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Blood Testing Lab Quest Diagnostics to Pay $6 Million to Settle Healthcare Whistleblower’s Allegations of Kickbacks and Unnecessary Testing

On May 1, 2017, Quest Diagnostics agreed to pay the U.S. government $6 million to settle a healthcare whistleblower lawsuit brought by whistleblower Dr. Michael Mayes against Berkeley HeartLab. The qui tam suit was brought in federal district court in South Carolina in 2011 and alleged that Berkeley HeartLab, Inc., a blood testing laboratory acquired by Quest Diagnostics, violated the False Claims Act by paying kickbacks to physicians and patients, thereby influencing doctors to use the lab for blood testing services and charge for medically unnecessary tests.

“We rely on doctors to provide honest, independent recommendations regarding clinical testing,” said Acting Assistant Attorney General Chad A. Readler of the U.S Justice Department’s Civil Division. “Companies that pay kickbacks to referring doctors corrupt those doctors’ independence, leaving patients vulnerable to expensive and unnecessary testing.”

This is the third medical testing lab to settle charges from Dr. Mayes’ case. Here, Quest Diagnostics settled allegations that Berkeley HeartLab violated the False Claims Act by submitting claims for both kickbacks and medically unnecessary services to government healthcare programs, and violated the Stark Act which prohibits referrals for medical services when there is a financial relationship between the doctor making the referral and the provider of the service.

Berkeley HeartLab, Inc., located in Alameda, California operated as an independent laboratory to which doctors referred their patients in order to conduct tests on blood samples. Berkeley HeartLab allegedly paid kickbacks to referring doctors under the label of “process and handling” fees and waived copayments owed by the referred patients, some of whom were legally required to pay for part of their tests. These breaks incentivized doctors and patients to choose Berkeley HeartLab over other blood testing labs, often resulting in doctors referring blood tests that were not medically necessary for some patients and diverting federal taxpayer dollars from important healthcare programs.

“We will not allow laboratories to provide financial incentives to induce physicians to steer patients their way,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “The Office of Inspector General will continue to work aggressively to eliminate this type of behavior which ultimately drives up healthcare costs and eliminates fair competition.”

Following this settlement, Quest Diagnostics no longer conducts the above fraudulent practices. However, the U.S. government will continue to pursue claims against remaining defendants in similar practices, including Latonya Mallory, former CEO of Health Diagnostics Laboratory, marketing company BlueWave Healthcare Consultants and its owners, Floyd Calhoun Dent III and Robert Bradford Johnson.

Blood testing laboratories such as Berkeley HeartLab, Inc. engage in government programs fraud by submitting false claims to the U.S. government for payment every day.

© 2017 by Tycko & Zavareei LLP

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About this Author

Jonathan K. Tycko leads the Whistleblower Practice Group of Tycko & Zavareei LLP

In recent years, the laws of the United States have undergone a whistleblower revolution. Federal and state governments now offer substantial monetary awards to individuals who come forward with information about fraud on government programs, tax fraud, securities fraud, and fraud involving the banking industry. Whistleblowers also now have important legal protections, designed to prevent retaliation and blacklisting.

The law firm of Tycko & Zavareei LLP works on the cutting edge of this whistleblower revolution, taking on even the most complex and confidential whistleblower...

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