U.S. Settles Huge Fraud Case With Medical Lab : Health care: La Jolla-based firm agrees to refund $110.4 million to government programs for charging for unnecessary blood tests.
In what federal prosecutors called the largest settlement of a medical fraud case in U.S. history, a La Jolla-based firm Friday agreed to refund $110.4 million to government-funded insurance programs and pay a $1-million fine for charging for unneeded blood tests.
U.S. Atty. William Braniff said the fraudulent practices used by National Health Laboratories are widespread in the medical testing industry, and other labs nationwide are under investigation.
“Health care costs are unquestionably one of the most uncontrollable items in our economy,” Braniff said. “Marketing schemes like the one exposed today are a primary reason for these escalating costs.”
In a plea bargain, company President Robert E. Draper pleaded guilty to two counts of submitting false claims to Medi-Cal and the Civilian Health and Medical Program of the United Services plan for military defendants.
Draper agreed to resign from National Health Laboratories and pay a $500,000 fine. He could face 10 years in prison, but Braniff said no decision has been made on whether to recommend a sentence.
Braniff said the scheme started in 1987, when National Health Laboratories began telling doctors that to get an ordinary blood work-up they must order two additional tests--one for cholesterol, another to measure iron in the blood--even if their patients did not need them.
National Health Laboratories was able to perform the tests cheaply because they were done at the same time as the other blood tests. The company billed the Civilian Health and Medical Program and Medi-Cal and Medicaid programs in other states at full cost, as if the two tests had been done separately.
“When you strip it all down, it’s fraud,” Braniff said.
The company will pay $100 million to the federal government by mid-1995 and $10.4 million to Medicaid programs in several states, including California.
National Health Laboratories, with 16 labs and 7,000 employees nationwide, is one of the country’s largest health testing companies and provides services for doctors, hospitals, clinics, nursing and other labs in 41 states. Blood tests, Braniff said, are the tests most frequently ordered by doctors.
Braniff said the firm may also have pulled the same scheme on doctors whose patients have private health insurance plans. He said those companies can file civil suits seeking refunds.
After the pleas were made in federal court, National Health Laboratories issued a statement that said prosecutors never questioned the accuracy of the additional blood tests and that the company believes that the tests were “medically sound.”
The company’s general counsel, James G. Richmond, said the company “is totally committed to full compliance with all government regulations.”
As part of the plea bargain, the company will continue to do business with Medi-Cal, Medicaid and the Civilian Health and Medical Program. Prosecutors could have sought to have the company banned from billing the public insurance programs, putting it out of business.
The investigation into National Health Laboratories began two years ago after a lawsuit brought under the federal False Claims Act was filed by a former sales manager for a rival testing laboratory.
