Mr. John Carreyrou at the Wall Street Journal is reporting Health Diagnostic Laboratory (HDL) has reached a tentative deal with the government to pay $47 million to settle allegations it paid kickbacks to physicians in exchange for test referrals.
In September 2014, the WSJ published an article that stated the Office of the Inspector General for the Department of Health and Human Services was investigating the $20 per specimen payment HDL remitted to referring physicians as a possible illegal kickback. According to an internal memo written by then-CEO Tonya Mallory, $17 of the fee was for “process and handling” and the remaining $3 was a CMS-allowable blood draw fee.
Two physicians the WSJ identified as prolific referrers to HDL were potentially paid close to $50,000 per year in P&H fees, and some practices were apparently paid more than $4,000 per week. In total, HDL reportedly paid $17 million in P&H fees to physicians in 2013 alone. While that sounds like a lot, it represents only 4.4% of HDL’s 2013 revenue.
HDL stopped the P&H payments after the OIG released a Special Fraud Alert in June 2014 that stated the agency was scrutinizing these P&H fees. Ms. Mallory resigned as HDL’s CEO soon after the WSJ article appeared.
P&H fees not the only legal iron in the fire for HDL
Cigna filed a lawsuit against HDL in October 2014 that alleges HDL engaged in “fee-forgiveness fraud” that cost the insurer $84 million. Cigna claims HDL, which is not in its network of lab providers, foregoes charging Cigna members any co-payment, co-insurance or deductible, and then jacks up the rates it charges Cigna for its services. Because Cigna members do not have to share any of the costs, they have “no incentive to moderate their demand for HDL’s services or to consider the higher costs of any particular out-of-network service”, according to the suit.
In addition, Cigna also accuses HDL of encouraging physicians to order “a litany of medical tests, regardless of whether the provider believes such tests are needed to diagnose or treat the patient”, and also of paying kickbacks to physicians in exchange for referrals.
HDL filed a motion to dismiss Cigna’s suit in December 2014, but to my knowledge, the case is still ongoing.
Boston Heart Diagnostics
Also in December 2014, HDL filed a lawsuit against Boston Heart Diagnostics that alleges Boston Heart is infringing on patent #8,119,358, “Diabetes-Related Biomarkers and Methods of Use Thereof” that is currently assigned to HDL.