New Developments in $1 Billion Laboratory Fraud Case

Federal whistleblower case reveals details about what appears to be biggest-ever laboratory fraud

IT’S THE $1 BILLION LABORATORY FRAUD that no one realized had grown so big. In this special issue of THE DARK REPORT, you’ll read how the next chapter of the federal whistleblower lawsuit against three specialty cardiology labs and certain individuals has pulled the curtain open on what we believe is the biggest case of laboratory fraud and abuse in the past 30 years.

Court documents filed last month in the federal qui tam case against Health Diagnostic Laboratory, Singulex, Berkeley Heart Lab, BlueWave Healthcare Consultants, and several lab executives allege that the defendants used illegal inducements and kickbacks to file false claims and generate payments of $500 million from Medicare and Tricare. This money was paid in just 60 months, from 2010 through 2014. Add up payments to the defendants from private insurers—two of whom are suing HDL—and the total could be as much as $1.2 billion.

In this special issue of THE DARK REPORT, you will read the nation’s first comprehensive news coverage to explain how  these clinical laboratory companies were able to take in between $1 billion and $1.2 billion in alleged Medicare fraud and claims submitted to private insurers that the federal government alleges were generated by offering thousands of physicians illegal inducements and kickbacks.

You will also learn the fascinating story of how two lab sales reps created a lab sales company that was paid $242.8 million during 2010 to 2014, and how that company distributed $116 million to those two individuals during the same period, making them the richest sales reps in the clinical lab industry.

This remarkable story does not stop there. You’ll learn about evidence now surfacing in news stories that hints at how some of the individuals accused of this wrongdoing—apparently having no fear of criminal prosecution from the federal government—may be involved in a brand-new lab company that specializes in the same cardiology tests that were at the heart of a still-unfolding whistleblower case.

Big whistleblower case

The foundation to this laboratory fraud story is the federal qui tam case that was filed by multiple whistleblowers and includes the following as defendants: Health Diagnostic Laboratories, Inc., of Richmond, Virginia; Tonya Mallory, HDL’s former CEO; Singulex, Inc., of Alameda, California; BlueWave Healthcare Consultants, Inc., of Hanceville, Alabama (the sales consulting company that marketed the testing services of HDL and Singulex), BlueWave’s cofounders Floyd Calhoun Dent, III, of Columbia, South Carolina, and Robert Bradford Johnson of Hanceville, Alabama; and Berkeley HeartLab (no longer in business).

In September 2014, The Wall Street Journal used a front-page story to break the news about the federal investigation into those lab companies. Additional news coverage of ongoing developments means that many pathologists and lab administrators are aware that HDL and Singulex entered into settlement agreements with the federal government in April. Both companies denied guilt and agreed to upfront payments of $47 million and $1.5 million respectively, along with additional payments under certain conditions. (See TDR, April 20, 2015.)

Some optimism at HDL

Following that settlement with the federal government, reports from inside HDL — which, at its revenue peak, dwarfed Singulex — indicated that the executive team there thought that they had weathered the storm. The belief was that, given the modest size of the settlement, HDL could survive financially.

But HDL was not prepared for what happened next. Following publication of the WJS story last fall, HDL was sued by Cigna Corporation for $84 million. Now, within weeks of the settlement with the Department of Justice, HDL found itself being sued by Aetna, Inc., for “tens of millions of dollars.” Further, in court documents filed with HDL’s Chapter 11 bankruptcy case in early July, it was reported that UnitedHealthcare had stopped paying HDL’s claims.

Outsiders then realized that HDL was in dire financial straits. Three of its largest payers had ceased to issue payment for HDL’s lab claims. However, this financial stress was the result of HDL’s own business actions.

The next chapter in the HDL laboratory fraud tale came on August 7.


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