Cleveland Clinic and related lab sue True Health Diagnostics

Tangled legal web also leads to alleged violations of anti-kickback statute

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THE DARK REPORT is the only lab industry news source to recognize the significance of the lawsuit between the Cleveland Clinic Foundation and Cleveland HeartLab against a new lab company, True Health Diagnostics. It is the latest chapter in a string of questionable sales practices engaged in by defendants in the federal whistleblower lawsuit against Health Diagnostic Laboratories, which also include violations of federal anti-kickback statutes.

 In its lawsuit, CCF and CHL claim that True Health Diagnostics not only refused to license a proprietary test developed by CCF and CHL, but True Health is buying a reference-use-only test and using it for clinical testing of patients.

In an amended complaint filed November 30 in the United States District Court for the Northern District of Ohio, Eastern Division, CCF and CHL claim that True Health Diagnostics is selling its proprietary cardiac-risk assessment test called Myeloperoxidase (MPO) and thus infringing on five U.S. patents that CCF owns and licenses exclusively to CHL.

What adds color to this case is that True Health, founded in 2014, is the lab company that purchased Health Diagnostics in a bankruptcy court auction in September.

It has been reported by some media outlets that investors and some executives of True Health are the same individuals named as defendants in a federal whistleblower lawsuit filed in Richmond, Virginia that seeks to recover $500 million and treble damages allegedly paid by the Medicare and Tricare programs to defendants Berkeley Heartlab, Inc., BlueWave Healthcare Consultants, Inc., Latonya Mallory, Floyd Calhoun Dent III and Robert Bradford Johnson. (See TDR, September 14, 2015.)

Mallory, Dent, and Johnson were all associated with Health Diagnostics Laboratory, the cardiology testing lab that paid $47 million to the federal government to settle its part of the whistleblower case earlier this year.

As True Health has ramped up its sales program, competing labs have begun commenting that True Health is offering different forms of incentives to physicians to encourage lab test referrals—incentives that some competitors consider to be inducements that violate federal anti-kickback statutes. Some of these comments can be found on postings at

CCF and CHL’s lawsuit against True Health seems straightforward. It describes how executives at True Health declined to negotiate a license to offer the patent-protected assays. Instead, the court papers say that True Health began using a similar MPO assay by purchasing kits from Diazyme, which are for research purposes only.

CCF and CHL charge that True Health infringed on the five patents and asks the court for an injunction against the sale of these clinical laboratory tests without authorization. The plaintiff labs also ask for a jury trial and triple damages. Further, if it is true that True Health is offering an assay for clinical testing that was only approved for research purposes, this would put the young lab company at risk of federal regulatory enforcement.

A ‘Straight Kickback Arrangement?’

True Health’s purchase of HDL came despite reports that ties existed between True Health and HDL and individuals who have worked for HDL’s former sales consulting firm, BlueWave Healthcare Consultants Inc.

HDL went up for sale after it entered bankruptcy following a $100 million settlement in April with the U.S. Department of Justice, based on allegations that it had violated the Anti-Kickback Statute and the False Claims Act between 2010 and 2014. The DOJ was acting on reports from three whistleblowers who had knowledge of HDL’s practices.

The whistleblower case started when Cigna sued HDL for waiving patients’ copayments, thus encouraging patients to use doctors who would send their lab test work to HDL. By waiving copayments, HDL was subverting Cigna’s attempts to steer patients to low-cost labs, Cigna said in court documents.

Further, THE DARK REPORT also reports in this issue on activities by another company that appear to also violate anti-kickback laws. Quest Diagnostics Incorporated in Florida seems to be offering free testing arrangements, known within public lab companies as “Waiver of Charges,” refers to the Advisory Opinion issued by the Office of the Inspector General in December 1994.

In a letter that appears to come from Quest Diagnostics and has been sent to a family physician, Quest offers to waive out-of-network charges for managed care services. The letter went to at least one physician in Florida and is signed by a physician in Southwest Florida and dated May 5, 2015. At the physician’s request, THE DARK REPORT agreed not to disclose the name of the doctor who signed the letter.

The letter, shown in this issue of THE DARK REPORT, is not printed on any letterhead. It is not clear how many physicians received the letter or how many physicians returned the letter. Attorney J. Marc Vezina, of the Vezina Law Group in New Orleans and Birmingham, Michigan, has seen the letter and claims it could be the basis for a False Claim Act violation, and possibly could be a violation of Florida state insurance rules and regulations. “My preliminary analysis is that this is a straight kickback arrangement—nothing more, nothing less.”

Vezina recently represented a whistleblower in the recent Millennium Laboratories lawsuit, in which the U.S. Department of Justice alleged in part that Millennium engaged in practices that violated the Anti-Kickback Statute. He has more to say on the Florida letter, based on his experience.

If you have any experience with Quest Diagnostics’ actions in Florida, please let us know in the comments.


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