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QUEST DIAGNOSTICS TO PAY $13.1 MILLION FOR SUBSIDIARY'S

WASHINGTON, DC -- Quest Diagnostics Incorporated has agreed to pay $13.1 million to settle allegations of health care fraud relating to billing practices at Nichols Institute, which Quest acquired in1994, the Justice Department announced today.

The settlement resolves allegations that certain clinical laboratories operated by Nichols defrauded Medicare, Medicaid, TRICARE, the Defense Department's health care program, and the Federal Employees Health Benefits Program (FEHBP) by routinely billing for laboratory tests that were not medically necessary. The government alleged that the overbilling practices, which began in 1989, ended shortly after Quest purchased Nichols in 1995.

The government's investigation of Nichols began as part of Operation LABSCAM, which targeted laboratory unbundling practices, the separate billing for groups of lab tests performed together in order to get a higher reimbursement. Collectively, the United States has recovered more than $850 million from the nation's largest clinical laboratories as a result of its LABSCAM and related investigations.

"This settlement again demonstrates the United States' commitment to protecting federal funds from fraud and abuse," said David W. Ogden, Assistant Attorney General the Department's Civil Division. "The federal health care system operates on the good faith and honesty of its providers, and we cannot tolerate misuse of the reimbursement system for financial gain."

The case was conducted jointly by the Civil Division of the Department of Justice and the United States Attorneys' offices in Portland, Houston and San Francisco, with the assistance of the FBI, the Office of Inspector General of the Department of Health and Human Services, the Defense Criminal Investigative Service, the Office of Personnel Management, and the Oregon State Attorney General's Office.

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