Southern California Medical Center and Universal Diagnostic Laboratories: The Money Behind the Laboratory Referral

The Southern California Medical Center UDL settlement totaled $15 million over allegations of laboratory referral kickbacks and self-referrals that generated false claims to Medicare and Medi-Cal. The government described payments to marketers who brought patients into clinics, benefits to outside clinics that sent patients to the laboratory, and referrals to a laboratory owned by the medical center’s leaders. For someone working inside a clinic or laboratory, the alleged benefits are recognizable: extra rent, discounted services and balances written off for people connected to a referring practice.

The Justice Department announced the resolution on December 26, 2024. Former employees or managers of the medical center and laboratory brought the False Claims Act case. The local announcement identified a $10 million payment for the portion handled by the United States and a separate $5 million settlement between the whistleblowers and defendants over additional allegations.

The Clinic’s Leaders Owned the Laboratory

Southern California Medical Center operated six clinics as a federally qualified health center. Universal Diagnostic Laboratories was a reference and esoteric laboratory in Southern California, operated under the corporate name R & B Medical Group, Inc.

The physician who founded the medical center served as its chief medical officer and co-owned Universal Diagnostic Laboratories. The medical center’s chief executive officer also co-owned the laboratory and served as its chief executive officer. Both companies and both individuals agreed to the settlement.

The clinic’s leaders had a financial stake in where its patients went for testing. The government alleged that the clinics sent patients to that laboratory in violation of the self-referral law.

The government’s allegations also reached referrals from outside clinics. Those involved a different relationship: benefits allegedly provided in exchange for laboratory business.

How the Alleged Referral Payments Worked

The United States alleged three routes into the false claims: paid recruitment into the medical center’s clinics, benefits exchanged for outside referrals to Universal Diagnostic Laboratories, and the medical center’s referrals to that laboratory.

Marketers Brought Patients Into the Clinics

The government alleged that the defendants paid marketers kickbacks to refer Medicare and Medi-Cal beneficiaries to Southern California Medical Center clinics. The clinic received the patient, while the marketer allegedly received payment for the referral.

That is a different transaction from a practice sending a patient’s laboratory work to UDL. Someone familiar with clinic recruitment may know how patients arrived and who received payment for bringing them in. Someone on the laboratory side may see the later referral without seeing that earlier arrangement.

Outside Clinics Received Rent, Services and Write-Offs

Third-party clinics allegedly received benefits in exchange for referring Medicare and Medi-Cal beneficiaries to Universal Diagnostic Laboratories for laboratory tests. The government’s list was specific: above-market rent payments, complimentary or discounted services to clinic staff, and write-offs of balances owed by patients and clinic staff.

The alleged benefits reached beyond the physician signing a test order. Clinic staff and patients appeared in the government’s account because their services or unpaid balances formed part of the alleged exchange. An employee handling leases, staff accounts or billing adjustments might see that side of the arrangement without handling a laboratory claim.

The alleged bargain was laboratory business in return. A rent payment or account adjustment could sit in a different part of the business from the referral it allegedly purchased. That separation is why knowledge of what was promised to a referring clinic matters alongside the laboratory’s billing.

A similar allegation appears in the whistleblower’s complaint against Genotox Laboratories. The whistleblower alleged that rent paid to medical practices for office space concealed additional kickbacks. The parallel is the use of an ordinary business expense to carry an alleged referral payment.

The Medical Center Sent Patients to Its Leaders’ Laboratory

The third allegation concerned Southern California Medical Center referring Medicare and Medi-Cal beneficiaries to Universal Diagnostic Laboratories for laboratory tests in violation of the physician self-referral law, commonly called the Stark Act. Here, the ownership relationship connected the medical center’s founder to the laboratory receiving the business.

Why a Laboratory Referral Becomes a Payment Question

Medicare’s laboratory payment rules generally pay the performing laboratory directly. The clinic’s choice of laboratory therefore has a financial consequence beyond the clinic visit.

The Justice Department’s national announcement explains that the physician self-referral law covers clinical laboratory services. Compliance with that law and the Anti-Kickback Statute are conditions of payment under federal health care programs. That connects the alleged referral arrangements to the government’s false-claims case: the financial relationship behind the order matters to the claim for payment.

The allegations specifically identified Medicare and Medi-Cal, California’s Medicaid program. Defense Department investigators also described TRICARE as affected by the alleged schemes. Buying referrals puts patients and taxpayers behind the financial interests of the people directing the tests. Honest laboratories must compete for work that someone else is paying to receive.

What Evidence Is Needed to Prove Fraud?

In a laboratory referral case, the evidence connects the financial benefit, the referrals and the resulting government claims. A rent ledger can show the payment. Staff-account adjustments can show discounts or balances removed. Clinic referral records can show where the testing went. An insider’s knowledge can explain why those otherwise separate transactions belong together.

The former employees or managers who brought this case worked inside the medical center and laboratory. That is the practical relevance of their roles: the alleged arrangements crossed clinic operations, laboratory business and management decisions. An employee may understand the reason for a payment that its accounting description does not reveal. We work with that knowledge to identify the alleged exchange and connect it to the claims.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know Why the Clinic Sent the Tests

If you saw rent, staff benefits or balance write-offs tied to laboratory referrals, speak to one of our Whistleblower Experts about the payments behind those referrals. We build the case with you around the decisions behind those payments and bring in laboratory fraud whistleblower lawyers who understand clinic ownership and referral agreements. We stay beside you through the pursuit of the government’s recovery.