Medical Lab Firm Settles Fraud Suit

Quest Diagnostics Inc., the largest operator of U.S. medical testing labs, said Wednesday that it had agreed to pay the federal government $11.4 million to settle allegations that it billed Medicare for blood tests that weren’t necessary.

The settlement stemmed from a lawsuit brought by a former salesman at Unilab Corp., the Tarzana-based company that Quest bought last year for about $800 million.

Kevin Spear, who filed the suit in 1997, will receive 21% of the settlement.

The suit alleged that Unilab, Quest and its predecessors, MedPath Inc. and Damon Corp., committed fraud against Medicare, the government health plan for the elderly and the disabled, from 1990 to 1997.

“We strongly disagree with the government’s position,” Quest spokesman Gary Samuels said. “However, we are settling this case to put behind us an historical matter that involved industry practices that were common in the early to mid-1990s.”

The government claimed that test order forms didn’t give adequate choices and that doctors had to order tests that were later determined to be unnecessary, Samuels said.

“Today we include and for many years have included the type of choice on our test request forms that the government wants us to offer,” he said.

Shares of Teterboro, N.J.-based Quest rose $1.35 to $81.89 on the New York Stock Exchange.