Washington Drug-Testing Lab Will Pay $12M to Settle Federal Claim It Paid Kickbacks to Doctors

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A Tacoma-based drug-testing laboratory is part of a nearly $12 million federal settlement over an alleged kickback scheme involving urine tests and a physician-owned laboratory in Bellevue.

Cordant Health Solutions, a Denver-based toxicology testing firm with a facility in Tacoma, will pay $11.9 million to settle federal allegations that it funneled illegal kickbacks to Northwest Physicians Laboratories of Bellevue, the U.S. Attorney's Office in Seattle announced Tuesday.

Northwest Physicians Laboratories, which was owned by several physicians and other investors, treats patients for pain management and often needs urine tests to monitor patients' use of opioids and other drugs, federal officials said.

Because federal law prohibits physicians from using their own testing labs for their Medicare and other federally insured patients, NWPL was required to contract its testing work to other labs.

From January 1, 2013, to July 31, 2015, Cordant paid NWPL a large monthly fee to run those tests in Cordant's labs in Tacoma and in Denver, and then billed the federal government for the services, according to the settlement. According to federal documents, Cordant paid about $3.4 million in kickbacks.

Cordant, which is the operating name for Sterling Reference Laboratories, had a similar arrangement with a Tennessee-based facility, Genesis Marketing Group, according to the settlement.

Prosecutors said those payments violated the Anti-Kickback Statute and the False Claims Act.

"The government alleged that the Cordant organization paid millions of dollars to buy referrals at the expense of the nation's taxpayers," Steven Ryan, special agent in charge for the Department of Health and Human Services' Office of Inspector General, said in a statement Monday.

Under the settlement, Cordant doesn't admit to any wrongdoing. In a statement, it said the settlement "reflects the Company's desire to put the matter behind it and avoid the expense of further litigation."

The settlement, which was finalized last week, follows December's criminal indictments of NWPL and three NWPL executives for conspiracy to pay and solicit kickbacks in their dealings with several urine testing labs, the U.S. Attorney's office said.

The three executives -- Jae Lee and Kevin Puls, both of Bellevue, and Richard Reid of Astoria, Oregon -- are scheduled to stand trial in 2021.

In December's indictment, federal officials said NWPL received $450,000 in kickbacks from another laboratory, Vancouver-based Molecular Testing Labs, which then billed federal government more than $2 million in testing fees.

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