by Bernice Yeung for California Watch

TUSCON, Ariz. -- Southern California's largest clinical laboratory and radiology company serving nursing homes faces fraud allegations, adding to thegrowing number of False Claims Act lawsuits filed against the health care industry nationwide.

According to court documents, Burbank-based Diagnostic Labs, which offers medical lab tests and radiology services, provideddeep discounts to skilled nursing facilities in exchange for business that can be charged to taxpayer-funded Medicare and Medi-Cal.

"This is an illegal kickback scheme, no more legal than if Diagnostic Labs, rather than providing below-cost discounts, had instead simply handed the SNFs (skilled nursing facilities) an envelope of cash," the lawsuit alleges.

The case against Diagnostic Labs was brought under the False Claims Act and a parallel state statute, both ofwhich makeit illegal to defraud the government. These laws are increasingly invoked in the health care arena, legal observers said.

"Since the start of the Obama administration, there has been a pretty pronounced and noticeable uptick in government investigations in which the False Claims Act is the spearhead of the investigation," said Zack Buck, a visiting assistant professor at Seton Hall Law School who teaches a class on health care fraud and abuse. "The government has put a lot of money into fraud investigations and prosecutions and as a result, the amount of settlements have grown and continues to increase."

According to a statement made recently by Stuart F. Delery, acting assistant attorney general of the civil division of the U.S. Department of Justice,morethan 630 whistleblowerlawsuitswere filed with the Department of Justice in 2011 more than any other year and an increase of nearly 50 percent since 2009. More than two-thirds of these cases are related toallegations offraud relatedto government health care programs.

These lawsuits have produced significantfinancial results for the federal government.

In 2011, the federal government collected $2.4 billion in settlements and judgments from health care cases more than fromany other industry, according to an analysis by law firm Gibson, Dunn & Crutcher. Over the past three years, the government has collected $6.6 billion in relation to health care fraud.

A majority of these funds are returned to the relevant federal or state-funded health programs.

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Radiology company accused of health care fraud