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Calif. AG settles suit for $241M

By Bryan Cohen | May 20, 2011


SACRAMENTO, Calif. (Legal Newsline) - California Attorney General Kamala Harris announced a $241 million settlement on Friday with the state's biggest provider of medical laboratory testing.

The settlement with Quest Diagnostics, the largest recovery in the history of the California False Claims Act, is meant to recover alleged illegal overcharges to the state's medical program for the poor. The settlement is the result of a 2005 lawsuit that alleged that the company overcharged the state's Medi-Cal program for over 15 years and gave illegal kickbacks in the form of discounted or free testing to hospitals, doctors and clinics that referred Medi-Cal patients and other business to the labs.

"In a time of shrinking budgets, this historic settlement affirms that Medi-Cal exists to help the state's most vulnerable families rather than to illicitly stoke corporate profits," Harris said. "Medi-Cal providers and others who seek to cheat the state through false claims and illegal kickbacks should know that my office is watching and will prosecute."

California law states that "no provider shall charge (Medi-Cal) for any service... more than would have been charged for the same other purchasers of comparable servicesl... under comparable circumstance." Quest allegedly charged Medi-Cal up to six times as much as it did to other customers for the same tests. In one alleged example, Quest charged Medi-Cal $8.59 to perform a complete blood count test while charging other customers $1.43.

The California False Claims Act also says that it is illegal to solicit or receive "any kickback, bribe, or rebate, directly or indirectly, overtly or covertly, in cash or in valuable consideration of any kind... (in) return for the referral, or promised referral, of any individual... for the furnishing... of any service (paid for by Medi-Cal)."

Quest allegedly systematically offered hospitals, doctors and clinics low lab test prices in return for referrals to Quest of patients, including Medi-Cal patients. Quest then allegedly charged Medi-Cal a higher price to make up for the difference, leading to a potential loss of millions of dollars to the Medi-Cal program.

A sealed lawsuit was filed as part of the state's False Claims Act by whistleblowers Christ Riedel and his company Hunter Laboratories. Medi-Cal is expected to potentially save hundreds of millions of dollars through reform of industry pricing practices stemming from the case.

The settlement provides compensation to the whistleblower and will reimburse the state's Medi-Cal program and Harris' office for expenses. A total of $171 million will go to the state of California. In addition, Quest must report information to assist the state in determining Quest's future compliance with Medi-Cal's pricing rules.

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