Two companies offering tests for cardiovascular diseases have agreed to pay almost $50 million after three whistleblower lawsuits -- including one filed by a Hilton Head Island doctor -- detailed their practices of soliciting clients from physicians and conducting unnecessary tests, according to the U.S. Department of Justice.
Health Diagnostic Laboratory Inc. of Richmond, Va., will pay $47 million and Singulex Inc. of Alameda, Calif., will pay $1.5 million in the settlements announced Thursday.
The two companies violated the federal False Claims Act by billing Medicare and Medicaid for medically unnecessary blood tests, a news release said, and they violated the Anti-Kickback Statute by offering payments to physicians in exchange for patient referrals.
The Justice Department intervened in the lawsuits filed against the two companies and Berkeley HeartLab Inc. of Burlingame, Calif., which offered fees to doctors who sent patients to them for blood tests, the release said. One of the three whistleblower lawsuits was filed by Dr. Michael Mayes, a physician on Hilton Head Island.
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According to the Justice Department release, HDL and Singulex offered payments between $10 and $17 to doctors for each referral and routinely waived patient co-pays and deductibles as an incentive for referrals.
Called processing and handling fees, the companies paid doctors and their practices for drawing blood and storing it before sending it out to the laboratories for analysis, Mayes' attorney, Peter Chatfield, said. However, doctors and practices already receive a Medicare reimbursement for drawing blood -- typically about $3 -- so the doctors were being paid twice for the work, Chatfield said.
Mayes filed suit against Berkeley HeartLab and two other companies in June 2011, alleging they had offered fees for referrals and that Berkeley HeartLab added unnecessary blood tests to its labwork.
According to his lawsuit, Mayes and other physicians at his former office, Heritage Medical Practice, had referred patients to Berkeley HeartLab in exchange for fees. Mayes said Monday he referred patients to Berkeley for a few months in 2010, after a company representative told them the referral fees were legal.
He stopped after realizing the fees weren't legal and noticing the company was performing cholesterol tests he had not ordered on blood samples. At the time, Berkeley and other companies were promoting genetic tests as a way to get a better look at cholesterol levels, Mayes said.
He contacted the company's representative about the tests, asking them to stop the practice, but it continued. When he asked patients to bring in their insurance explanation of benefits, one showed Medicare had been billed almost $1,000 for the unnecessary test.
Mayes' lawsuit said Berkeley ordered unnecessary vitamin D tests and genotype tests during its labwork. The company also offered incentives for a Plavix test to help determine if a patient has the ability to metabolize the drug, which treats blood clots.
The test was only necessary if a doctor was considering prescribing the drug, but Berkeley began adding the Plavix test for every follow-up lab analysis, the lawsuit said. The majority of those follow-ups were for patients who have high cholesterol, the "vast majority" of whom were not in consideration to receive the drug.
The company offered an additional $7.50 fee for a Plavix test, in addition to the $11.50 referral fee. In 2010 alone, Berkeley paid the Heritage practice $28,175 for 2,450 patient referrals, the suit said.
One of the other two companies in Mayes' initial lawsuit, BlueWave Healthcare Consultants Inc. of Hanceville, Ala., offered Heritage Medical Partners $20 for each referral to HDL, and another $10 fee if additional blood analysis was ordered at Singulex, Mayes said. Both companies were added to his lawsuit the following year; they, too, conducted unnecessary lab tests, among them the Plavix test, according to an amended lawsuit filed in October 2012.
Mayes said the two companies were added after Hunter Laboratories CEO Chris Riedel, one of the other three whistleblowers named in the Justice Department release, sued the companies.
Mayes and Chatfield said the incentives offered for ordering tests led doctors to order more of them, even if they weren't needed. HDL, which was founded in 2009, had about $400 million in yearly revenue by 2013, a majority from Medicare payments, Mayes said.
Mayes said it was only a small portion of doctors, limited mostly to ones specializing in heart health and internal medicine, who received fees. He said he didn't blame doctors for accepting the money, as the referrals were presented as a legal venture.
After a Centers for Medicare and Medicaid Services announcement last year that such payments were "abusive and illegal," the number of tests dropped off, Chatfield said.
The Justice Department release said it would intervene in pending lawsuits against Berkeley, BlueWave and its owners, and the former CEO of HDL, Tonya Mallory. U.S. attorneys are expected to file complaints against the companies and individual defendants within the next four months, the release said.
Chatfield, of the Washington, D.C., law firm of Phillips & Cohen LLP, said it is still being evaluated whether to continue a lawsuit against Quest Diagnostics, the company that purchased Berkeley in May 2011.
Follow reporter Matt McNab at twitter.com/IPBG_Matt.