Richmond-based Health Diagnostic Laboratory Inc. will pay $47 million to settle claims that it paid kickbacks and conducted unnecessary testing.
HDL and Singulex Inc., a testing laboratory in Alameda, Calif., agreed to resolve allegations that they violated the False Claims Act by paying remuneration to physicians in exchange for patient referrals and billing federal health care programs for medically unnecessary testing, the Department of Justice said Thursday.
Singulex will pay $1.5 million.
“Health care providers that attempt to profit by providing illegal inducements will be held accountable,” said Acting Assistant Attorney General Benjamin C. Mizer for the Justice Department’s Civil Division. “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”
The agreement resolves all allegations made against the companies.
Reaching the agreement does not mean that HDL engaged in any wrongdoing, the blood-testing company said in a statement. “The settlement is not an indication that any conduct was improper or unlawful.”
As noted by the Department of Justice in announcing the settlement: “The claims settled by these agreements and asserted against these companies and individuals are allegations only, and there has been no determination of liability.”
“We have taken the step of resolving this matter in order to put these allegations, which stemmed from historical practices once common in the industry, behind us,” HDL said in the statement. “These allegations were made against a number of companies operating in the clinical laboratory industry by individuals who stand to personally profit by making these allegations.”
Reaching the agreement enables HDL to avoid the distraction of possibly years of uncertainty associated with protracted and expensive litigation, the company said. “The settlement allows us to move ahead with our important work of helping improve the health of millions of Americans.”
HDL said it has consistently sought to comply with all applicable legal and regulatory requirements, and it will continue to do so. “HDL Inc. is proud of its work to help revolutionize patient care by changing the way that cardiovascular disease, diabetes and related conditions are diagnosed and treated.”
The company said it will continue to participate in all federal health care programs, including Medicare, Medicaid and TRICARE. As part of the settlement, it will continue to develop and strengthen its compliance program in accordance with a five-year agreement with the Office of Inspector General of the U.S. Department of Health and Human Services.
The settlements stem from three related whistleblower lawsuits filed under the federal False Claims Act. The whistleblowers’ share of the settlements has yet to be determined, the Department of Justice said.
The government also intervened in the lawsuits regarding similar allegations against another laboratory, Berkeley HeartLab Inc.; a marketing company, BlueWave Healthcare Consultants Inc., and its owners, Floyd Calhoun Dent and J. Bradley Johnson; and former HDL CEO Tonya Mallory .
Mallory abruptly resigned in September to work for her brother’s company.
As alleged in the lawsuits, HDL, Singulex and Berkeley induced physicians to refer patients to them for blood tests by paying them processing and handling fees of between $10 and $17 per referral and by routinely waiving patient co-pays and deductibles.
“In addition, HDL and Singulex allegedly conspired with BlueWave to offer these inducements on behalf of HDL and Singulex,” the Department of Justice said. “As a result, physicians allegedly referred patients to HDL, Singulex and Berkeley for medically unnecessary tests, which were then billed to federal health care programs, including Medicare.”
An Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs.
HDL disputed claims that the processing and handling of fees were improper and that some testing was unnecessary. “The payment of processing and handling fees was a long-standing practice in the diagnostic laboratory industry,” HDL said.
“In June 2014,” it said, “when the government for the first time issued new guidance stating that the payments presented risk, HDL immediately stopped paying processing and handling fees to referring providers. HDL’s comprehensive biomarkers provide a far broader and deeper picture of patient health than the traditional reactive model based on technology available decades ago, and aid physicians in identifying risks, setting appropriate therapeutic targets and delivering the right treatments at the earliest meaningful time.
“Each physician chooses the testing he or she would like to perform in the best interest of his or her patients, and HDL is proud to continue to partner with physicians to offer this critically important testing service.”
The company said that under the new leadership of President and CEO Joe McConnell, it has taken decisive actions to return to its core mission of fighting cardiovascular disease and diabetes with innovative, advanced testing that can lead to earlier diagnosis and treatment.
HDL added that it has eliminated non-core business initiatives and streamlined the workforce.
The company added two board members with medical and business expertise in advanced diagnostic testing. And it announced on Jan. 9 that it was establishing a new national network of directly employed sales representatives, terminating its contract with independent sales firm BlueWave Healthcare Consultants.
The company said last week, as it cut more jobs from its Richmond operations, that it had reached an agreement to settle a U.S. Department of Justice investigation and won a dismissal of a lawsuit brought by BlueWave. But details of the deal were not available.
HDL last Thursday laid off 42 employees, including 30 at its local operations, or about 6 percent of its overall workforce.
The workforce reduction was the second round of job cuts publicly confirmed by the company in less than six months.
In November, HDL laid off about 132 employees, including 112 at its Richmond-area operations — or about 15 percent of the company’s overall staff and 18 percent of its Richmond-area staff.
HDL started operations in Richmond in 2009, providing blood tests to detect early signs of heart disease and diabetes. It hired hundreds of employees and invested tens of millions of dollars to expand its office and laboratory in the Virginia BioTechnology Research Park in downtown Richmond.
In July, the company revealed it was cooperating in a federal investigation of reimbursement practices in the laboratory industry.
After the Justice Department probe was revealed, HDL became the target of a lawsuit filed by Cigna, one of the nation’s largest health insurers, which accused the Richmond company of engaging in a “fraudulent fee-forgiving scheme” that defrauded the insurer of $84 million.
HDL is seeking a dismissal of the Cigna lawsuit.