diagnostics and LabCorp.

But O’Hare’s work is not alone in drawing attention from regulators and other authorities.

The FBI has executed search warrants at the locations of two other Chicago coronavirus testing companies that also set up pop-up sites and collected tens of millions of dollars for carrying out coronavirus testing of the uninsured, searches reported by USA Today and Block Club Chicago. The FBI declined to comment on any investigations into the labs. The two labs, Doctors Clinical Laboratory and LabElite, also rank among the nation’s top 25 government-funded providers of testing for the uninsured, having collected $152 million and $77 million under the program, respectively.

The scrutiny of the testing companies comes as the Biden administration announced in early March that the Justice Department would appoint a chief prosecutor and create a task force to investigate fraud in the government’s pandemic spending.

O’Hare’s expansion into coronavirus testing was overseen by Mohamed Siraj, who took over management of the lab in September 2020 and now owns it, according to documents and interviews.

In recent years, Siraj, 49, has managed companies focused on real estate investment, website design and laundry service, as well as storefront medical clinics and a same-day surgical center, according to court and state incorporation records.

Siraj in a brief phone call declined an interview and referred a Post reporter to an attorney, who in turn directed the request to a public relations firm. Siraj did not respond to another request to talk left at his office or to an interview request sought among a list of questions posed to the company.

O’Hare started modestly.

Launched in 2006, its clients were mostly nursing homes and assisted-living centers in the Chicago area, and it never generated more than $2 million in annual revenue over the following decade, according to Frank Perez, one of two founders. Perez, 55, stepped down as co-owner in 2016, and the other founder, Mohd Emad Jaber, took over sole ownership of the lab, Perez said. Jaber declined to comment through an attorney, Josh Herman.

O’Hare told regulators last year that Jaber, 64, had a master’s degree in clinical lab sciences and 40 years of experience.

As far back as 2015, regulators found lapses at the lab, according to interviews and documents obtained from the Illinois Department of Public Health through public records requests.

That year, O’Hare was temporarily ordered to stop cholesterol testing after it failed multiple examinations of its testing procedures, according to a government-approved lab accreditation organization called COLA. In an interview, Perez described the failure as a minor error by a lab worker and said the issue was resolved. O’Hare passed examinations the following year, according to COLA.

In 2019, an inspector for CMS found the lab was not properly documenting storage requirements and expiration dates for lab materials and was violating regulations that require written procedures for handling patient specimens. The lab accepted the findings and said it would fix the labeling problem and update its policies, according to the federal inspection report.

The following year, O’Hare moved to its current location on the far West Side of Chicago, on the third floor of a brick office building that it shares with a charter high school. The move coincided with Siraj’s involvement in the lab. O’Hare signed an agreement in September 2020 that made one of Siraj’s companies, Chicago Polyclinic, the management firm of the lab with responsibility for O’Hare’s operations, marketing and accounting, according to a letter provided by a spokesman for O’Hare. O’Hare declined to answer questions about exactly when the move and the new ownership occurred.

Siraj also helped finance O’Hare during the pandemic and would later manage its pop-up testing sites, O’Hare’s attorney, Lee, said in the emailed statement.

Chicago Polyclinic, launched in May 2020, is set among appliance and electronics shops and restaurants on the far North Side of Chicago. The clinic’s storefront advertises services for pain management and laser hair removal, as well as chiropractic services. It also advertises medical treatment after auto accidents and work injuries and promises “top settlement guaranteed.”

By December 2020, with the pandemic raging, O’Hare began performing only coronavirus testing, according to CMS records. It also began submitting claims to the federal government for testing the uninsured, according to a spokesman for the federal Health Resources and Services Administration.

Collecting payments from the government was relatively easy: Health-care providers entered a patient’s name into an electronic portal, along with other information, and attested that the patient did not have insurance. The payment to the provider would be made by direct deposit within 30 days, according to the HRSA website. The government reimbursed $100 per PCR test, according to the HRSA website. O’Hare’s lawyer said in a statement that the lab did not bill the government for rapid tests it performed at its remote sites.

The same month that O’Hare began receiving payments, a federal inspector visited its lab, documents show.

Touring on Dec. 30, 2020, the inspector found glaring safety violations: Specimens were tested in an area beside the open kitchen, which workers passed through without removing their gloves, masks or lab coats, according to the report.

The lab had already done 15,000 coronavirus tests at that point but still had not run its procedures through the verification process required to show its tests yielded accurate results, the inspector found.

Additionally, O’Hare was not reporting test results to public health officials as it was supposed to, according to the report. O’Hare lab workers explained to the inspector that they regularly gave the test results to the company’s accountant, who worked at a separate location, and they said they believed he was manually faxing the results to Illinois health officials.

The inspector also found that the lab director, who was not named in the report, was unqualified to run a “high-complexity laboratory.” The lab lacked other highly trained personnel required under federal regulations, too. And there were not enough qualified lab workers to perform either the volume or complexity of coronavirus tests they were doing, according to the inspection.

At the time, O’Hare was advertising seven walk-in sites for coronavirus testing — all in the Chicago area — according to an archived version of the lab’s website.

O’Hare quickly tried to address the problems, according to documents it provided to regulators, including by bringing Smaranda Badescu aboard as the new lab director in January 2021.

A doctor and microbiologist, Badescu, 82, was in retirement but maintained the credentials and board certification to run a high-complexity lab. A native of Romania, she came to the United States when she was 50 and had worked as director of another Chicago lab, she said in a brief interview outside her home in February.

She told The Post that O’Hare “was a mess” before she came on and that Jaber, one of the lab’s founders, hired her to help set it right. “They were desperate,” she said.

She said she agreed to the job with conditions: She would mostly work remotely because she no longer felt comfortable driving on the highway, and she needed to care for her ill husband, she said. She estimated she visited the lab three times in person in total during her year with O’Hare. Badescu worked with regulators to get the lab in compliance, documents show.

The new lab director “solved and corrected many problems,” O’Hare wrote in a response to regulators on March 30 of last year, documents show.

O’Hare also told regulators that the lab had hired other qualified scientists and medical personnel, submitting a roster of employees and their credentials to the Illinois Department of Public Health. The roster, dated March 31, listed nine lab employees in all.

When contacted by a reporter, two of the people on the roster said that they had done little or no work for the lab.

Abdel Abdelhadi, identified as O’Hare’s quality assurance and regulatory officer, said through his lawyer that he never agreed to take on that role.

“Mr. Abdelhadi acted as an outside consultant to O’Hare Clinical Lab Services in a limited capacity in 2021,” attorney Eric Pruitt wrote. “He never served as O’Hare’s Quality Assurance and Regulatory Officer, nor did he serve in any other oversight or supervisory role within the lab. Any document or communication with regulatory authorities suggesting otherwise is incorrect and was made without Mr. Abdelhadi’s knowledge or authorization.”

Javed Nazir, a doctor of internal medicine in a Chicago suburb, is listed on the roster as the lab’s clinical consultant, a position that is required under federal regulations.

“I am on paper, but I don’t do anything for them,” he said when reached by phone in February, before hanging up. He declined to comment when a reporter later visited his office in La Grange, about 15 miles southwest of Chicago.

O’Hare also told federal regulators in January 2021 that it was performing only PCR tests and that it was analyzing specimens in only one location: its lab in Chicago. It repeated those claims in a document to regulators in March.

At the same time, O’Hare was taking steps to open new pop-up sites, according to court records.

Under a Jan. 26, 2021, agreement, O’Hare promised to pay a newly formed company called Express Covid Tests to set up more collection sites, according to a contract in a lawsuit Express filed in Illinois state circuit court.

O’Hare would pay $35 for each sample collected at the sites for PCR testing, as long as they numbered a least 5,000 a month, according to a copy of the contract — signed by Siraj for O’Hare — that was filed with the lawsuit. The contract provides that O’Hare would then seek reimbursement from the federal government or from insurance companies. It does not specify where the sites would be.

In its lawsuit, Express alleged that O’Hare owed it $241,000. The lawsuit, filed in December, is still in its early stages. O’Hare has not yet filed a response in court. Both O’Hare and Express declined to comment on the lawsuit.

In addition to collecting samples to send back to the lab in Chicago for PCR testing, the pop-up sites also offered free rapid antigen tests at each location, tests that were not authorized under O’Hare’s license.

Lee, the company’s attorney, acknowledged the error in the statement to The Post. “O’Hare’s management company mistakenly assumed in 2021 that antigen tests could be performed at collection sites,” he wrote.

Badescu said she was unaware of the more than 100 remote sites and therefore never developed safety procedures for them or training for site workers. Badescu said she also became increasingly busy with caring for her husband, whose condition worsened before he died of covid in December.

She said that at one point last year she asked Jaber where the PCR samples arriving at the lab were coming from. Jaber, who was still working as general supervisor of the lab, responded, “ ‘You shouldn’t worry, the management is taking care of it,’ ” Badescu recalls. O’Hare’s attorney said Jaber is no longer an employee or owner of the lab and that Siraj now owns O’Hare.

Siraj wrote a letter to Badescu on Nov. 24, 2021, saying he took “full responsibility for rolling out the antigen testing” without getting formal approval from O’Hare for expanding the rapid testing. O’Hare provided The Post a copy of the letter.

By late last year, O’Hare advertised testing collection sites beyond Illinois, in Kentucky, Louisiana, Florida, Wisconsin, Indiana, Minnesota, Massachusetts, California and Tennessee, according to an archived version of its website.

Some of the remote locations were set up without required permits from local authorities, according to the local officials. In Florida’s Miami-Dade County, for example, O’Hare advertised five testing sites. Each would have required a business permit from the county, said county spokeswoman Natalia Jaramillo. She said there were none on record. The company did not address The Post’s questions about approvals from local authorities.

As O’Hare extended its reach, samples for PCR testing were flooding into the Chicago lab.

O’Hare had told federal regulators it expected to perform 180,000 covid-19 PCR tests during all of 2021, according to a document it submitted in January 2021. But it would administer vastly more — some 284,000 tests in November and December 2021 alone — according to data the company provided to The Post.

Among the O’Hare sites was a shipping container placed in the parking lot of an outlet mall in Pleasant Prairie, Wis., a village just south of Milwaukee in Kenosha County.

The county’s public health director, Jen Freiheit, told The Post she recalled getting a phone call from a representative of O’Hare last fall alerting her that the testing site was coming online. Testing options were limited at the time, so Freiheit said she was enthusiastic.

“They sounded legit,” she said about the O’Hare representative.

In late October, Kenosha County listed the O’Hare location on its website as a recommended testing option for both rapid and PCR tests. But soon after, Freiheit and other officials began getting complaints about the O’Hare site, including reports of collection workers not wearing protective equipment and patients not getting their results, she said.

She forwarded the complaints to state health officials and the county removed the location from its website, she said.

On the afternoon of Nov. 3, a CMS inspector visited the Pleasant Prairie site in response to a complaint. The inspector found a 10-foot-by-10-foot metal pod with a sign advertising “Free Covid testing.”

Inside, workers were performing rapid antigen tests that are supposed to be kept at room temperature to work properly. But it was in the low 40s outdoors, and the pod had only a small kerosene heater that emitted little heat, according to the report. It also lacked electricity, running water and a refrigerator.

The workers had collected 65 patient samples to send back to Chicago for PCR testing. None were labeled with patient information, as required, leading the inspector to conclude that the lab “failed to ensure positive identification and optimum integrity of a patient’s specimen from the time of collection through completion of testing and reporting of results.”

A week later the inspector went to O’Hare’s Chicago lab to investigate further. Asked for documentation showing that the workers at 50 collection sites advertised on its website had been properly trained, O’Hare produced records for only 15, the report shows.

The inspector also found that the samples tested by O’Hare were first sent to Siraj’s Chicago Polyclinic. Chicago Polyclinic did business under the name Devon Polyclinic, according to state corporation records. Devon performed tasks related to tracking and labeling O’Hare’s samples but was not authorized to do so, the inspector wrote.

The inspection, previously reported by Block Club Chicago, found the O’Hare lab had put patients in “immediate jeopardy.”

In response, O’Hare sent a letter on Nov. 24 to all the operators of its pop-up sites telling them to stop performing rapid antigen tests, according to CMS documents. But the Indianapolis site Alexander and her 17-year-old daughter Mariah went to in December was still offering those tests, and testing continued into mid-January, when the Indiana state inspectors were at the location and found “deficiencies in the performance of testing,” federal records show.

By late last year, more than 45 complaints about O’Hare had poured in to state attorneys general in Florida, Illinois, Missouri and Kentucky, most from people who said they never received their results, according to records reviewed by The Post.

Mike Bass of Louisville was feeling rundown and achy when he scoured for a testing site in late December and was drawn to O’Hare’s advertising free, fast results and walk-ins. He has never received a record of his test results, he said.

After standing in line for about an hour with about 15 people, Bass said he had a rapid test from the lone employee who handled everything from passing out clipboards to swabbing noses and packing samples. He said he was told verbally he was negative.

But the 50-year-old began doubting the outcome as his symptoms persisted and took another rapid test the next day at a drugstore. That test showed he was positive, as did a PCR test at a university, Bass said.

Thinking about the plumbers and other contractors he had seen waiting at O’Hare, he said, “all these guys who were probably testing ‘negative’ that day, and going back to work,” Bass said. “Doing electrical work in someone’s house, or working at a bar, thinking that they’re fine.”

O’Hare declined to comment on individual cases.

O’Hare’s lab certification on the line

In January, after the Wisconsin inspection and the follow-up visit to O’Hare’s Chicago lab, O’Hare struggled to prove to regulators that it had addressed testing problems, CMS documents show.

Twice that month, O’Hare asked for extensions — that CMS granted — to make its case for why it should not be sanctioned.

When the company submitted paperwork, CMS found the explanations were “not credible” and stated that O’Hare still had not provided key information about its operation, including a list of all of its collection sites, a Feb. 10 letter to O’Hare obtained by The Post shows.

The letter also notified O’Hare that CMS was suspending O’Hare’s license and barring it from receiving Medicare or Medicaid money for any lab services.

Additionally, the CMS letter said, regulators had visited two O’Hare collection sites in Indiana in January and found still more violations.

The letter said O’Hare’s certificate to operate a lab would be revoked on April 11, unless the company appealed and persuaded the agency to reverse its decision at a hearing.

Badescu said she learned about the pop-up sites from the inspection report out of Wisconsin. She resigned from the lab in January and said she filed a complaint with a law enforcement agency but declined to identify the agency or elaborate on what her complaint contained.

In retrospect, she said, she feels the lab hired her believing she would not raise red flags.

“I think in their mind, they thought, she is female, she’s 82, she won’t see,” she said.

She said she was not involved in the lab’s billing or financial side and was surprised the lab had received $187 million from the federal government.

“I don’t understand how,” she said. “It’s absolutely unbelievable.”

Alice Crites contributed to this report.

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