HDL CEO Tonya Mallory Steps Down

Little more than five years after building Health Diagnostic Laboratory Inc. into a $400 million-a-year powerhouse, Chief Executive Officer and co-founder Tonya Mallory has stepped down. Mallory announced her resignation on Sept. 23. A letter she sent to her employees included a twist on the “spending more time with my family” theme often cited by departing executives. “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 wrote. Mallory is being replaced by Joe McConnell, another HDL co-founder who was the company’s chief laboratory officer. Mallory’s departure could be said to be coming at a high point for HDL, which went from virtually no sales in 2009 to $420 million just three years later. But it also came close on the heels of intensifying scrutiny of HDL’s business practices, including payments to physicians that could be perceived as kickbacks. Laboratory Industry Report reported late last year that the company may have been paying physicians as much as $30 per test remitted. It also cited sources saying the company was under investigation by either state or federal regulators, although that could not be confirmed. Mallory denied that HDL was paying physicians directly, saying only that they were paid the $3 Medicare allows for a venipuncture, as well as other phlebotomy services “like all other labs in the country,” she said. As for an investigation, Mallory said at the time that “as a policy matter, our company does not confirm or deny or comment upon any pending or threatened legal proceedings or investigations.” In July, the Richmond Times-Dispatch confirmed that HDL was the target of a federal investigation. And a front page story in the Wall Street Journal last month confirmed that physicians were getting paid by the lab as much as $20 per test, $3 for the venipuncture and an additional $17 for packaging and handling fees, which HDL believed fell under the safe harbor provision of the anti-kickback statute. Some medical practices were receiving as much as $4,000 a week as a result, according to the story. However, the newspaper also reported that HDL also decided to stop the payments last June after the U.S. Department of Health and Human Services issued an advisory saying they could violate the anti-kickback statute. Although the story indicated HDL was not the only lab being investigated, the company issued a strong response on Sept. 8, the day the story was published, insisting that the reporting “paints a highly distorted picture of our company and our work. In particular, HDL . . . vehemently disagrees with any insinuation that payments to doctors were an inducement, or that the payments were illegal or known to violate any law.” Mallory stepped down little more than two weeks after that statement was issued. Takeaway: Health Diagnostic Laboratory co-founder Tonya Mallory has stepped down as scrutiny on the company she swiftly built into a huge operation has intensified.