LabCorp to Pay $2.1 Million in Settlement for Overbilling Department of Defense Mainly for Genetic Tests

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Laboratory Corporation of America, commonly known as LabCorp, will pay $2.1 million to the U.S. government to settle allegations that it overbilled the Department of Defense for genetic tests involving children and fetuses, the Department of Justice announced Monday.

Donna Hecker-Gross, a former LabCorp employee turned whistleblower, filed the lawsuit against the diagnostic testing company in 2018 on behalf of the federal government under the False Claims Act.

The civil lawsuit was lodged in the U.S. District Court for the District of Maryland.

As part of the settlement, Hecker-Gross will receive $357,000, according to the DOJ.

The allegations by Hecker-Gross pertained to genetic tests performed under a 2012 contract between LabCorp and the Defense Department.

This contract involved providing laboratory testing to DOD military treatment facilities globally, including tests conducted by genetic testing company GeneDx.

Hecker-Gross claimed that LabCorp overcharged and billed the DOD multiple times for genetic tests performed by GeneDx.

The lawsuit detailed $210,959 in overcharges on 38 tests, including $113,525.50 for 21 tests billed between March 2016 and January 2017 alone.

According to the lawsuit, staff at Walter Reed National Military Medical Center first questioned LabCorp in 2017 about charges for a specific test screening for genetic abnormalities in children and fetuses, costing between $5,000 and $10,000.

This test typically runs two or three analyses on DNA samples from a child or fetus and one or both biological parents. LabCorp was supposed to pay GeneDx for one test and charge the DOD for a single test and a small fixed fee.

However, the lawsuit alleged that Walter Reed staff noticed LabCorp charging for analyses on parental DNA samples in addition to child or fetus samples.

LabCorp insisted its billing was appropriate until Hecker-Gross sought confirmation about GeneDx’s billing practices, revealing that LabCorp had been overcharging the DOD by billing two or three times the test cost, pocketing the difference in violation of its contract.

Even after discovering the issue, LabCorp conducted a limited investigation that failed to uncover the problem’s full scope, only reviewing billing records for tests at Walter Reed between March 2016 and July 2017, despite performing tests at military facilities worldwide for years.

LabCorp also did not repay the department for the overbillings it identified, instead offering Walter Reed a credit for overbilled tests dating back to January 2017, with a promise to correct the issue moving forward.

LabCorp (Photo: Dreamstime)

Hecker-Gross repeatedly raised concerns about LabCorp’s billing practices with her supervisors until she was fired on August 8, 2017.

“She believed LabCorp was responsible for repaying all the overcharges, not just the short period of time that they offered to do,” Peter Chatfield, Hecker-Gross’s attorney, told.

“She pressed them to pay for all of it and she got fired for that. That’s what made her come forward as a whistleblower.”

Chatfield noted that Hecker-Gross is “pleased” with the settlement.

Scott Moreland, special agent in charge of the Army Criminal Investigation Division Major Procurement Fraud Field Office, expressed satisfaction with the settlement in the Justice Department press release.

“This is a true testament to our continued commitment to work closely and seamlessly with our outstanding fellow law enforcement agencies to protect the financial interests of the United States Army and the United States Government as a whole,” he said.

LabCorp stated that the company does not comment on litigation.

“It is important to note that this settlement is not an admission of wrongdoing, and Labcorp vigorously disputed the allegations in this case,” the company said.

“Labcorp entered into the settlement to avoid the costs and burdens of litigation.”

Following the DOJ announcement, LabCorp shares remained relatively flat.

LabCorp, based in Burlington, North Carolina, is one of the nation’s largest providers of clinical laboratory services and became well-known during the pandemic for manufacturing and distributing Covid testing kits.

The company has faced numerous lawsuits over its billing practices for more than two decades. Just last month, LabCorp agreed to pay $19 million to resolve allegations that it violated the False Claims Act by submitting false claims to Medicare.

In 1996, LabCorp agreed to pay $187 million for fraudulently billing the government for unnecessary tests on elderly patients.

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