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Quest Diagnostic Agrees to Pay $6 Million to Settle Allegations of Kickbacks and Unnecessary Testing

The government’s prosecution on companies that put monetary gain over medical consideration is a common theme in its crackdown against health care fraud. The government proved this fact last week when the Justice Department announced that a blood laboratory testing company Quest Diagnostics had agreed to pay $6 million to resolve allegations that it violated the False Claims Act by paying kickbacks to physicians and patients to induce the use of their Berkeley HeartLab facility in Alameda, California. Quest has also been accused of having charged for medically unnecessary tests as well. Quest acquired Berkeley HeartLab Inc., (BHI) in 2011 and has ended the conduct that prompted the settlement. “We rely on doctors to provide honest, independent recommendations regarding clinical testing,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Companies that pay kickbacks to referring doctors corrupt those doctors’ independence, leaving patients vulnerable to expensive and unnecessary testing.”


According to the government’s complaint, BHI paid kickbacks in the form of “process and handling fees” to physicians. The complaint also alleged that BHI waived copayments owed by certain patients who were legally required to pay for part of their tests. These alleged kickbacks were meant to induce patients and doctors as an incentive for them to choose BHI over other laboratories. Moreover, the complaint alleged that these practices resulted in medically unnecessary cardiovascular tests being charged to federal health care programs. The Anti-Kickback Statute (42 U.S. Code § 1320a–7b) prohibits offering, paying, soliciting or receiving remuneration to induce services covered by federally funded programs. The statute is intended to ensure that a physician’s medical judgment is not influenced by improper financial incentives. The statute also prohibits routinely waiving patient copayments to ensure that patients are incentivized to reject medically unnecessary tests.


“The South Carolina U.S. Attorney’s Office has dedicated considerable resources to pursuing fraud cases that divert federal taxpayer dollars from important programs, like health care and defense contracting,” said U.S. Attorney Beth Drake of the District of South Carolina. “The goal for our qui tam unit is to protect taxpayers, patients, and soldiers by ensuring that important decisions are made according to medical science and engineering, and not based on dollar signs.”


The original lawsuit was filed by Dr. Michael Mayes under the qui tam, or whistleblower, provisions of the False Claims Act. Under this act, private citizens can sue on behalf of the federal government for False Claim Act violations and share in any recovery. The United States partially intervened in this and two other actions on March 31, 2015. The remaining defendants are Latonya Mallory, the former CEO of Health Diagnostics Laboratory, Inc., and marketing company BlueWave Healthcare Consultants, Inc. and its owners, Floyd Calhoun Dent III and Robert Bradford Johnson. Dr. Mayes’ share of the settlement has not yet been determined. In 2015 the government announced settlements with two other laboratories – Health Diagnostics Laboratory Inc. of Richmond, Virginia and Singulex, Inc., of Alameda, California – for engaging in similar conduct. The settlement and the government’s intervention in the lawsuit brought forward by Dr. Mayes illustrate its ongoing efforts to combat health care fraud which began back in the Obama administration.


Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477). If you have chosen to disclose wrongdoing it is also advised that you contact a qui tam attorney. Qui tam attorneys can advise you on such matters and will work to protect your rights under the law.