A settlement has been reached in a whistleblower class action lawsuit brought against Kan-Di-Ki LLC, formerly known as Kan-Di-Ki Inc., doing business as Diagnostic Laboratories and Radiology (Diagnostic Labs). They are accused of paying kickbacks for referral of mobile lab and radiology services subsequently billed to Medicare and Medi-Cal (the state of California’s Medicaid program).
The whistleblowers in this case will receive $3,755,500 as their share of the federal government’s recovery.
The initial case, filed by two whistleblowers, was filed in 2010. The government's alleged that Diagnostic Labs was charging Skilled Nursing Facilities (SNFs) in California discounted rates for inpatient services paid by Medicare in exchange for the facilities’ referral of outpatient business to Diagnostic Labs. For inpatient services, Medicare pays a fixed rate based on the patient’s diagnosis, regardless of specific services provided. For outpatients, Medicare pays for each service separately. Diagnostic Labs’ scheme enabled the SNFs to maximize profit earned for providing inpatient services by decreasing SNFs’ costs of providing these services. It also allegedly allowed Diagnostic Labs to obtain a steady stream of lucrative outpatient referrals that it could directly bill to Medicare and Medi-Cal. The provision of inducements, including discounted rates, to generate referrals is prohibited by federal and state law.
