Two whistleblowers share $3.75 million for exposing Diagnostic Laboratories fraud scheme

posted on:
September 27, 2013

author:
Kurt Niland

Two whistleblowers will share more than $3.75 million for their role in exposing an alleged fraud scheme orchestrated by a California-based mobile diagnostic and x-ray provider.

Two former Diagnostic Laboratories employees filed the lawsuit under the qui tam, or “whistleblower,” provisions of the U.S. and California False Claims Acts, which allow private citizens with knowledge of fraud and other wrongdoing to file civil claims on behalf of the government and share in any recovery.

According to the U.S. Justice Department, Kan-Di-Ki LLC, doing business as Diagnostic Laboratories, has agreed to pay $17.5 million to settle the whistleblowers’ allegations that it violated federal and California False Claims Acts by providing kickbacks for referrals to its mobile lab and radiology services, which it subsequently billed to Medicare and California’s state Medicaid program, Medi-Cal.

Diagnostic Labs allegedly took advantage of Medicare’s different reimbursement system for inpatient and outpatient services by giving skilled nursing facilities in California discounted rates for inpatient services paid by Medicare in exchange for the facilities’ referral of outpatient business to Diagnostic Labs.

This scheme enabled the skilled nursing facilities that did business with Diagnostic Labs to maximize their profits because they were paying the discounted rates for inpatient services. In return, Diagnostic labs received a highly lucrative and steady stream of patient referrals. Diagnostic Labs then billed the treatment of those referral patients to federal and state health care programs.

Providing kickbacks in the form of discounted rates and other inducements in order to generate referrals is a violation of both federal and California law.

“When medical facility owners illegally offer discounts to customers to generate business, it results in inflated claims to government health care programs and increases costs for all taxpayers,” said Glenn Ferry, Special Agent with the Department of Health and Human Services’ Office of Inspector General. “This $17.5 million settlement demonstrates [our] ongoing commitment to safeguarding federal health care programs and taxpayer dollars against all types of fraudulent activities.”

Find more information about Whistleblower claims on our website.

Source: U.S. Department of Justice

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