Kan-Di-Ki LLC, which operated in Southern California as Diagnostic Laboratories and Radiology, will pay $17.5 million to settle allegations that it paid kickbacks for the referral of mobile lab and radiology services billed to Medicare and Medi-Cal, California’s Medicaid program.

In a statement from the U.S. Department of Justice, authorities alleged that Diagnostic Laboratories exploited Medicare’s reimbursement system to boost the profits of skilled nursing facilities it worked with by offering discounted rates for inpatient services that were then paid in full by Medicare. In return, the nursing facilities allegedly would refer outpatient business to Diagnostic Laboratories.

“When medical facility owners illegally offer discounts to customers to generate business, it results in inflated claims to government health care programs and increases costs for all taxpayers,” Glenn R. Ferry, special agent in charge for the Los Angeles Region of the Department of Health and Human Services’ Office of Inspector General (OIG), said in the statement.  “This $17.5 million settlement demonstrates OIG’s ongoing commitment to safeguarding federal health care programs and taxpayer dollars against all types of fraudulent activities.”

Two former Diagnostic Laboratories employees, Jon Pasqua and Jeff Hauser, will receive a combined $3.75 million for bringing the lawsuit against the provider under the whistleblower provisions of the False Claims Act.