Zombie Lab Company Sics Bill Collectors On Doctors Who Took Kickbacks

–The liquidating trustee for HDL Lab is seeking to reclaim kickbacks paid to doctors who ordered the company’s tests.

Many doctors who ordered tests in the past from Health Diagnostic Laboratory (HDL) are now opening some unexpected and very unwelcome letters.

HDL was the billion dollar lab company with a meteoric rise and an even more spectacular fall. A key ingredient to the company’s success was the use of kickbacks– in the form of excessive process and handling fees– to doctors who ordered the company’s expensive panel of cardiovascular and metabolic risk factor tests. In 2015 the company declared bankruptcy and went out of business after being sued by the government and private insurance companies for fraud involving these kickbacks.

Now doctors who accepted kickbacks from the company are receiving a letter [PDF] demanding repayment of the kickbacks. The letter comes from a law firm, Wolcott Rivers Gates, that has been retained by HDL’s Liquidating Trustee, Richard Arrowsmith, to recover the illegal payments on behalf of the company’s creditors. The letter cites a US Office of Inspector General “Special Fraud Alert” that “specifically recognized that blood-specimen collection, processing and packaging arrangements may implicate the AKS [Anti-Kickback Statute] ‘if even one purpose of the payment is to induce or reward referrals’.” The letter offers physicians a settlement representing 90% of the “Fraudulent Transfers received” “in an effort to quickly and amicably resolve the claim against Recipient without the need for time-consuming and expensive litigation.”

Physicians who don’t pay may be subject to civil action in the Bankruptcy Court, the letter warns. “This settlement proposal is an opportunity to resolve this matter at a discount and without having to incur your own legal costs,” the letter states.

One knowledgeable lab industry source told me that “thousands” of doctors have now received these letters. Most doctors are being asked to pay about $10,000-$30,000, but there is a large group that is being asked to pay back several hundred thousand dollars apiece. These were the “whales,” as HDL called them according to my source, who participated in the company’s competition among doctors to collect increasing number of lab samples from month to month and year to year.

The new move to collect from doctors follows a similar move late last year when the HDL trustee authorized a collections agency to send threatening letters to patients, most of whom were told by their doctor, and assured by the company, that they would never be billed for the tests. The letters provoked considerable anxiety and concern, particularly since many of the patients were unable to afford the bills, often for several thousand dollars.

Many lab industry observers are keen to see if this new chapter in the HDL saga will help to finally put a damper on the newer schemes that have emerged in the specialty laboratory world in the wake of HDL’s collapse. These schemes involve phlebotomy services, physician-0wned labs, and management service organizations (MSOs) to circumvent antikickback laws.

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  1. Gracie Harris says

    Karma is a beautiful thing.

  2. Walter Shelton says

    Thanks Larry. Our primary care physician had no sympathy for us when the bill collectors were on our tail. I take great pleasure in knowing that the ordering doctor gets her turn in the barrel.
    You are our lifeline for fair treatment and informed decision making. Thanks again for staying on top of the Zombie Lab issue.

    Best Regards,

    Walt Shelton

  3. Larry, I did some expert witness work for the New Jersey Attorney General, and what I learned is that there are physicians who are driven by greed rather than the ability to diagnose, treat and comfort their patients.The vast number of doctors and members of their staffs who were in collusion with Zombie Labs confirms my suspicion that the situation has deteriorated.
    Stories like this are an embarrassment to every honest, altruistic physician that practices for the right reasons.
    Fear of retribution by governmental oversight is not a deterrent, since the criminals are allowed to keep 90% of their ill-gotten lucre.
    I am deeply offended.

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