Lab company settles fraud case for $256 million

Millennium Health, a San Diegobased medical lab company, will pay the government $256 million to settle allegations it billed the government for medically unnecessary urine, drug and genetic testing and gave free tests to

physicians in exchange for referrals.

The U.S. Justice Department’s announcement of the settlement last week came after the company had reached agreement with its equity holders, the CMS, and Justice on terms of a plan to financially restructure the company. Millennium CEO Brock Hardaway said the agreement would help the firm reduce its debt and pay the settlement. The agreement allows Millennium to restructure through a Chapter 11 bankruptcy proceeding or outside of court.

The government alleged Millennium prompted doctors to order excessive numbers of urine drug tests without individualized assessments of patients. It claimed Millennium gave free urine drug-testing cups to doctors on the condition that the physicians returned the urine to Millennium for hundreds of dollars of additional testing, in violation of the Stark law and the Anti-Kickback Law. Millennium also submitted false claims to federal programs for genetic testing performed without individualized assessments of need, the government alleged.

Clinton Mikel, a partner with Health Law Partners, called the settlement one of the larger ones he’s seen beyond those with pharmaceutical and medical-device companies. “It will send a message certainly,” Mikel said. “The government is cracking down on labs.”

Another lab company, Health Diagnostic Laboratory, recently filed for bankruptcy after agreeing to pay nearly $50 million to resolve allegations that it improperly paid doctors for blood samples. The firm denied wrongdoing.