The clinic said it would add $1 million to earlier payment for its lab testing "error issue."
The Mayo Clinic has agreed to pay $1.26 million to settle a federal lawsuit that accused it of billing the government for thousands of lab tests that were never performed.
The U.S. Department of Justice and four whistleblowers had accused the Rochester clinic of "knowingly" submitting false claims for nonexistent pathology tests over a period of eight years, from 1999 to 2007.
"Billing government health programs for services never rendered-- as Mayo allegedly did -- is totally unacceptable," said Lamont Pugh III, of the Office of Inspector General of Health and Human Services, in a statement released Thursday.
Mayo issued a statement calling the dispute a "billing error issue" and saying that it agreed to the settlement to avoid a prolonged legal process.
"Mayo has fully complied with the law and cooperated fully with the DOJ throughout the inquiry," said Karl Oestreich, a Mayo spokesman. He noted that Mayo voluntarily repaid $263,000 in 2007, when the allegations came to light.
Oestreich said Mayo believed that payment was both complete and "the right thing to do."
Under the settlement, Mayo will pay an additional $1 million within seven business days.
The case began five years ago when a Plymouth attorney, Dr. David Ketroser, who is also a physician, filed suit against Mayo under the False Claims Act, also known as the federal whistleblower law.
Ketroser said he was investigating possible malpractice cases on behalf of several Mayo patients when he discovered that the clinic had been routinely billing Medicare, Medicaid and other government health programs for two sets of pathology tests, while performing only one.
Although the lawsuit was filed in 2007, it was kept under seal until 2010, when the Justice Department joined the case as a plaintiff.
Under the settlement, Ketroser will split the whistleblower's share -- $230,000 -- with the families of three patients who joined him in the lawsuit.
Federal law allows whistle-blowers in such cases to get a percentage of any funds recovered by the government.
About 10,000 tests
The dispute centered on Mayo's surgical pathology lab and tests done primarily to detect or rule out cancer, said Phil Benson, one of Ketroser's attorneys.
According to the lawsuit, Mayo billed the government for both a frozen tissue slide, which is used for quicker analysis, and a permanent tissue slide -- but "never made or examined" the permanent ones. The complaint involved an estimated 10,000 tests, costing up to $100 apiece.
Benson, however, said that the case is not entirely over. He said Ketroser plans to appeal a judge's ruling that dismissed one of his complaints -- that Mayo failed to provide the written interpretive reports on an additional 100,000 lab tests, and should not have billed for them.
Mayo noted that the Department of Justice refused to join in those allegations.
Maura Lerner 612-673-7384