Health Diagnostic Laboratory seeking bidders

Published August 28, 2015 by Veronica Garabelli

What was once one of Richmond’s fastest-growing companies now is up for sale. 

Blood-testing company Health Diagnostic Laboratory (HDL) plans to receive bids from companies that want to buy it until Sept. 4 and then hold an auction Sept. 10. A hearing to gain approval of a federal bankruptcy court judge will be held Sept. 16.

HDL filed for Chapter 11 bankruptcy in June, saying its sales had greatly decreased since it came under fire last year for paying doctors a $20 processing and handling fee for each blood sample it received. HDL stopped the payments, which it described as an industry-wide practice, after federal officials said they might violate federal anti-kickback laws. HDL eventually settled a U.S. Department of Justice investigation by agreeing to pay $49.5 million but admitting no wrongdoing.

HDL once employed nearly 900 people. That number had fallen to 570 employees by mid-August. According to its bankruptcy  filing, the company’s net revenue fell from $375 million in 2013 to $320 million in 2014. It had more than 200 creditors and assets and liabilities each were listed at between $100 million to $500 million, the filing said.

In early August, the Justice Department sued Tonya Mallory, HDL’s co-founder and former CEO, accusing her of participating in an $80 million kickback scheme that caused the federal government to pay $500 million in false claims for tests conducted by HDL and two California-based laboratories, Berkeley Heartlab Inc. and Singulex Inc.

Besides Mallory, the suit names four other defendants: Alabama-based BlueWave Health Consultants Inc., HDL’s former outside sales contractor; BlueWave’s owners, Floyd Calhoun Dent III and Robert Bradford Johnson; and Berkeley Heartlab, where Mallory, Dent and Johnson once worked.

The suit says the defendants “knowingly and willfully offered and/or paid kickbacks, primarily in the form of $80 million dollars in improper process and handling fees to induce physicians to refer blood samples,” to the labs for large panels of tests “that included a significant number of medically unnecessary tests.”

Mallory declined to comment on the suit. She resigned from HDL in September 2014.