True Health Diagnostics will pay $37.1 million for Health Diagnostics Laboratory, making the year-old clinical diagnostics laboratory the largest provider of its kind in the country, according to the company.
True Health of Frisco, Texas, acquired Health Diagnostics of Richmond, Virginia, during a court-supervised bankruptcy auction on Sept. 11, according to the company.
The acquisition is a significant milestone for True Health Diagnostics to establish the company as the premier diabetes and cardiovascular advanced clinical diagnostics laboratory in the United States, according to True Health CEO Chris Grottenthaler.
The sale by Health Diagnostics ends a decline that began with a whistleblower-based federal investigation into claims the cardiovascular testing laboratory, along with Singulex Inc. of California, paid physicians kickbacks for patient referrals, according to the Department of Justice.
In April, the federal government announced settlements with both companies. HDL agreed to pay $47 million and Singulex, $1.5 million, according to the Justice Department.
Under the agreement, HDL admitted no wrongdoing.
HDL had quickly grown from startup in 2008 to a company with revenue of $375 million in 2013. Of that, $152 million came from Medicare, according to the Wall Street Journal.
However, the company's business began to unravel after the fraud investigation and subsequent resignation of CEO Tonya Mallory, according to reports.
"The confluence of these events" and "certain payer issues and changes in billing practices in certain states that affected the fees earned by HDL from each sample test" hit the company's business hard, HDL said in court papers, according to a report in the Wall Street Journal.
Health Diagnostics Laboratory filed for Chapter 11 bankruptcy for reorganization and offered itself for sale to pay off debts.
Like Healthcare Finance on Facebook
True Health agreed to pay $37.1 million to acquire substantially all of the business assets of HDL -- $5.1 million more than its initial bid, according to the Richmond Times-Dispatch.
The sale is expected to get final approval from U.S. Bankruptcy Court in a hearing scheduled for Sept. 16.
True Health Diagnostics specializes in bio-markers, enabling healthcare providers to more accurately diagnose, manage, and prevent the progression of cardiovascular diseases, genetic disorders, diabetes and other metabolic conditions, according to the company.
HDL provides tests designed to detect early signs of such conditions as heart disease and diabetes.
The acquisition give providers additional diagnostics to help them improve early detection, reduce risk and costs, and save lives, according to True Health.
True Health is expected to keep HDL's operations in Richmond.