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Lawsuit Alleges Radiology Company Kickbacks

June 20, 2012
Written by: , Filed in: Medical Ethics, Practice Management
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Another big radiology company gets hit with a False Claims Act whistle-blower suit alleging that it defrauded Medicare. Does it seems that such suits are increasing? Well, they are.

So says the investigative-reporting group California Watch. It reported Monday on accusations against Diagnostic Laboratories and Radiology, based in Burbank, California, which California Watch described as “Southern California’s largest clinical laboratory and radiology company serving nursing homes.”

Two former employees brought the action in 2010. It was unsealed in November 2011. The State of California has joined the litigation, based on a state law that parallels the federal False Claims Act.

Court documents say Diagnostic Labs offered deep discounts to skilled nursing facilities (SNFs) in exchange for business that could be charged at maximum reimbursement rates to Medicare and Medi-Cal, California’s Medicaid program. The documents allege:

This is an illegal kickback scheme, no more legal than if Diagnostic Labs, rather than providing below-cost discounts, had instead simply handed the SNFs an envelope of cash.

Diagnostic Labs’ response, in court documents, is that “there is no specific allegation tying any specific remuneration to any resulting referrals.” Prosecutors, the company said, are making “the leap that giving a ‘discount’ equals an intent to induce referrals.”

Leap or not, prosecutors have sharply increased the number of such suits they pursue in recent years. The U.S. Justice Department has said that more than 630 civil whistle-blower lawsuits were filed with the department in 2011, more than in any other year and an increase of nearly 50 percent since 2009. Of those cases, 454 alleged health-care fraud.

The number of cases has been rising under the Obama administration. So has the financial benefit to the government. The law firm Gibson, Dunn & Crutcher, of Los Angeles, said the federal government collected $2.4 billion in settlements and judgments from health-care cases in 2011, according to California Watch. That’s more than it collected from any other industry.

Zack Buck, JD, a visiting assistant professor at Seton Hall Law School who teaches a class on health-care fraud and abuse, said:

There’s been an explosion in attention and realization that we’ve got to do something with our health care program if it is going to survive. Things need to be trimmed and cut, and going after fraud is a good way to do it. It’s a good investment.

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