Dallas-based Magnolia Diagnostics, its owners and several investors will pay $24 million to resolve allegations involving medically unnecessary testing performed on seniors during the COVID-19 pandemic.
According to the Justice Department, Magnolia and owners John Bains and Kelly Bains agreed to pay $19.2 million to settle False Claims Act allegations. Investors will pay another $4.8 million over distributions they received from the laboratory.
Federal officials alleged Magnolia required senior living communities seeking COVID-19 testing to also obtain expensive respiratory pathogen panels. The laboratory allegedly used prepopulated forms and provider signatures as standing orders covering entire facilities without individual clinical assessments.
Magnolia allegedly continued performing the panels even after communities questioned their medical necessity or requested COVID-19-only testing. John Bains was also accused of threatening to withhold COVID-19 testing and altering signed requisition forms to broaden their apparent authorization.
The laboratory allegedly froze thousands of specimens for weeks or months before testing them, producing results too late to guide treatment or infection-control decisions.
The case provides a glimpse into how qui tam enforcement under the Trump administration has evolved, specifically in the Northern District of Texas.
This settlement also offers a roadmap for Find Corporate Waste projects: follow the money beyond the entity that submitted the claims to the owners, affiliates and investors who ultimately received the proceeds.
Public records showing where taxpayer funds flowed may expose recovery targets beyond those which can be indexed from public records, even when the recipients never billed the government directly.
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