HDL CEO Resigns Post as Lab Faces Federal Investigation

Tonya Mallory, the president and chief executive officer of Richmond, Va.-based Health Diagnostic Laboratory (HDL), resigned Sept. 23. Although HDL was the subject of a recent Wall Street Journal article and is under investigation by the federal government, the company says that Mallory’s resignation is unrelated and is for personal family reasons. Joseph McConnell, M.D., co-founder of the company and its chief laboratory officer, will take over as president and CEO. Mallory will continue to serve as a company board member and an adviser to McConnell. Mallory said she is leaving HDL to help her brother run a new business. In a letter to employees posted on the company’s Web site, Mallory wrote, “Many of you know that my brother lost his wife a little over two years ago. He has recently started a new business close to home to avoid what was a two-hour round trip commute each day. The new venture will permit him to keep his young kids in their supportive community. I am leaving HDL, Inc. to help him get his new company off the ground in an effort that we hope will give his family financial security in addition to allowing him more time with his children.” Mallory’s resignation comes as HDL cooperates with an ongoing U.S. Department of Justice investigation into its reimbursement practices. The government is investigating a practice by HDL and some other laboratories of paying fees to health care providers to collect patients’ blood samples and send them to the labs for testing. Regulators have warned that such fees could amount to an illegal financial inducement. HDL in late June discontinued its “process and handling (P&H) payments” following a special fraud alert issued June 25 by the Department of Health and Human Services Office of Inspector General. That alert warned clinical laboratories that providing remuneration to physicians to collect, process, and package patient specimens could violate the anti-kickback law. HDL said the fraud alert was the first clear guidance it received from regulators about P&H payments (NIR, July 24, 2014, p. 1) An article on Forbes.com recently suggested that the federal probe may go beyond investigating the practice of paying fees to health care providers and also may look at other billing practices, such as deferring or covering patient copays that are not covered by insurance. HDL also said that it eliminated 30 jobs in August, which is less than 3.5 percent of its total workforce. The company previously reported having about 860 employees. Takeaway: Health Diagnostic Laboratory is under the gun as federal authorities investigate billing practices and its president and chief executive officer announces her resignation.