Berkeley HeartLab: Processing Fees, Copay Waivers and Quest’s Resolution

In the Berkeley HeartLab settlement, Quest Diagnostics agreed to pay $6 million over allegations of physician kickbacks, patient copay waivers and medically unnecessary cardiovascular testing. The alleged arrangement rewarded the doctor for sending the blood, removed charges that certain patients owed, and sent the testing bill to federal health care programs. The whistleblower’s complaint brought the story inside the practice, down to a test a physician allegedly discovered only when the results came back.

Berkeley was an independent blood-testing laboratory in Alameda, California. In its April 28, 2017 announcement, the Justice Department said Quest had acquired Berkeley and ended the conduct that gave rise to the settlement. A physician had brought the False Claims Act case. What the physician described went beyond money changing hands: the complaint connected the sales pitch, the order form, the tests performed and the Medicare claim.

Do Doctors Get Kickbacks for Ordering Tests?

The government alleged that Berkeley paid doctors kickbacks for ordering tests, disguised as processing and handling fees. In its earlier account of the cardiovascular-laboratory cases, the Justice Department described alleged payments of $10 to $17 per referral involving Berkeley, Health Diagnostic Laboratory and Singulex. The government’s point was what the payment bought: a physician’s decision to send patients to a particular laboratory. Its settlement announcement explained that the Anti-Kickback Statute prohibits payments to induce referrals for services covered by federal programs.

The Berkeley whistleblower’s complaint put that incentive into the accounts of a medical practice identified as HMP. It alleged that Berkeley paid the practice approximately $28,175 for an estimated 2,450 patient referrals in 2010. That is a practice revenue stream tied directly to where the blood goes.

The complaint also described a sales representative offering an additional draw fee when physicians ordered a Plavix test alongside Berkeley’s usual panel. According to the whistleblower, the representative proposed either adding the fee to the existing payment or ordering the test on a separate day to justify another draw fee. The sales conversation allegedly reached into the appointment schedule: another testing day could mean another payment to the practice.

Those details explain why the government treated the arrangements as referral payments. The laboratory wanted the specimens, the practice could earn money by sending them, and the alleged extra payment encouraged an additional test. Calling the payment a fee for handling blood did not answer why it was offered or what it encouraged the doctor to order.

How Berkeley Allegedly Added Tests to Follow-Up Panels

Berkeley allegedly added Plavix testing to routine follow-up panels after physicians had discussed ordering it only for individual patients who needed it. The complaint said the laboratory began including the test with every follow-up order for patients with hyperlipidemia, or high cholesterol and triglycerides, although most were not being considered for Plavix treatment.

The change allegedly traveled through the order forms sent to the practice’s billing staff. Those forms were not completed by the physicians themselves. In the complaint’s account, the ordering doctor could be the last person in the office to learn what the panel now contained:

The doctor was supposed to choose the test. In the complaint’s account, the doctor learned of that choice from the results.

The complaint gave a separate patient example from April 2011. The physician alleged that Berkeley performed Plavix, Vitamin D and NT-proBNP tests that the physician had neither ordered nor considered necessary, then billed Medicare and received payment for all three. The patient underwent tests the physician said were unnecessary, and Medicare and the taxpayers behind it paid.

The importance of showing physicians what a panel contains was already familiar in laboratory practice. The 1997 Laboratory Medicine article Model Plan Helps Laboratories Fight Fraud described the Department of Health and Human Services Inspector General’s recommendations for requisition forms that document the medical necessity of each test and annual notices explaining the individual components of laboratory profiles. It also described physician acknowledgment of customized profiles and review of standing orders.

That history gives the Berkeley allegation its force. A panel name is shorthand for the tests inside it. If the laboratory changes those tests without the physician’s knowledge, the same familiar name can send a different set of services to billing. The complaint alleged precisely that break between the physician’s decision and the laboratory’s execution.

Why the Copay Waivers Mattered

The government alleged that Berkeley routinely waived copayments to induce certain patients to choose Berkeley, even though those patients were legally required to pay for part of their tests. Its settlement announcement treated that as a kickback to the patient as well as a way to win the physician’s business. The doctor’s payment and the patient’s waived bill served the same alleged commercial purpose: directing the testing to Berkeley.

The Justice Department explained the patient side in terms of unnecessary testing. A patient expected to pay part of a bill has a financial reason to question the test. According to the government, routinely removing that cost helped remove that reason to refuse. Combined with a payment to the referring doctor, the alleged arrangement put financial incentives on both sides of the referral.

The waiver allegation concerned patients who owed a share of their tests, while covered services paid under Medicare’s Clinical Laboratory Fee Schedule have no beneficiary cost sharing, as MedPAC explains clinical laboratory payment.

Quest’s Role in the Berkeley Case

Quest acquired Berkeley through Celera in 2011 and ultimately agreed to resolve the government’s case against Berkeley. The physician’s complaint also named Quest. The complaint’s allegations about Quest concerned how the company proposed to replace the practice’s drawing-fee income.

The physician alleged that Quest offered to provide a phlebotomist for all of the practice’s laboratory blood draws in exchange for continued Berkeley referrals. That included basic panels performed in the practice’s own office. The alleged benefit therefore reached beyond collecting specimens that would go to Berkeley: it covered work the practice needed for its own testing.

The complaint also alleged that Quest offered office rent as a way to replace lost draw-fee revenue, proposing to use the space for Berkeley’s 4myheart program. Another alleged proposal involved passing commercial-insurance drawing-fee payments through to the physicians. The whistleblower described these offers as alternate compensation for physicians losing the Berkeley fees.

That account belongs in the physician-office setting where laboratory relationships operate. National laboratories place staff inside medical practices, and specimens move from the office to the laboratory by courier. A laboratory can therefore affect both the practice’s testing business and the cost of running its collection work. In the Berkeley complaint, the alleged bargain attached that practical benefit to continued referrals.

In 2015, the government joined claims involving Berkeley while declining to join the claims against Quest. The later Quest settlement resolved the government’s complaint against Berkeley, and the Department of Justice said Quest had ended the conduct giving rise to that resolution.

Health Diagnostic Laboratory and Singulex had reached their own resolutions in April 2015: HDL agreed to pay $47 million and Singulex $1.5 million. Their alleged combination of referral fees, routine patient waivers and unnecessary testing explains why they appear alongside Berkeley. The shared mechanism was money to the referral source, a waived patient charge, and tests billed to the government.

Berkeley’s Separate Duplicate-Claim Matter

Berkeley’s separate $750,000 administrative settlement with the Department of Health and Human Services’ Office of Inspector General concerned duplicate claims for clinical laboratory services. That January 21, 2016 resolution was smaller than the later referral-fee settlement and addressed a different billing problem.

A Physician Brought the Case

The Berkeley settlement grew out of a physician’s qui tam case under the False Claims Act, through which a private person can bring claims on the government’s behalf and share in a recovery.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In a laboratory case, the valuable knowledge may sit with the physician who heard the offer, the employee who changed the panel, or the billing worker who saw what reached the payer. Berkeley’s complaint connects those views of the same business.

What Evidence Is Needed to Prove Fraud?

Proving a laboratory kickback case means connecting decisions and records held by different people. Our whistleblower experts work with you to connect what happened inside the practice to the laboratory’s testing and billing, and bring in laboratory fraud whistleblower lawyers for the case.

Berkeley’s complaint shows why those connections matter. A result report allegedly revealed the extra test, while a sales conversation explained the incentive to order it. The clinician, the laboratory and the payer each saw a different part of the transaction. If you know where an order stopped reflecting the physician’s decision, or what a practice was offered to keep sending specimens, we can build on that knowledge with you.

You Know What the Practice Was Offered

If you saw a referral payment dressed up as a service fee or a panel changed without the physician’s knowledge, talk to our whistleblower experts. We build the case with you and bring in laboratory fraud whistleblower lawyers who understand referral payments, test selection and Medicare billing. We stay beside you through the pursuit of the case, keeping what you saw inside the business at its center.