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California Lab Company Faces Medicare and Medicaid Fraud Charges for Illegal Kickbacks

Diagnostic Labs, the largest clinical laboratory and radiology company operating in Southern California, is facing a False Claims Act lawsuit claiming that it committed Medicare and Medicaid fraud by giving kickbacks to nursing homes.

According to the allegations, the Burbank-based company gave large discounts to nursing homes (charging only $1 per patient for some services) in exchange for business chargeable to Medi-Cal, the State of California’s Medicaid program, and Medicare. The company does business with approximately 80 percent of all nursing homes in Southern California.

The lawsuit was filed in 2010 by two former employees of the company, and the State of California has since joined the suit. The whistleblowers allege that the company charged skilled nursing centers low rates for lab and radiology services, and that in return, the nursing centers referred additional testing and radiology work to the company. Diagnostic Labs then billed the government the maximum amount that Medicare and Medi-Cal programs pay for such services.

The case is just one example of the creative types of kickbacks that medical companies may use to try to circumvent anti-kickback laws related to the Medicare and Medicaid health care programs. Lawsuits involving health care fraud are on the rise. The U.S. Department of Justice has reported that over 630 False Claims Act lawsuits were filed with the agency in 2011, a nearly 50 percent increase since 2009 and the largest number on record. Over two-thirds of these lawsuits concern fraud allegations impacting government health care programs such as Medicare and Medicaid. In 2011 alone, the federal government collected $2.4 billion in awards and settlements for health care-related cases.

Waters & Kraus is a national firm with highly skilled lawyers practicing qui tam litigation in four offices, including Dallas, Los Angeles, San Francisco, and Baltimore. Our attorneys have decades of experience successfully representing whistleblowers in a variety of fraud cases. Contact us or call our attorneys at 800.226.9880 to learn more about our practice and how we can assist.

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