DLR Agrees to $19.4 Million Settlement Over Kickback Charges

Diagnostic Laboratories and Radiology (DLR) in Burbank, Calif., has agreed to pay $19.4 million to the state and federal governments to settle a lawsuit that alleged the company provided kickbacks to skilled nursing facilities (SNFs). The qui tam lawsuit was brought by two former employees of DLR who claim the company was charging SNFs as much as 80 percent below market value for lab testing in order to receive referrals for Medi-Cal and Medicare patients, according to the Pathology Blawg (www.pathologyblawg.com). In some cases, the SNFs would pay only $1 per patient for some services, the lawsuit alleged. When DLR received Medi-Cal and Medicare referrals, it would then bill the government the maximum amount allowed. Although DLR believes it would have been acquitted at trial (scheduled for next week), it chose to settle so as to avoid further litigation expense, company officials said. The settlement will be divided as follows: $12.95 million to the federal government, $4.55 million to California; and $1.9 million to the plaintiff attorneys. The two former employees will split at least $3.5 million between the two of them. As the Pathology Blawg notes and G2 Intelligence has reported, the billing practices alleged in this lawsuit are not new. Quest and LabCorp paid a total of $290.5 million in 2011 to settle similar charges in California. Two other lawsuits against Quest and LabCorp containing the same allegations were unsealed earlier this month in Virginia and Georgia. DLR, which is owned by Trident USA, is the largest clinical laboratory and radiology company operating in Southern California. The company does business with approximately 80 percent of all nursing homes in Southern California. It’s interesting to note that lawsuits involving health care fraud are on the rise, and labs appear to be an easy target. Laboratories must ensure that their fee schedules for services provided comply with all state and federal requirements and must not provide discounts in exchange for referral of federal health care business. When considering whether to offer discounts, be sure to consult with inside or outside counsel to ensure you are on the right side of the law.