Texas Laboratory Settles for $63.5 million in False Claims Act Suit

Last month, a Texas-based pathology laboratory company named Inform Diagnostics agreed to pay $63.5 million to settle multiple allegations that it violated the False Claims Act. The allegations included charges that the company engaged in financial relationships with referring physicians that were deemed improper.

Lab Paid for Referrals

More specifically, Inform Diagnostics was accused of violating the Anti-Kickback Statute and the Stark Law when they provided referring physicians with subsidies for electronic health records (EHR) systems and free or discounted technology consulting services. At the time of the violations, the company was known as Miraca Holdings Inc.  In 2017, majority ownership of the company changed, and the company was renamed Inform Diagnostics.

The accusations were based on a longstanding policy on the part of the Department of Justice (DOJ) reflecting their concerns about the improper financial relationships that between physicians and health care providers and those who refer them. The belief is, when a referral is rewarded, it can impact a physician’s judgment regarding a patient’s health care. It also impacts a patient’s trust in the health care system and causes an increase in healthcare costs for everyone.

The DOJ Hopes to Send a Message

The recovery of $63.5 million from Inform Diagnostics not only represents a significant recovery for taxpayers, but the DOJ is certain the amount will serve as a deterrent to other physicians and healthcare companies from engaging in bribes and other types of financial relationships that are detrimental to the healthcare system.

The Anti-Kickback Statute places significant restrictions on the financial relationships that health care providers, including laboratories, may have with those doctors who refer patients to them. While the Department of Health and Human Services (HHS) regulations adopted in 2006 included provisions that allowed laboratories to provide EHR donations to physicians under certain conditions, HHS subsequently withdrew those exemptions for laboratories in 2013. According to the DOJ, the defendant violated those conditions.

Whistleblowers Will Recover a Lot

The Commercial Litigation Branch of the Civil Division of the U.S. Attorney’s Office for the Middle District of Tennessee, the U.S. Attorney’s Office for the Middle District of Florida, the Department of Health and Human Services Office of Inspector General all conducted a joint investigation along with the FBI.

The claims asserted against Miraca Life Sciences/Inform Diagnostics are allegations only. As part of the settlement, there was no official determination of liability.

Following the settlement announcement, Inform Diagnostics issued a statement saying, “We have admitted no wrongdoing as part of the agreement with the DOJ, but resolving this issue will allow us to focus on what’s most important—providing best-in-class anatomic pathology services to our clients and building a business that is successful and sustainable.”

The allegations came from three whistleblower lawsuits that were filed under the qui tam provisions of the False Claims Act. These provisions permit private citizens to bring suit on behalf of the United States for false claims and to also share in any recovery. While the three whistleblowers’ share of the settlement has not yet been determined, the False Claims Act allows recovery of between 15 and 30 percent, so these whistleblowers will likely recover millions of dollars each.

The purpose of the rewards paid to whistleblowers is to serve as an incentive to more whistleblowers to come forward, so if you know of any government contractor or healthcare provider who is participating in activities that are against the law and/or cost the taxpayers’ money, you should consider reporting it and filing suit under the False Claims Act. When you recover money for taxpayers, you will be handsomely rewarded.

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