Litigation > False Claims Act/Qui Tam Defense > State FCA Resource Center > Diagnostic Labs Settles Federal and California State FCA Claims for $17.5 Million
02 Oct '13

On September 25, 2013, the United States Department of Justice announced that Diagnostic Laboratories and Radiology will pay $17.5 million to settle whistleblower allegations that the California-based company violated the federal and California false claims acts by giving kickbacks for referral of mobile lab and radiology services, which were subsequently billed to Medicare and Medi-Cal (California’s Medicaid program). The settlement resolves a lawsuit filed by Jon Pasqua and Jeff Hauser, two former Diagnostic labs employees, in the Central District of California, titled United States and State of California ex rel. Pasqua et al. v. Kan-Di-Ki LLC f/k/a Kan-Di-Ki Inc. d/b/a Diagnostic Laboratories and Radiology, Civ. Action No. 10 0965 JST (Rzx) (C.D. Cal.). The lawsuit alleged that Diagnostic Labs charged Skilled Nursing Facilities (SNFs) in California discounted rates for inpatient services paid by Medicare in exchange for the facilities’ referral of outpatient business to Diagnostic Labs. The alleged scheme enabled the SNFs to maximize profitability by decreasing the cost of providing in-patient services and generated a steady stream of lucrative referrals to Diagnostic Labs that it could directly bill to Medicare and Medi-Cal. The DOJ’s press release is available here.