Diagnostic Laboratories and Radiology to Pay $17.5 Million Settlement

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The California mobile radiology and laboratory company Diagnostic Laboratories and Radiology (Diagnostic Labs) has reached a settlement with the government over allegations that the company paid kickbacks for referrals.

According to the U.S. Department of Justice (DOJ) press release, Kan-Di-Ki LLC, which was doing business as Diagnostic Labs, broke the law by charging Skilled Nursing Facilities (SNFs) in California discounted rates for inpatient services paid by Medicare in exchange for the facilities’ referral for referral of mobile lab and radiology services subsequently billed to Medicare and Medi-Cal (the state of California’s Medicaid program).

Since the SNFs were profiting from this arrangement, it amounted to paying them a kickback in exchange for their referrals, which is illegal under the federal and California False Claims Acts.

The allegedly illegal kickback arrangements were brought to the government's attention by two former Diagnostic Lab employees, Jon Pasqua and Jeff Hauser, who filed a qui tam, or whistleblower, lawsuit against Diagnostic Lab. The settlement reached between the DOJ and Diagnostic Lab is for $17.5 million, and Pasqua and Hauser will receive $3,755,500 of that amount as their share of the federal government’s recovery to split as they see fit.

This settlement came about in part because of the now 4-year-old Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is a partnership between the DOJ and the U.S. Department of Health and Human Services (HHS). The investigation was jointly handled by the U.S. Attorney’s Office for the Central District of California, the Justice Department’s Civil Division, Commercial Litigation Branch and the Department of Health and Human Services’ Office of the Inspector General.