Quest Diagnostics to pay $6 million settlement for alleged kickback scheme

(Story updated on May 1, 2017)

Medical laboratory giant Quest Diagnostics agreed to pay a $6 million settlement to resolve a lawsuit alleging one of the company's laboratories paid kickbacks to physicians and patients who used its tests, the U.S. Justice Department announced Friday.

The complaint filed by the federal government claimed that Berkeley HeartLab in Alameda, Calif., which Quest acquired in 2011, paid physicians and patients to use its blood tests as well as charge for frivolous tests.

"Companies that pay kickbacks to referring doctors corrupt those doctors' independence, leaving patients vulnerable to expensive and unnecessary testing," acting Assistant Attorney General Chad Readler of the Justice Department's Civil Division said in a statement.

Madison, N.J.-based Quest said in a statement that it ended Berkeley HeartLab "soon after discovering BHL's use of paying processing and handling fees."

Berkeley allegedly paid referring physicians kickbacks disguised as processing and handling fees and waived copayments for patients, the complaint said. The medically unnecessary cardiovascular tests, which violated the False Claims Act, diverted federal taxpayer dollars from important healthcare programs, according to the lawsuit.

"We will not allow laboratories to provide financial incentives to induce physicians to steer patients their way," special agent in charge Derrick Jackson of HHS' Office of Inspector General in Atlanta, said in a statement.

The federal government intervened on this case as well as two related actions in March 2015 and will continue to pursue claims against the remaining defendants: Latonya Mallory, the former CEO of Health Diagnostics Laboratory; and marketing company BlueWave Healthcare Consultants and its owners, Floyd Calhoun Dent III and Robert Bradford Johnson.

In April 2015, the government reached settlements on similar matters with Health Diagnostics Laboratory of Richmond, Va., and Singulex of Alameda, Calif.

"This settlement is part of the government's ongoing efforts to address conduct that allows medical decisions to be influenced by money rather than the best interests of patients," U.S. Attorney Channing Phillips of the District of Columbia said in a statement.