Quest Diagnostic, Inc.’s recent $241 million Medi-Cal settlement under the California False Claims Act suggests that (1) failing to offer Medi-Cal the lowest wholesale price offered to other purchasers of health care items and services may violate Medi-Cal rules; and (2) providing discounts to referral sources creates a risk of a Medi-Cal anti-kickback “swap” violation. Recent California activity underscores the need to review arrangements not only with respect to Medicare, but also Medi-Cal and private insurers.

On May 19, 2011, Quest Diagnostics, Inc., California’s leading provider of medical laboratory testing, agreed to a $241 million settlement with the State of California over alleged violations of California Government Code Section 12651 et seq. (the California False Claims Act). According to the California Attorney General’s Office, this settlement is the largest recovery in the history of the California False Claims Act.