CASES

Blood Money features numerous Qui-tam cases in which Author Chris Riedel has been centrally involved as a fraud fighter. Among those cases are:

California vs. Quest Diagnostics and Laboratory Corporation of America

During the 1990s, two labs (dubbed the “Blood Brothers” by Wall Street analysts) grew to dominate the industry: Quest Diagnostics and Laboratory Corporation of America (LabCorp). When my wife, Marcia, and I came back into the industry 11 years after we retired, the California laboratory industry had changed. Instead of walking into a level playing field for all labs, what we found was a rigged deck, a broad pattern of corruption, kickbacks, price gouging, and naked profiteering. This made it impossible for honest competitors, like our Hunter Labs, to survive. Even worse, I discovered that hundreds of millions of dollars were being stolen from California’s Medicaid system. The “Brothers” business model was to capture physician clients by losing money on deeply discounted prices billed to the physicians or IPA capitated contracts, and making huge profits from “pulling-through” the remainder of the physicians practice of Medicare, Medicaid, insurance payors and a small amount of patient billing, all of which were billed at rates grossly exceeding the discounts. They blatantly refused to follow California law mandating that the Medi-Cal program for California’s neediest citizens is entitled to the lowest charge offered to other customers. Often, the charges to Medi-Cal were 20 - 40 times the charges offered to physicians, clinics, and insurance companies- stealing billions of dollars from California taxpayers. I believed that such shameful conduct would quickly be stopped by the California Department of Justice. Boy was I wrong!

Florida vs. Quest Diagnostics and Laboratory Corporation of America

Like California, Florida law required the lowest charge for its Medicaid program. Unlike California, we faced a corrupt Governor who opposed his own Attorney General’s lawsuit and state law. READ MORE

US vs. Health Diagnostic Labs & BlueWave

In 2008, two enterprising lab sales representatives, Brad Johnson and Cal Dent, concocted an incredible value proposition to induce physicians to order large panels of advanced cardiovascular disease (CVD) tests. The pitch was simple: “Doc, how much money do you want to order our CVD panels? We will pay you $20 for each panel you order. If that is not enough, we will split specimens between multiple labs, and each lab will pay you $20 for packaging and handling. In this way, if you split specimens among four labs, you can collect up to $80 per patient. If that is not enough, we will put you on our speaker’s bureau and pay you a monthly fee, whether you speak or not.” Quite a combined package of incentives and revenue opportunities for doctors, wasn’t it? Or, should I say, kickback scheme? Cal Dent even bragged that one physician was paid more than $250,000 in one year from this scheme. Furthermore, patients were never sent an invoice, a direct violation of federal and state laws. A physician could offer prospective patients free lab testing if treated by that doctor. How could HDL make money while performing free lab testing? Their answer was simple: charge Medicare up to $5,000 for each panel. They paid physicians and ran patient panels as unbilled loss leaders, both effective hooks. Then, to improve profitability, HDL added additional tests, some of dubious medical value, others that provided duplicate information — which amounted to double billing. It was a creative, evolved version of the “loss leader, pull-through” scheme the Blood Brothers employed so profitably. What a scheme. The boldness of it would make Bernie Madoff smile from inside his prison cell. Hunter Labs found it could not compete with its own CVD panel unless it matched the illegal activity. I thought the scheme was so outrageous that DOJ would act quickly. Once again, I was wrong.

US vs. True Health Diagnostics

Chris Grottenhaler was no stranger to Medicare fraud. He was formerly VP Finance for Ameritox, a drug testing laboratory. In 2010, Ameritox paid $16.3 million to settle kickback claims. Chris became CEO of True Health in 2015. He quickly implemented a variety of fraud schemes, including those of Ameritox, and also new kickbacks, billing for tests not performed and billing for medically unnecessary tests. True Health also did not pass on lowest charges required by state laws to Medicaid programs across the country. And then he raised the fraud bar even higher by introducing a novel money laundering scam. He did this in the face of recent DOJ fraud alerts on the very kickback schemes he implemented. The Lab industry was stunned at his brazenness and fully expected that DOJ would soon take him away in handcuffs. This didn’t happen.

US vs. Boston Heart Labs

I served on the Boston Heart Board of Directors (BOD) from its early stages until it was acquired by Bain & Company (The company Mitt Romney founded). At a couple of BOD meetings the CEO stated that unless it copied the kickback schemes of Health Diagnostic Labs, it could not successfully grow. I advised the BOD, none of whom had commercial laboratory experience, that the schemes were illegal, and it was only a matter of time before DOJ took action. While I was a member of the BOD, implementing the schemes was never put to a vote. I later learned that behind my back as a BOD member the kickback schemes were implemented, resulting in successful growth for the company. Even though I was no longer a BOD member, I remained a shareholder. When the Hunter Labs sales team reported that they could not compete against BH unless we also matched the kickbacks, in my capacity as a shareholder I wrote a letter to the BOD demanding it stop and that an outside regulatory counsel be hired to investigate the illegal payments and immediately return the monies to Medicare. Guess what, nothing happened except the company stopped sending me shareholder reports.