Health Diagnostic Laboratory and Singulex: A Blood Test With a Sales Commission Attached

In the Health Diagnostic Laboratory and Singulex False Claims Act settlements, HDL agreed to pay $47 million and Singulex $1.5 million over alleged referral kickbacks and medically unnecessary testing. The government alleged that the laboratories paid physicians to send them blood tests, then billed federal health care programs for unnecessary tests. If you worked with the referral accounts, specimen payments or sales commissions, you may recognize the business behind that description. The payment for bringing in the test can explain as much as the test itself.

How the Laboratory Referral Payments Worked

The government alleged that HDL, Singulex and Berkeley HeartLab paid physicians processing and handling fees of $10 to $17 per referral and routinely waived patients’ copays and deductibles. Its settlement announcement connected those inducements to physician referrals for medically unnecessary blood tests billed to federal programs, including Medicare.

HDL provided blood testing for cardiovascular disease and diabetes. Singulex also tested for cardiovascular disease. The court’s account of their business model describes physicians collecting blood, preserving the samples and shipping them to the laboratories. The individual defendants said the processing and handling payment covered that work.

That explanation put the purpose of the payment at the center of the case. There was a service to describe, a fee to record and a physician choosing where to send the sample. The government’s allegation was that the money bought the referral. Its account also connected the routine copay and deductible waivers to the same effort to bring in testing business.

The patient depended on the physician’s medical judgment. The laboratory depended on the physician’s orders. The alleged kickback put the laboratory’s sales interest inside that medical decision.

BlueWave Earned More When It Sold More Tests

BlueWave Healthcare Consultants marketed the laboratories’ tests under contracts that paid a base fee and commissions tied to the testing business it generated. Its HDL contract was exclusive. BlueWave then engaged independent salespeople whose commissions also depended on sales volume.

The court described money moving at several points in the operation: the laboratory paid the referring physician, the laboratory paid BlueWave, and BlueWave paid the people selling the tests. An employee handling specimen payments and a contractor handling sales could therefore see different parts of the same business.

For scale, between 2010 and June 2014, Medicare and TRICARE paid HDL approximately $538 million, and HDL paid BlueWave approximately $220 million. We see a corporate settlement dwarfed by the federal revenue flowing through HDL.

We see the problem in what the contracts rewarded: bringing in more tests paid the sales operation more money. At the later civil trial, the government challenged those volume-based commissions as kickbacks, and the jury agreed. The commission arrangements became a basis for the individual defendants’ liability under the False Claims Act.

Three Whistleblower Actions, Different Defendants

Three related whistleblower actions led to the corporate settlements announced on April 9, 2015. Private citizens brought the cases under the False Claims Act’s qui tam provisions, which allow a whistleblower to sue on the government’s behalf.

The Justice Department joined the cases in part. It took over similar allegations against Berkeley HeartLab, BlueWave, BlueWave’s owners and HDL’s former chief executive. Two of the whistleblower suits also alleged liability against Singulex’s former chief executive and Quest Diagnostics, Berkeley’s parent. The government declined to take over those allegations.

What HDL and Singulex Agreed to Settle

The companies’ settlements resolved the referral-payment and unnecessary-testing allegations. The government also alleged that HDL and Singulex conspired with BlueWave to offer the inducements on their behalf.

HDL and Singulex also agreed to separate corporate integrity agreements with the Department of Health and Human Services’ Office of Inspector General. The Justice Department described procedures and reviews intended to prevent and promptly detect conduct like that alleged in the cases.

The Later Civil Judgments Applied to Individuals

The 2018 civil judgments imposed liability on HDL’s former chief executive and the two BlueWave owners for causing false claims through the laboratory business.

The jury’s findings covered 35,074 HDL claims worth $16,601,591 and 3,813 Singulex claims worth $467,935. The court tripled damages, accounted for settlement credits and imposed civil penalties.

The judgment against the former HDL chief executive and both BlueWave owners was $111,109,655, shared among those defendants. An additional $3,039,007 applied to the two BlueWave owners.

The Commission Evidence Reached Beyond the Physician

The court’s analysis focused on the commissions paid to independent sales contractors. The defendants argued that BlueWave’s sales representatives did not directly refer patients for testing. The court rejected that argument because the Anti-Kickback Statute also reaches payments for recommending health care services to physicians.

For a laboratory insider, that makes the sales contract consequential. The person paid to generate orders may sit outside the laboratory and outside the referring practice. Here, the government’s evidence connected that sales work to the tests and the resulting federal claims.

Warnings Reached the Board

The government’s trial evidence included repeated warnings about the commission arrangements. HDL’s board received a written warning that its BlueWave contract posed a high risk of violating the Anti-Kickback Statute, together with a recommendation to move to an employee sales force. An employee overseeing compliance also testified that he discussed the concerns with board members, including the chief executive.

The defendants pointed to the involvement of legal advisers in drafting contracts and to outside audits. The court found that those explanations did not overcome the evidence of repeated warnings. We see little reassurance in an audit whose own terms said it was not designed to disclose illegal acts. Some defense.

The warnings reached the people making the decisions. That is the part an insider may be able to explain: who raised the concern, who received it and why the payment arrangement continued.

What Made a Blood Test Medically Necessary?

A patient’s illness, injury, symptoms or complaint, together with a physician’s order, supplies the clinical basis for covered diagnostic laboratory services. The Medicare Claims Processing Manual describes that relationship.

In the HDL and Singulex settlements, the government alleged that financial inducements led physicians to order medically unnecessary tests. The clinical question runs through what the patient needed and what the physician ordered. The financial question runs through what the practice and the sales operation earned from that order.

A separate whistleblower complaint against Millennium Laboratories shows how a sales pitch could collapse those questions into one. The complaint attributes this sales pitch to one of the company’s agents:

The alleged pitch made the availability of payment the reason for ordering the test. We would expect the patient to be the reason. That is why the words used to sell a test can matter alongside the order form and the bill.

The Evidence Connects the Payment to the Order

Useful laboratory whistleblower evidence connects the compensation, the referral, the patient, the service and the government claim. In this case, the processing fees and sales commissions show why that connection may run through more than one company’s records.

A payment ledger can identify the practice or salesperson receiving money. The contract explains what that payment rewarded. The referral and specimen records connect the account to the patient’s test, while the order and clinical records explain why the test was requested. The billing record completes the connection to the federal program.

The testimony and internal warnings in the civil trial supplied another part of the story: what the decision-makers understood about the arrangements. Someone who worked in laboratory sales, practice administration, billing or compliance may know how those records fit together.

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

You Know What the Referral Payment Bought

If you have seen laboratory payments shape the tests a practice orders, speak to one of our whistleblower experts about what the referral payment bought. We work with you to build your strongest laboratory whistleblower case and bring in healthcare fraud whistleblower lawyers who understand laboratory marketing, referral payments and federal billing. You have a partner from that first conversation through the decisions that follow.