Quest Diagnostics pays $6M to settle whistleblower case brought by Phillips & Cohen LLP

COLUMBIA, S.C., May 1, 2017 /PRNewswire/ -- Quest Diagnostics has agreed to pay $6 million to the federal government to settle a whistleblower lawsuit brought on behalf of a physician by Phillips & Cohen LLP.

The "qui tam" lawsuit alleged that Berkeley HeartLab, which Quest acquired in 2011, was paying doctors kickbacks in the form of "process and handling fees" to induce them to order expensive cardiovascular blood tests that were medically unnecessary.        

"The money Berkeley offered was hard for most doctors to resist," said Peter Chatfield, a whistleblower attorney with Phillips & Cohen. "But once our client, Dr. Michael Mayes, realized that the tests didn't help with treatment decisions and were very expensive, he refused to participate. He saw those 'process and handling fees' for what they were: illegal kickbacks."

As a further inducement to get doctors' business, Berkeley routinely waived copayments so that the blood tests wouldn't cost the doctors' patients anything. This also was a violation of the law since certain patients are legally required to pay for part of their tests so that they have a financial incentive to refuse unnecessary tests.

"Dr. Mayes decided to take an ethical stand and warn fellow physicians of his concerns about accepting the payments as well as file a 'qui tam' lawsuit to stop this scheme even though this cost him his relationships with many colleagues who were receiving payments from the labs," Chatfield said. "Dr. Mayes pursued this case because of the impact healthcare fraud can have on patients, such as draining Medicare funds that are needed for patient services and causing higher premiums."

The settlement reached was negotiated based on Berkeley's representation that it was virtually insolvent. Quest ended up paying the lion's share of the settlement based in substantial part on Dr. Mayes' claims, which the government didn't join, about Quest's involvement in the scheme during the first few months it owned Berkeley.

The government announced the settlement with Quest Diagnostics late Friday afternoon. Dr. Mayes will be awarded 26 percent of the settlement for the information and assistance he and his counsel provided to recover funds for the government.

Quest is the third medical testing lab to settle charges from Dr. Mayes' whistleblower case, which was filed in federal district court in South Carolina in 2011. In 2015, Health Diagnostics Laboratory of Richmond, Virginia, agreed to pay a total of more than $50 million, and Singulex Inc., a privately held lab company based in Alameda, California, agreed to pay more than $1.5 million to settle similar charges against them.

The lawsuit alleges violations of the False Claims Act – for submitting claims for medically unnecessary services to government healthcare programs and claims that involved kickbacks – and the Stark Act, which prohibits referrals for medical services when there is a financial relationship between the doctor making the referral and the provider of the services.

The government is continuing to pursue charges against others named in Dr. Mayes' qui tam lawsuit: Tonya Mallory, the former CEO of Health Diagnostics Laboratory Inc., and marketing company BlueWave Healthcare Consultants Inc. and its owners, Floyd Calhoun Dent III and Robert Bradford Johnson.

Bill Coates, of Roe Cassidy Coates & Price P.A., served as local counsel on the case with Phillips & Cohen. The settlement agreement is posted here.

About Phillips & Cohen LLP
Phillips & Cohen (www.phillipsandcohen.com) is the nation's most successful law firm representing whistleblowers, with recoveries totaling more than $12.2 billion in civil settlements and criminal fines. The firm represents whistleblowers in "qui tam" lawsuits under the False Claims Act as well as cases brought under the whistleblower reward programs of the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service. Phillips & Cohen and its attorneys have been recognized frequently for their work, with awards including Lawdragon's "500 Leading Lawyers in America" and the National Law Journal's annual "Plaintiffs' Hot List" for "exemplary and cutting-edge work."

SOURCE Phillips & Cohen LLP

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