Archive for November, 2011

LabCorp accused of Medicare fraud, under Senate investigation

Source: The Times-News


November 11, 2011 5:43 PM

LabCorp is at the center of a Senate investigation to determine whether the Burlington-based laboratory testing company is one of several that might have cheated Medicare and Medicaid out of billions of dollars by rigging deals with insurance companies and doctors.

The allegations came this week as Senators Chuck Grassley, R-Iowa, of the Senate Judiciary Committee, and Senate Finance Committee Chairman Max Baucus, D-Mont., requested LabCorp, three major health insurance companies and one other lab company turn over copies of lab service agreements, contracts and other related documents.

In a news release, the senators expressed suspicion that LabCorp, Alamance County’s largest employer, and other medical companies are involved in “pull-through” schemes that guarantee insurance companies discounted lab rates in exchange for referrals. The inquiry questions whether federal health care programs Medicare and Medicaid were also overbilled by lab testing companies.

“A Medicaid fraud case in California that recently settled for $241 million involved allegations that a medical laboratory had overcharged the state’s insurance program as part of paying kickbacks to doctors and hospitals that referred patients to its labs,” the Senate Finance Committee’s release said.

Members of LabCorp’s media relations office didn’t return calls about the inquiry by press time Friday.

LabCorp, Quest Diagnostics Inc., Cigna, Aetna Inc. and UnitedHealth Group Inc. were asked to turn over company documents, including detailed financial and lab records.

A copy of the letter sent from Grassley and Baucus to LabCorp CEO David King requests pricing schedules comparing the price per test for LabCorp’s 10 most common lab tests, with the price per test charged to each of the largest managed care organizations (insurance companies) and the Medicare payment per test.

The letter also requests copies of any documents submitted in response to subpoenas by the Attorney General of the State of California in response to “pull-through” practices and LabCorp’s revenue totals — including Medicare revenue as a share of total revenue, Medicaid revenue as a share of total revenue, commercial payor revenue as a share of total revenue and “all other” revenue as a share of total revenue.

The Senate request also references a lawsuit filed in New York, which alleges that LabCorp violated the federal Anti-Kickback law and overcharged Medicare and Medicaid.

The Anti-Kickback law forbids health care companies from directly or indirectly remunerating other parties to encourage them to order any service or item federal health care programs might pay for. Businesses violating the law can’t participate in the Medicare program.

The lawsuit — filed in August by Andrew Baker of NPT Associates, a lab company, on behalf of the federal government — accuses LabCorp of making a deal with UnitedHealth Group to provide cut-rate testing in exchange for becoming its exclusive in-network lab partner. The suit claims LabCorp charged UnitedHealth Group “one-third to one-half of the prices paid by Medicare for the same services” and as little as one-sixth of prices paid by private payors.

“These commercially unreasonable prices constituted remuneration paid to UnitedHealthcare in order to induce UnitedHealthcare to arrange for or recommend that their in-network physicians send their Medicare-reimbursable tests to (LabCorp),” the suit says.

The suit claims a 2007 contract between LabCorp and UnitedHealth Group stipulated that LabCorp would pay the insurance company up to $200 million during the first three years of the 10-year contract to cover any extra costs incurred by the insurer under the deal.

“LabCorp believed that the contract with UnitedHealthcare, including the expected ‘pull-through’ would generate additional revenues of $3 billion and that without the pull-through the contract would result in substantial losses,” the suit claims.

The suit also claims that Medicare reimbursement made up about $1 billion of its $5 billion annual intake in 2010.

The suit requests a jury trial to determine whether LabCorp was involved in Medicare fraud and asks for an injunction against LabCorp filing any more false claims with the government. The suit also requests that LabCorp repay the United States government damages equal to three times the amount the government sustained as well as substantial civil penalties.

LabCorp must respond to the suit by Nov. 17.