Friday, September 23, 2011

California Reaches $49.5 Million Settlement With Labcorp (State's 2nd Largest Lab)

California recently announced a $49.5 million settlement with Laboratory Corporation of America, the state's second largest provider of medical laboratory testing, stemming from a qui tam lawsuit alleging illegal overcharges to the state's Medi-Cal program for the poor. In May, Attorney General Harris announced a settlement of $241 million with Quest Diagnostics for the same alleged practice. 

Our firm represented one of the smaller laboratories in this case which also settled for business reasons and, thus, we have followed the settlements in this case closely.  

The settlement with Labcorp is the result of a lawsuit filed under court seal in 2005 by a whistleblower and referred to the Attorney General's office. The lawsuit alleged that Labcorp and other medical laboratories systematically overcharged the state's Medi-Cal program for more than 15 years and gave illegal kickbacks in the form of discounted or free testing to doctors, hospitals and clinics that referred Medi-Cal patients and other business to the labs. 

According to the allegations in the lawsuit, Labcorp charged Medi-Cal over five times as much as it charged some other customers for certain tests. For example, Labcorp was accused of charging Medi-Cal $35.04 to test for total testosterone, while it allegedly charged another customer $7.36 for the same test. What the state did not realize was that in servicing certain low-income community clinics, the labs had to charge a lower price given that the State's reimbursement to the clinic was too low for the clinic to pay the lab the standard rate. 

This case was filed as a qui tam case. Under the state's False Claims Act, any person with previously undisclosed information about a fraud, overcharge, or other false claim can file a sealed lawsuit on behalf of California to recover the losses, and is entitled to a share of the recovery in some cases. Such individuals become plaintiffs and are known as "whistleblowers," "qui tam plaintiffs," or "relators." 

In this case, the whistleblowers were Chris Riedel and his company Hunter Laboratories. Hunter Laboratories allegedly found it could not compete in a significant segment of the marketplace where major medical laboratories such as Labcorp offered doctors, hospitals and clinics far lower rates than they were charging Medi-Cal.

Attorney Commentary: The State is making it more difficult for smaller and medium-sized laboratories to co-exist with large national laboratories. In this case, the State's real targets were the larger laboratories since they could obtain larger monetary settlements from them. Given the state of the economy and the lack of funding for Medi-Cal, we can expect more qui tam cases against larger health care providers.

Posted by Tracy Green, Esq. Please email Ms. Green at or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.  

Any questions or comments  should be directed to Tracy Green, a very experienced California health care attorneyadministrative attorney, and California Medical Board attorney at


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