Health Diagnostic Laboratory Inc, the embattled lab company, is nearing a $50 million settlement with the Justice Department, according to a Wall Street Journal story by John Carreyrou. As previously reported here, the federal government is investigating HDL for giving kickbacks to physicians who use the company’s tests. Additional allegations suggest a broader pattern of serious misconduct based on questionable sales, marketing, and billing practices involving unnecessary testing.
In a statement, the company said that it "has worked cooperatively with the Department of Justice since the inception of its investigation" and that it looks forward "to concluding a settlement with the Department in the very near future that will enable our company to avoid potentially expensive and protracted litigation and allow us to move ahead with our important work of helping improve the health of millions of Americans." The company said the agreement "will contain an explicit denial of any wrongdoing. We have consistently sought to comply with all applicable legal and regulatory requirements, and are committed to continuing to do so.... We are reaching this resolution in order to put the matter behind us and maintain our focus on our mission of fighting cardiovascular disease and diabetes with innovative, advanced testing.” The company said it will also "further develop and strengthen its robust compliance program in a five-year corporate integrity agreement."
Since its founding in 2008 HDL enjoyed explosive growth. According to the Journal, HDL's revenue for 2012 and 2013 reached $800 million, more than $300 million of which came from Medicare. Critics charge that most of HDL's growth was a result of illegal or unethical behavior on the part of the company.
The Journal article reports that BlueWave, HDL's sales and marketing contractor, received $220 million in sales commissions from 2010 to 2014. BlueWave's owners, Cal Dent and Brad Johnson, received $173 million of that amount, though a lawyer for BlueWave said that was an overstatement by "tens of millions of dollars." Sources told the Journal that the new HDL CEO, Joseph McConnell, has "placed much of the blame for any alleged misconduct on BlueWave."
An HDL agreement with the government has been anticipated for a long time. Many observers have expressed disappointment at the prospect because it means that criminal charges will not be filed against the company. But the Journal article suggests that the HDL settlement may not be the end of the story, since the original CEO of HDL, Tonya Mallory, and the two founders of BlueWave will not be "a party to the agreement, leaving prosecutors the option of pursuing them in civil court."
It is also widely expected that similar agreements with other lab companies will take place. HDL is also facing an $84 million lawsuit from Cigna Health and Life Insurance company based on accusations that closely echo the government charges.
Comment:
In the course of writing about this story since it first broke last September I have spoken with many people with intimate knowledge of the company's activities. My sources include a former employee with detailed knowledge of the company's finances, several doctors who used HDL, a phlebotomist who worked for the company, a Fraud, Waste and Abuse investigator for a third party payments administrator, and a patient.
The stories from these sources have been remarkably consistent. HDL and its salesmen engaged in a variety of illegal and highly questionable practices. In addition to the individual kickbacks in the form of excessive process and handling fees, the tests were often combined with multiple tests from multiple companies, resulting in payments to physician as high as $100 per patient. To avoid scrutiny from payors-- including private insurance companies and the government-- the company had a policy of rarely if ever requesting co-payments from patients. It should also be remembered that, as I documented in my earlier stories, the vast majority of tests included in the standard HDL panels were medically unnecessary.
These practices, from HDL and other companies, have undoubtedly cost the government and insurance companies well over a billion dollars in recent years. Even worse, they have contributed to the general deterioration of the values and standards of our healthcare system.
A $50 million fine may seem like a lot of money to many of us, but to HDL it appears to be just a small cost of doing business. For now it appears that other companies will have little to fear from an investigation.
One possible bright point is that the Journal reports that the current agreement will not include BlueWave, its leaders, and the former HDL CEO Tonya Mallory. If the agreement with HDL is only a prelude to a far more aggressive action against these players then perhaps there will be a measure of true justice after all.
Previous Stories About HDL:
- Beyond Kickbacks: More Questions About Unnecessary Cardiovascular Biomarker Tests
- Way Beyond Kickbacks: More Serious Misconduct Alleged Against Medical Testing Company HDL
- Embattled HDL Laboratory CEO Resigns Amid Federal Investigation
- Doctor: You're Going To Have A Heart Attack! Patient: Your Tests Results Are Giving Me A Heart Attack!
- Cigna Sues Embattled HDL Laboratory For $84 Million
