Seven medical labs accused of Medi-Cal fraud


Seven private medical laboratories have defrauded the Medi-Cal program of hundreds of millions of dollars by systematically overcharging the state by as much as 400% for blood, urine and other lab tests, state Atty. Gen. Jerry Brown said Thursday.

Brown plans to announce a civil lawsuit today against the companies, five of which are in Los Angeles. The suit aims to recover at least $100 million worth of the excessive charges paid by the program, which provides health services to the poor.

The attorney general’s office launched an investigation three years ago after an executive of a competing medical lab filed a private false-claims action under seal.


The whistle-blower will be rewarded with a share of whatever fraudulent receipts the state can recover from the seven labs.

“Our lawyer said that if I offered to settle this case for $100 million that the other side would jump at it,” Brown said in an interview with The Times. “These companies have funds. They’re not all household names but they have money.”

But the attorney general, rumored to be preparing another run for governor next year, couldn’t explain why it took an outside party to realize that Medi-Cal was paying the suspect labs four times what it was paying other medical services vendors for blood, urine, HIV/AIDS, sexually transmitted disease and other tests ordered by the healthcare providers reimbursed by the state.

Nor could Brown say why criminal charges were not forthcoming in view of the magnitude of the fraud allegedly committed against the state for the last 15 years.

“I don’t know the answer to that. These are all good questions -- if there were these gross discrepancies, why wouldn’t the state have jumped on this at an earlier point?” Brown said. “If they were charging $8 for a lab test when competitors were charging $2, what was the state doing?”

He said he couldn’t say whether Medi-Cal was remiss in failing to notice, through internal reviews or audits, that the labs were overcharging.

Brown declined to name the companies before a news conference at which state lawyers will appear with the whistle-blower to expose the alleged wrongdoing.

“They don’t know this is coming,” he said of the companies that are the targets of the lawsuit he planned to announce at the Los Angeles office of the state attorney general at 10 a.m.

Medi-Cal has been the target of other recent fraud schemes.

The former senior vice president of City of Angels Medical Center pleaded guilty this week to paying illegal kickbacks for referral of homeless people with Medi-Cal cards to the hospital for services. A year ago, two physicians and three administrators from a downtown maternity clinic were arrested on suspicion of defrauding Medi-Cal of at least $2 million.

Sources have also told The Times that Medi-Cal has been asked to reimburse Kaiser Permanente’s Bellflower Medical Center for hundreds of thousands of dollars for care of the octuplets born there in January.

The mother, Nadya Suleman, depends on disability payments and food stamps to help care for her other six children.