Diagnostic Labs to Settle Healthcare Fraud Claims For $17.5M; Whistleblower to Get $3.7M

Posted: 09/25/2013  browse the blog archive

California-based Kan-Di-Ki, doing business as Diagnostic Laboratories and Radiology (Diagnostic Labs) has agreed to pay $17.5 million to resolve allegations that the company violated both the federal and California False Claims Acts, the U.S. Department of Justice announced today.  Kan-Di-Ki allegedly paid kickbacks for the referral of mobile lab and radiology services that were subsequently billed to Medicare and Medi-Cal.

The government alleged that Diagnostic Labs took advantage of Medicare’s different reimbursement system for inpatient and outpatient services by charging discounted rates to California Skilled Nursing Facilities (SNFs) for inpatient services paid by Medicare, in exchange for referrals of outpatient business.  For inpatient services, Medicare pays a fixed rate based on the patient’s diagnosis, regardless of specific services provided.  For outpatients, Medicare pays for each service separately.  Diagnostic Labs’ scheme enabled the SNFs to maximize profit earned for providing inpatient services by decreasing SNFs’ costs of providing these services.  It also allegedly allowed Diagnostic Labs to obtain a steady stream of lucrative outpatient referrals that it could directly bill to Medicare and Medi-Cal.  The provision of inducements, including discounted rates, to generate referrals is prohibited by federal and state law.

The lawsuit was originally filed by Jon Pasqua and Jeff Hauser, former Diagnostic Lab employees, under the False Claims Act.  The False Claims Act allows private citizens with knowledge of fraud against the government to sue on behalf of the government and share in the recovery.  Pasqua and Hauser will receive $3.75 million as their portion of the settlement.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.