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Burbank Company To Pay $17.5M Amid Allegations That It Submitted False Claims To Medicare, Medi-Cal

LOS ANGELES ( — A company that provides diagnostic services to Southern California nursing homes has agreed to pay millions over allegations that it submitted false claims to Medicare and Medi-Cal, it was reported Friday.

The United States will receive $12.95 million of the settlement while California will get $4.55 million from Kan-Di-Ki, LLC, also known as Diagnostic Laboratories and Radiology, the Department of Justice said in a statement.

The company, which has its headquarters in Burbank, offers skilled nursing facilities (SNFs) lab and X-ray services.

"Diagnostic Labs allegedly charged SNFs below cost rates for Medicare Part A business, in exchange for the facilities' provision of Medicare Part B and Medi-Cal business back to Diagnostic Labs," the statement said.

The alleged kickback scheme is alleged to have violated both federal and state laws.

"When medical facility owners illegally offer discounts to customers to generate business, it results in inflated claims to government health care programs and increases costs for all taxpayers," said Glenn R. Ferry, Special Agent in Charge for the Los Angeles Region of the Department of Health and Human Services' Office of Inspector General. "This $17.5 million settlement demonstrates OIG's ongoing commitment to safeguarding federal health care programs and taxpayer dollars against all types of fraudulent activities."

In 2010, two former employees filed the lawsuit against Diagnostic Labs under the "whistleblower" provisions of the federal and state False Claims Act.

The statement said that both employees are expected to collectively receive $3,755,500 from the federal recovery. It's not yet known how much they'll receive from the state's amount.

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