Closely Scrutinized Health Diagnostic Laboratory Cuts 15 Percent of Its Workforce

Exactly a year ago, Health Diagnostic Laboratory (HDL) founder and Chief Executive Officer Tonya Mallory talked at length to G2 Intelligence about the remarkable success of her company, which grew from virtually no sales in 2009 to $420 million in three years. Mallory also discussed helping employees with issues such as fitness and childcare and helping to fund their own startup businesses. Ten months later, Mallory stepped down, ostensibly to help her brother with a startup of his own. However, her exit came under a cloud of allegations of illegal kickbacks paid to physicians in the guise of specimen collection fees, a federal investigation into the lab’s payment practices, and more recently, a fraud lawsuit filed against the Virginia-based company by one of the nation’s largest health insurers. Now, the employees Mallory had spoken of in glowing terms are being shown the door themselves. HDL confirmed it has laid off 132 employees this month, representing about 15 percent of its total workforce. The job cuts were throughout the organization and did not impact a specific department or operation, according to spokesperson Jeff Kelley. HDL Chief Executive Officer Joe McConnell—the company’s former chief laboratory officer who replaced Mallory—cast the job cuts as part of a plan to refocus on the company’s strengths. “HDL . . . has made the strategic decision to return to its core mission: Fighting cardiovascular disease and diabetes with innovative cutting-edge, advanced laboratory testing that can lead to earlier diagnosis and treatment,” McConnell said in a statement. “In recent years, HDL had become involved in a number of noncore business interests that required significant time, attention and resources. The need to reallocate our resources to return to our core mission is what led to the reduction in force.” Kelley declined to say what noncore resources that company had been focusing on. The company no doubt has some stormy times ahead. Mallory indicated last year that its 2013 revenues were flat compared to 2012, suggesting the company abruptly hit a wall after a relatively brief period of dramatically explosive growth. The federal investigation and the probe are likely to impact its bottom line even further. And in late October, the Connecticut-based insurer Cigna sued HDL for $84 million. It claims in its suit that a combination of the large panels HDL offers to providers, along with its systematic forgiveness of patient copayments, deductibles, and other charges, allows it to engage in unnecessary testing and to bill the insurer excessively. But McConnell indicated he expects the layoffs will help spur a turnaround. “We deeply regret the business necessity that made this reduction in force necessary and we are all mindful that this will pose difficulties and challenges for our former colleagues and their families. At the same time, these necessary changes provide us with the opportunity to re-energize our company,” he said. Takeaway: Health Diagnostic Laboratory is facing numerous obstacles in continuing on the path of the dramatic growth it enjoyed during the first four years of its operation.