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Corning Subsidiary To Pay $119 Million To Settle Medicare Fraud

October 10, 1996

BOSTON (AP) _ Another subsidiary of Corning Inc. has been caught in the Justice Department’s four-year investigation of fraudulent billing in the medical industry, agreeing Wednesday to pay $119 million in fines.

Damon Clinical Laboratories agreed to pay the criminal and civil fines and plead guilty to submitting millions of fraudulent claims for unnecessary blood tests in the years before it was bought by Corning in 1993.

If the plea agreement is accepted by a federal court, the fines would be among the largest the government ever has recovered in a health care fraud case. Several Corning subsidiaries have already agreed to multi-million dollar settlements of similar fraud investigations.

As in similar prosecutions elsewhere, the government said it was tipped to the fraud by whistleblowers, who will be rewarded with a portion of the money from the fines.

One whistleblower, a former sales representative, will receive $9 million. Other former salespeople at one of Damon’s competitors will receive $1.5 million.

Damon, in response to fee reductions Medicare adopted in 1988 and 1989, began grouping certain blood tests so that doctors would order more than were necessary, the charges said.

The company, formerly based in the Boston suburb of Needham, operated 13 laboratories around the country, then billed Medicare for all of the tests, together called a ``LabScan.″

``This is a case, pure and simple, of corporate greed run amok in the face of declining profits,″ said U.S. Attorney Donald K. Stern.

To keep doctors from complaining, Damon Clinical did not charge physicians for the unnecessary tests, and did not disclose that the lab intended to bill Medicare for them, prosecutors said.

Medicare is the government health insurance program for the elderly and disabled.

In the settlement, Damon also admitted submitting false claims to the Railroad Retirement Board, the CHAMPUS program, which serves military dependents, the Office of Personnel Management and 25 state Medicaid programs, which serve the poor.

Damon was purchased by Corning Clinical Laboratories, a division of Corning Inc. of Corning, N.Y. in 1993 that reported revenues of $1.6 billion in 1995.

Upon learning of Damon’s test bundling, Corning put a stop to the practice, prosecutors said.

``The activity couldn’t be stopped on a dime, but they quickly became aware of it and took steps to stop it,″ Stern said. ``They’ve been cooperative and very professional.″

Still, Roger Ackerman, chairman and chief executive of Corning, said he was ``very disappointed at the final amount″ of the settlement, given that the crimes occurred before Corning bought Damon.

Last month, a Teterboro, N.J., subsidiary of Corning Inc. agreed to pay $6.9 million in similar fines, and in February, the former Bioran Medical Laboratories of Cambridge, which was bought by Corning in 1994, agreed to pay $6.7 million.

Corning Inc. said Wednesday that its third-quarter earnings would include after-tax expenses of $115 million related to the fines. Corning’s shares fell $1.62 1/2 to $38.50 in trading on the New York Stock Exchange.

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