COLUMBIA, SOUTH CAROLINA, May 1, 2017 – Quest Diagnostics and Berkeley Heartlab have agreed to pay a total of $6 million to the federal government to settle a whistleblower lawsuit brought on behalf of a physician by Phillips & Cohen LLP.
The “qui tam” lawsuit alleged that Berkeley HeartLab, which Quest acquired in 2011, was paying doctors kickbacks in the form of “process and handling fees” to induce them to order expensive cardiovascular blood tests that were medically unnecessary.
“The fees that doctors were paid to order these tests added up to thousands of dollars a month for individual doctors,” said Peter Chatfield, a whistleblower attorney with Phillips & Cohen. “The money Berkeley offered was hard for most doctors to resist. But once our client, Dr. Michael Mayes, realized that the tests didn’t help with treatment decisions and were very expensive, he refused to participate. He saw those ‘process and handling fees’ for what they were: illegal kickbacks.”
As a further inducement to get doctors’ business, Berkeley routinely waived copayments so that the blood tests wouldn’t cost the doctors’ patients anything. This also was a violation of the law since certain patients are legally required to pay for part of their tests so that they have a financial incentive to refuse unnecessary tests.
“Dr. Mayes decided to take an ethical stand and warn fellow physicians of his concerns about accepting the payments as well as file a ‘qui tam’ lawsuit to stop this scheme even though this cost him his relationships with many colleagues who were receiving payments from the labs,” Chatfield said. “Dr. Mayes pursued this case because of the impact healthcare fraud can have on patients, such as draining Medicare funds that are needed for patient services and causing higher premiums.”
“The labs and doctors profited from this kickback scheme, but Medicare lost many millions of dollars paying for those unnecessary tests,” Chatfield said.
As part of the settlement, Quest resolved certain claims made by Dr. Mayes about Quest’s involvement in the scheme during the first few months it owned Berkeley.
After Quest acquired Berkeley, it soon recognized that the “process and handling fees” were a problem. However, the payments continued through January 2012 while Quest sought to convince doctors to order the tests without receiving the unlawful fees, according to the qui tam lawsuit.
Other labs were paying doctors even more than Berkeley was to order the same tests. Berkeley offered $11.50 per testing referral, while competitors engaged in similar misconduct offered up to $30 per testing referral to doctors. Berkeley stopped operating after it ended its practice of paying doctors the unlawful process and handling fees. The settlement reached was negotiated based on Berkeley’s representation that its financial condition left it unable to pay a larger amount.
The government announced the settlement with Quest Diagnostics April 28. Dr. Mayes will be awarded 26 percent of the settlement for the information and assistance he and his counsel provided to recover funds for the government.
This is the third settlement of charges based on Dr. Mayes’ whistleblower case, which was filed in federal district court in South Carolina in 2011. In 2015, Health Diagnostics Laboratory of Richmond, Virginia, agreed to pay a total of more than $50 million, and Singulex Inc., a privately held lab company based in Alameda, California, agreed to pay more than $1.5 million to settle similar charges against them.
The lawsuit alleges violations of the False Claims Act – for submitting claims for medically unnecessary services to government healthcare programs and claims that involved kickbacks – and the Stark Act, which prohibits referrals for medical services when there is a financial relationship between the doctor making the referral and the provider of the services.
The government is continuing to pursue charges against others named in Dr. Mayes’ qui tam lawsuit: Tonya Mallory, the former CEO of Health Diagnostics Laboratory Inc., and marketing company BlueWave Healthcare Consultants Inc. and its owners, Floyd Calhoun Dent III and Robert Bradford Johnson.
Bill Coates, of Roe Cassidy Coates & Price P.A., served as local counsel on the case with Phillips & Cohen. The settlement agreement is posted here.
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Phillips & Cohen is the most successful law firm representing whistleblowers, with recoveries from our cases totaling over $12.3 billion. We have been recognized for our work by numerous national awards. Our attorneys and cases have been in The New York Times, The Wall Street Journal, the Financial Times and other news media. Three of our cases were featured in the CBS series, “Whistleblower.” Phillips & Cohen’s roster includes former federal prosecutors, the first head of the SEC Office of the Whistleblower, a former deputy administrator of the Centers for Medicare and Medicaid Services, the author of a leading treatise on the False Claims Act and attorneys with decades of experience representing whistleblowers.