(LEGAFI) -- Quest Diagnostics, California’s biggest provider of medical lab testing, has agreed to pay $241 million to settle a whistleblower lawsuit that accused it of overcharging the state’s Medi-Cal program. The Quest Diagnostics settlement is the largest ever recovered in the history of California’s False Claims Act, which allows private citizens to sue on behalf of the state if they have evidence that a government contractor has defrauded a state agency.  

The 2005 whistleblower lawsuit accused Quest Diagnostics of not only overcharging patients of Medi-Cal but for also paying illegal kickbacks to doctors, hospitals and clinics that sent patients their way. Medi-Cal is a joint state-federal government program that provides medical care for the poor and disabled.

The whistleblower in the case, Chris Riedel -- CEO of competitor Hunter Laboratories -- alleged that the unfair business practices Quest and other companies were pushing his company out of the market. Riedel complained that it was a struggle to compete with Quest’s low rates for doctors, hospital and clinics, noting that they were much lower than what Medi-Cal was being charged. 

The California attorney general subsequently intervened and conducted a three-year investigation that found Quest made deals with medical providers to keep lab test prices low in exchange for referrals of Medi-Cal patients. 

The attorney general’s office announced similar cases are pending against four other defendants, including Laboratory Corporation of America, known as LabCorp, which is the second largest lab in California. That trial is set to begin early next year.

Under qui tam provisions of the False Claims Act, whistleblowers can receive between 15 – 25 percent of any money recovered if the federal government joins the case.