SoCal rad provider faces fraud allegations

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Diagnostic Labs, a Burbank, Calif.-based clinical laboratory and radiology services company, is facing fraud allegations brought under the False Claims Act, according to a report from California Watch, a project of the Center for Investigative Reporting.

According to court documents cited in the report, Diagnostic Labs allegedly provided discounts to skilled nursing facilities in exchange for business that could be charged to Medicare and Medi-Cal, California’s Medicaid program.

"This is an illegal kickback scheme, no more legal than if Diagnostic Labs, rather than providing below-cost discounts, had instead simply handed the [skilled nursing facilities] an envelope of cash," according to the lawsuit.

The suit was brought by two former Diagnostic Labs employees who claimed the company exploited the Medicare and Medi-Cal billing system by charging nursing homes as little as $1 per patient per day for lab and radiology services, according to California Watch. The skilled nursing facilities then referred outpatient work, including x-rays, to Diagnostic Labs, which billed the government programs for the maximum allowed amount, according to court documents cited in the report.

Specifically, the complaint alleged that Diagnostic Labs offered 69 percent discounts for radiology services as of March 2005.

The federal government collected $2.4 billion in settlements and judgments from healthcare fraud cases in 2011, according to California Watch.