Quest Diagnostics Inc., the biggest provider of medical lab services in California, has agreed to pay $241 million to settle a whistle-blower's lawsuit that accused it of overcharging the state Medi-Cal program.
The lawsuit also alleged that the Madison, N.J., company paid illegal kickbacks to doctors, hospitals and clinics that sent patients their way.
The settlement was the largest in the history of California's False Claims Act, which allows private citizens to sue on behalf of the state if they have evidence that a government contractor has defrauded a state agency.
The whistle-blower, Chris Riedel and his company — Hunter Laboratories of Campbell, Calif. — alleged that the unfair business practices of Quest and other labs was pushing them out of the market.
The California attorney general subsequently intervened in the case and conducted a three-year investigation.
Quest acknowledged the settlement in a statement but denied any wrongdoing.
"Our laboratory testing services for Medi-Cal were priced appropriately, and we deny all allegations in the complaint," said Michael E. Prevoznik, Quest's senior vice president and general counsel.
Quest said it settled "to put the lawsuit behind us."
The lawsuit was one of five pending cases against medical laboratory firms, the attorney general's office said.
"Medi-Cal providers and others who seek to cheat the state through false claims and illegal kickbacks should know that my office is watching and will prosecute," said California Atty. Gen. Kamala Harris.
Medi-Cal is a joint state-federal government program that provides medical care for the poor and disabled.