LabCorp (Laboratory Corporation of America Holdings) has been hit with a whistle-blower federal lawsuit alleging the laboratory services company defrauded Virginia’s Medicaid program by billing it at much higher rates than other customers, according to a recently unsealed complaint filed in federal court on September 9th.
Relators Hunter Laboratories LLC and its founder Chris Riedel contend that LabCorp made false claims for payment of Medicaid-covered laboratory tests by claiming that the fees they charged to Medicaid were no higher that the maximum allowed under Virginia regulations.
As a participating Medicaid provider, LabCorp is required to provide services to Medicaid patients at their most favorable rates, but they repeatedly defrauded Medicaid by billing the program for fees well in excess of their lowest costs, according to the complaint.
For example, LabCorp, the Relators say, provided volume-based discounts to members of the Premier Inc. purchasing collective, resulting in discounted fees that are way below what LabCorp has billed to Medicaid.
“This suit calls defendants to answer for defrauding Virginia’s taxpayers and compromising the welfare of Medicaid beneficiaries,” the Relators said.
Additionally, for some tests, rates for private customers have been discounted well below costs, but LabCorp nevertheless has an interest in keeping those rates low in order to prevent any other laboratories from gaining a piece of the market, according to the complaint.
“In other words, by using the publicly funded Medicaid program to subsidize private discounts, the larger and better established laboratories have cornered much of the market for themselves,” the complaint said.
The suit alleges violations of the Virginia Fraud Against Taxpayers Act. The Relators are seeking civil penalties and treble damages.
Representatives for LabCorp did not immediately respond to requests for comment on Wednesday.
Riedel and Hunter have won big in cases against LabCorp before. In 2011, LabCorp agreed to pay $49.5 million to settle a California lawsuit alleging it illegally overcharged Medi-Cal for laboratory tests and gave kickbacks in exchange for Medi-Cal referrals.
The suit originated with a qui tam complaint also filed in 2005 Riedel and Hunter alleging that LabCorp and others had systematically overcharged Medi-Cal over a 15-year period. In March 2009, then-California Attorney General Jerry Brown announced that the state had intervened in the suit.
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Andrew Baker, the former CEO of Unilab and current CEO of Huntington Life Sciences, has written an article for The Huffington Post in which he asks the federal government to stop LabCorp and another lab company from continuing to scam the Medicare and Medicaid programs of billions of dollars.
Mr. Baker had previously filed a whistleblower lawsuit against LabCorp in 2007 alleging that LabCorp violated the federal False Claims Act and Anti-Kickback Statutes. Those case is still in court.
In the article he estimates that LabCorp and the other lab have cost taxpayers $15 billion since 1996 in the form of false claims stemming from illegal kickbacks to Aetna, Cigna, United Healthcare and Blue Cross.
The claims are that Labcorp is breaking federal laws by deeply discounting lab fees to private insurance companies, sometimes charging them for laboratory tests even below their costs. In exchange, the insurance companies pressure doctors in their networks to send all of their patients’ lab work, including Medicare and Medicaid patients, to LabCorp.
He claims that Labcorp funds the kickbacks, in the form of lower lab fees for private insurance companies, by charging Medicare and Medicaid patients the highest possible fee instead of offering them the lowest charged price, and by pressuring doctors to send all of their lab work exclusively to Labcorp. Other categories in Medicaid and Medicare require that the government be charged the lowest charged fees by a provider.
Mr. Baker also mentions LabCorp’s $50 million settlement with the state of California for overcharging California’s Medicaid program and for providing kickbacks to physicians for referrals.
As a result of his article, pressure is increasing for government intervention in laboratory pricing for government programs. He advocates for clarification of the intent of current federal law that would require laboratories to charge Medicare and Medicaid their “best price”, just as California has already done. This would require that Laboratory Corporation of America can only charge Medicare and Medicaid the lowest price they charge private insurance companies or HMOs. Which in turn means a massive hit to Labcorp’s bottom line. It would also open up the market to smaller labs which don’t have the multi-tier, lower than cost pricing intended to put them out of business. Such a hit to Labcorp’s financials would tumble their stock (NYSE: LH).
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LabCorp has been sued and is under Federal investigation for Medicaid and Medicare fraud. In addition, it’s under scrutiny by the U.S. Senate Finance Committee who is investigating Medicare and Medicaid fraud. Laboratory Corporation of America was ordered to hand over its financial records to the U.S. Senate.
A lawsuit was filed on behalf of the Federal government that claims LabCorp operated a “pull-through” scheme to force doctors covered by insurers to use LabCorp for all medical testing viagra uk buy. The suit claims LabCorp (NYSE: LH) offered illegal discounts to doctors in exchange for referring all their patients who need laboratory testing to the company. According to federal anti-kickback laws, it’s illegal for health care companies to directly or indirectly compensate other parties to encourage them to order any service paid for by the federal health care programs.
Under federal law, companies can’t charge or participate in the Medicare or Medicaid program if they violate federal laws. The suit claims LabCorp charged Medicaid and Medicare more than $1 billion, which is about 20% of the companies total income. If LabCorp is found guilty they will not be allowed to conduct lab tests on anyone covered by Medicaid and Medicare, which is a large portion of LabCorps testing income.
On other news, LabCorp secured a new credit line of $1 billion. What a coincidence.
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LabCorp (Laboratory Croporation of America) shares of stock fell more than 2% on Tuesday, March 23rd after a Deutsche Bank analyst downgraded the company’s stock (NYSE: LH) from “buy” to “hold.” LabCorp is the second largest US commercial reference lab. One of the key factors cited for this change was lower than expected First Quarter volume. Physician office visits have been below the trend line for the first two months of 2010 and physician offices are responsible for a significant percentage of LabCorp’s test volume. It is estimated that for every 1% increase in the unemployment rate, 2.5 million Americans lose their health care benefits.
Other factors influencing the recommendation were weather, intensifying competition and possible pricing pressures from public payors. The analysts reported that “Downside risks: competition, Medicare / Medicaid / VA cuts, weak demand. Upside risks: accretive M&A and share buyback, higher volume growth.”