California False Claims Act Invoked In Medi-Cal Suit Against Labs

California’s Attorney General has joined a whistleblower lawsuit brought under the California state False Claims Act against seven laboratories accused of overcharging Medi-Cal, the state’s low income healthcare program, and providing illegal kickbacks over the last 15 years. Chris Riedel was the original qui tam plaintiff, and the lawsuit only recently became public. Riedel is the CEO of Hunter Laboratories, a company that found it impossible to compete with the seven laboratories in question, which it alleges offered providers reduced rates to private customers in exchange for referring Medi-Cal customers who were, in turn, charged inflated prices.

The defendants include Quest Diagnostics, the nation’s top provider of diagnostic testing (along with five of its affiliates), and Laboratory Corporation of America, a company that performs over a million tests on 400,000 samples per day. Health Line Clinical Laboratories Inc., Westcliff Medical Laboratories Inc., Physicians Immunodiagnostic Laboratory Inc., Whitefield Medical Laboratory Inc., and Seacliffs Diagnostics Medical Group round out the defendants.

The lawsuit alleges that the laboratories gave providers significant discounted prices for private patients in exchange for the referral of Medi-Cal patients, who the labs charged up to six times the discounted prices. According to California law, this sort of arrangement constitutes an illegal kickback. Even absent the kickbacks, state law dictates that Medi-Cal is not to be charged a higher prices than non-Medi-Cal consumers would pay for comparable services. A few of the more egregious price increases alleged include the following:

– Quest charged Medi-Cal $8.59 for a complete blood count test (CBC), a test for which other customers paid only $1.43.

– Laboratory Corporation billed Medi-Cal $30.09 for a Hepatitis C Antibody screening, while some others customers paid as little as $6.44.

– Health Line charged $12.65 for an HIV Antibody screening, a service some other customers were billed prices as low as $1.75.

While some of the defendants do all of their business in California, others are national companies, so the results of this case could have far-reaching implications.

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