Labcorp has to pay $2.1 million to settle the DOJ’s lawsuit alleging overbilling by the Division of Protection

The Laboratory Corporation of America will pay $2.1 million to settle allegations that it overcharged the Defense Department for genetic testing involving children and fetuses, the Justice Department announced Monday.

A former Lab Corp Whistleblower-turned employee Donna Hecker-Gross sued the diagnostic testing company under the False Claims Act on behalf of the federal government in 2018. The civil complaint was filed in the US District Court for the District of Maryland.

Hecker-Gross will receive $357,000 as part of the settlement, according to the Justice Department.

Hecker-Gross’ allegations involved genetic testing performed under a contract LabCorp struck with the Department of Defense in 2012. Under the terms of the contract, LabCorp provided laboratory testing to Department of Defense military treatment facilities around the world, including testing paid for by genetic testing company GeneDx to perform.

Hecker-Gross alleged that LabCorp overcharged and double- or triple-billed DOD for genetic testing performed by GeneDx. Thirty-eight tests were overcharged by $210,959, including $113,525.50 for 21 tests billed between March 2016 and January 2017 alone, according to the lawsuit.

The lawsuit alleges that in 2017, employees at Walter Reed National Military Medical Center first questioned LabCorp about charges for a particular test that screens for genetic abnormalities in children and fetuses. The test costs between $5,000 and $10,000, the lawsuit says.

The test typically performs two or three analyzes on DNA samples from a child or fetus and one or both biological parents. Under the contract, LabCorp pays GeneDx for only one test and should only charge the DOD for a single test and a small fixed fee.

But Walter Reed’s staff noted that LabCorp billed the military facility for analysis of DNA samples from parents in addition to analysis of samples from children or fetuses, according to the lawsuit. LabCorp insisted the company had appropriately billed for the tests until Hecker-Gross sought confirmation of GeneDx’s billing practices, according to the lawsuit.

LabCorp then found that it had billed the DOD “two or three times what it paid for the test and breached the contract with the difference,” according to the lawsuit.

Even after that discovery, LabCorp conducted only a limited investigation that “did not reveal the magnitude and scope of the problem,” according to the lawsuit. The company only reviewed billing records for tests performed at Walter Reed between March 2016 and July 2017, according to the lawsuit, despite years of testing at military treatment facilities worldwide, according to the lawsuit.

LabCorp also did not fail to pay the department back for overbilling it uncovered, the lawsuit says. It only offered Walter Reed a credit for double- or triple-billed tests from January 2017, with a promise to fix the problem in the future.

Hecker-Gross repeatedly complained about LabCorp’s improper billing to her line managers until the company fired her on Aug. 8, 2017, the lawsuit states.

“She believed that LabCorp was responsible for repaying all the overcharges, not just for the short period of time they offered,” Peter Chatfield, the attorney representing Hecker-Gross, told CNBC. “She pressured her to pay for everything and she got fired for that. That made her come forward as a whistleblower.”

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

Scott Moreland, special agent in charge of the Army Criminal Investigation Division’s Major Procurement Fraud Field Office, said in the Justice Department’s press release that he was “very pleased” with the announcement of the settlement.

“This is a true testament to our continued commitment to working closely and seamlessly with our world-class law enforcement community to protect the financial interests of the US Army and the overall US government,” he said.

LabCorp also did not immediately respond to a request for comment. Shares of the Burlington, North Carolina-based company were relatively flat following the Justice Department’s announcement.

LabCorp is one of the nation’s largest providers of clinical laboratory services and has become best known for manufacturing and distributing Covid test kits during the pandemic.

The has faced a series of lawsuits related to its billing practices for more than two decades. Just last month, the company agreed to pay $19 million to resolve allegations that it violated the False Claims Act by making false claims on Medicare. In 1996, LabCorp agreed to pay $187 million for fraudulently charging the government for unnecessary testing of elderly patients.