Health Diagnostic Laboratory CEO resigns

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Tonya Mallory, president and CEO of Health Diagnostic Laboratory Inc. (HDL) in Richmond, resigned Sept. 23 from the fast-growing company that she helped found in 2009.

Citing personal family reasons,  Mallory said she was stepping down immediately from her executive positions. Her abrupt departure comes during a federal investigation into the company's payment practices to doctors.

Dr. Joe McConnell, a co-founder of the company and currently its chief laboratory officer, will succeed her in both roles. Mallory will continue to serve HDL as a member of its board of directors and as an adviser to McConnell.

In a letter to employees that the company released in a statement, Mallory wrote, “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’s departure comes while HDL is cooperating with a Department of Justice investigation into what is reportedly an industry-wide review of certain clinical laboratory practices.

In early September, HDL also was the subject of a front-page story in the Wall Street Journal. The story detailed how HDL collected millions of dollars from Medicare while using a model — paying some doctors a $20 fee per blood sample — now under review by federal investigators.

According to the WSJ story, $157 million, or 41 percent of HDL’s 2013 revenues of $383 million, came from Medicare.  It also said that HDL’s fee to doctors was higher than other labs.

HDL discontinued the practice after June 25 when the Office of the Inspector General for the Department of Health and Human Services Office issued a “special fraud alert,” warning that such remittances could present “a substantial risk of fraud and abuse under the anti-kickback statute.”

HDL responded with a strong rebuttal to the WSJ story,  issuing a statement and providing updated information on its website about its practices. It claimed that paying fees to physicians to help cover the costs of providing specimen handling and processing of blood samples for testing was a longstanding, industry-wide practice until the alert was issued, which the company considered to be new government guidance.

“HDL Inc. has been cooperating fully with the government investigation and has consistently complied with all applicable legal and regulatory requirements.  In the event that the DOJ investigation results in legal action against HDL Inc., we are prepared to defend our business practices vigorously,” the company’s statement said.

Mallory has been recognized with many awards for her entrepreneurship. In 2012, she received the 2012 Ernst & Young Entrepreneur of The Year award in Greater Washington. In December 2013, Virginia Business magazine named Mallory its Virginia Business Person of the Year.

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