Quest Settles $241M Whistleblower Case

Cheryl Clark, May 23, 2011

Quest Diagnostics, California's largest provider of medical lab testing, has agreed to pay the state $241 million to settle a 2005 whistleblower lawsuit that it illegally overcharged Medi-Cal, the state's Medicaid program.

According to a statement from the state Attorney General Kamala D. Harris, a three-year investigation revealed that Quest charged Medi-Cal "up to six times as much as it charged some other customers for the same tests. For example, Quest charged Medi-Cal $8.59 to perform a complete blood count test, while it charged some of its other customers $1.43."

In another part of the lawsuit, Quest was found to have "systematically offered doctors, hospitals, and clinics low prices for lab tests in return for referrals." Quest then charged a higher price to Medi-Cal to make up the difference.

Harris' statement said this "resulted in the loss of millions of dollars to the Medi-Cal program."

The whistleblower in this case was Chris Riedel and his company, Hunter Laboratories, which found it could not compete in areas where Quest offered doctors, hospitals, and clinics far lower rates than what they charged Medi-Cal.

"This agreement sends a strong message that fraud against the state and its Medi-Cal program will not be tolerated," Toby Douglas, director of the California Department of Health Care Services said in a statement.

Under the agreement, the settlement amount allows the state to recapture $171 million. Portions of the $70 million difference will go to Riedel and his attorneys.

In a statement released at the time of the lawsuit's filling by then Attorney General Edmund G. Brown Jr., Riedel was quoted saying "I confirmed with the California Department of Health Care Services that these practices were illegal. We then had a choice – either join the other labs in violating the law or be unable to compete for business. We choose to suffer the financial consequence, and follow the law."

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