The Wall Street Journal is reporting the Office of the Inspector General for the Department of Health and Human Services is investigating Health Diagnostic Laboratory (HDL) for potentially paying illegal kickbacks to referring physicians.
HDL, which opened in late 2008, “offers the most comprehensive laboratory test menu of risk factors and biomarkers for cardiovascular and related diseases” according to the company’s website. It generated $383 million in revenue in 2013, 41% of which was from Medicare.
At issue is the fact HDL, until late June 2014, was paying referring physicians $20 for each specimen sent to HDL. HDL’s CEO, Ms. Tonya Mallory, claimed in an internal company memo that $17 of the fee is for “process and handling” and the remaining $3 is a CMS-allowable blood draw fee. The memo lists all of the services HDL considers to be included in for specimen processing and handling.
The WSJ took a sample of HDL’s 2010 Medicare claims in order to identify the lab’s top referrers. At the top of that 296-physician list is Charles Fillingane, DO, a family practitioner in Mississippi. Dr. Fillingane, according to HDL documents, sent 1,179 specimens to HDL in just the first half of 2010, and could have “earned” up to $23,580 in payments from HDL.
Oh, and by the way, Dr. Fillingane also happens to be on HDL’s medical advisory board, which can pay up to $3,000 per month, and also gives paid lectures for HDL. Nope, no potential conflict of interest there.
Another family physician, J. Frank Martin, MD of South Carolina, reportedly received up to $24,740 in fees during the same time period.
A former HDL employee who actually wrote the checks to referring physicians said some practices were paid more than $4,000 per week in “process and handling fees”.
Another interesting question raised by the WSJ piece is whether HDL performed medically unnecessary testing for Plavix sensitivity on stored samples.
Before opening HDL, Ms. Mallory was the senior lab operations manager for Berkeley HeartLab, another laboratory being investigated by the OIG. Not long after Ms. Mallory’s departure, two Berkeley sales reps also left and formed a company which (conveniently?) became an independent sales and marketing contractor for HDL.
After losing referrals to HDL, Berkeley accused HDL of stealing its business and filed suit. The case reportedly settled for approximately $7 million in 2010.