Health Diagnostics Laboratory to pay nearly $50 million to settle kickback allegations

Health Diagnostics Laboratory Inc. has agreed to pay approximately $47 million to the government after an investigation revealed the Virginia-based company paid fees to physicians in exchange for blood samples, according to The Wall Street Journal. The investigation raises interesting questions regarding how both laboratories and the government define kickbacks.

The laboratory confirmed that it is negotiating a settlement in order to avoid a lengthy legal battle, but it denies any wrongdoing. Sources told the WSJ that HDL would enter a five-year corporate integrity agreement with the Department of Health and Humans Services (HHS) as part of the settlement.

In September, the WSJ reported that HDL had been paying doctors $20 for each blood sample, arguing that it was fair compensation for the work required to process and handle the sample. In January, the laboratory cut ties with BlueWave Healthcare Consultants, Inc., a sales-and-marketing contractor that allegedly served as the middleman between the lab and the doctors, FierceHealthPayer: AntiFraud previously reported. Sources told the WSJ that HDL's settlement would not include BlueWave, allowing prosecutors to pursue civil action. BlueWave has denied any wrongdoing.

HDL claims it ceased the practice of paying physicians once the Office of Inspector General released a warning last year that paying physicians to handle samples could fall under the anti-kickback statute, offering an incentive for physicians to order unnecessary tests. However, the WSJ reports that HDL paid more than $17 million to physicians in 2013 while profiting handsomely, earning $157 million from Medicare during the same year.

HDL also claims its competitors engage in similar practices. That's an issue federal regulators are investigating. In September, Universal Oral Laboratories was accused of paying kickbacks to physicians in an effort to become the exclusive lab for drug testing services. Private insurers and Medicare paid the lab more than $53 million over two years.

But HDL isn't out of the woods yet: The fast-growing start-up is also in the midst of a lawsuit from Cigna for a "fee-forgiving" scheme in which the lab billed the insurer for consumer fees. Cigna claims practice resulted in $84 million in additional costs.

For more:
- here's the Wall Street Journal article

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