HDL, Singulex Agree to Settle AKS, FCA Charges for $48.5 Million

Labs should revisit their arrangements with referring physicians now that lab giant Health Diagnostic Laboratory, Inc. (HDL) and Alameda, Calif., based Singulex, Inc. have agreed to pay $47 million and $1.5 million respectively to settle claims of paying kickbacks and conducting medically unnecessary testing. Under the deal, announced by the U.S. Department of Justice (DOJ) April 9, HDL and Singulex will settle allegations that they induced physicians to refer to them for blood testing by paying them processing and handling fees of between $10 to $17 per referral and routinely waived copayments and deductibles, causing the submission of false claims to federal health care programs. Both companies will also enter into corporate integrity agreements with the government, according to the DOJ’s press release. The two settlements stem from three lawsuits filed by whistleblowers under the False Claims Act. The whistleblowers can receive up to 25 percent of the settlement proceeds; the DOJ has not released the exact amounts that they’ll receive under these settlements. The government has also joined—or “intervened”—in whistleblower lawsuits against Berkeley HeartLab, Inc., BlueWave Healthcare Consultants, Inc. (the apparent middleman in the arrangement between HDL and the physicians), and former HDL CEO Tonya Mallory. HDL issued its own statement regarding the settlement, indicating that it was “pleased” with it and stressing that it was part of an industry-wide investigation into the diagnostic lab industry, not one merely targeting HDL:

In June 2014, when the government for the first time issued new guidance stating that the payments presented risk, HDL, Inc. immediately stopped paying processing and handling fees to referring providers. HDL, Inc.’s comprehensive biomarkers provide a far broader and deeper picture of patient health than the traditional reactive model based on technology available decades ago, and aid physicians in identifying risks, setting appropriate therapeutic targets and delivering the right treatments at the earliest meaningful time. Each physician chooses the testing he or she would like to perform in the best interest of his or her patients, and HDL, Inc. is proud to continue to partner with physicians to offer this critically important testing service.

We have taken the step of resolving this matter in order to put these allegations, which stemmed from historical practices once common in the industry, behind us. These allegations were made against a number of companies operating in the clinical laboratory industry by individuals who stand to personally profit by making these allegations.

Reaching this agreement enables HDL, Inc. to avoid the distraction of what could have been years of uncertainty associated with protracted and expensive litigation. The settlement allows us to move ahead with our important work of helping improve the health of millions of Americans.

HDL also reiterated that it will not be excluded from participation in the Medicare and Medicaid programs and that the settlement “does not mean that HDL, Inc. engaged in any wrongdoing” and “is not an indication that any conduct was improper or unlawful.” The deal did not come as a surprise; the Wall Street Journal (WSJ) had leaked news of it in March. WSJ had also reported in 2014 that HDL had been paying physicians for blood sample referrals and some referring physicians had received thousands of dollars from the company a week. HDL, clearly displeased that the WSJ had leaked news of the impending settlement before it was finalized and formally announced, issued its own statement in March specifically denying wrongdoing and asserting that it has “consistently sought to comply with all applicable legal and regulatory requirements, and [is] committed to continuing to do so.” “We wish to make it clear that HDL, Inc. has worked cooperatively with the Department of Justice since the inception of its investigation of various diagnostic laboratory industry practices, many of them common within the industry,” HDL stated. This settlement does not end HDL’s other legal troubles. As we have reported in the December 2014 and January 2015 issues of G2 Compliance Advisor, HDL is still embroiled in a lawsuit brought by Cigna alleging that it unlawfully waived copayments and coinsurance, as well as defending itself in a breach of contract action by BlueWave. HDL terminated its contract with the consulting company after the Department of Health and Human Services’ Office of Inspector General issued its special fraud alert in 2014 against these lab-physician payment agreements. For some advice about how to avoid similar legal issues relating to relationships with referring physicians, see the next story below. Takeaway: In the wake of last year’s fraud alert about payments to referral sources, the HDL and Singulex settlements could be the first of several agreements concerning such payments.