Embattled Health Diagnostic Laboratory (HDL) has yet another problem to worry about: Cigna Health has filed a lawsuit against the Richmond, Va.-based lab, alleging that it induced patients to use its lab through a fraudulent “fee-forgiving” scheme. In a complaint filed Oct. 15 in the U.S. District Court in Connecticut, Cigna says that HDL has unlawfully obtained at least $84 million from Cigna and the benefit plan it serves. The insurer is seeking return of that money along with monetary damages. HDL has come under fire in recent months. The lab, which was highlighted in a Wall Street Journal article examining processing and handling fees (P&H) paid by laboratories to referring physicians, is under federal investigation. HDL stopped paying P&H fees June 25, 2014, after the Department of Health and Human Services Office of Inspector General (OIG) issued a special fraud alert saying such fees could pose a risk of inducement under the anti-kickback statute. HDL Chief Executive Officer Tonya Mallory resigned Sept. 23, reportedly for personal family reasons. In the Oct. 15 lawsuit, Cigna says that one way it controls costs is by entering into agreements with health care providers under which the providers agree to accept fixed rates […]
Embattled Health Diagnostic Laboratory (HDL) has yet another problem to worry about: Cigna Health has filed a lawsuit against the Richmond, Va.-based lab, alleging that it induced patients to use its lab through a fraudulent “fee-forgiving” scheme.
In a complaint filed Oct. 15 in the U.S. District Court in Connecticut, Cigna says that HDL has unlawfully obtained at least $84 million from Cigna and the benefit plan it serves. The insurer is seeking return of that money along with monetary damages.
HDL has come under fire in recent months. The lab, which was highlighted in a Wall Street Journal article examining processing and handling fees (P&H) paid by laboratories to referring physicians, is under federal investigation. HDL stopped paying P&H fees June 25, 2014, after the Department of Health and Human Services Office of Inspector General (OIG) issued a special fraud alert saying such fees could pose a risk of inducement under the anti-kickback statute. HDL Chief Executive Officer Tonya Mallory resigned Sept. 23, reportedly for personal family reasons.
In the Oct. 15 lawsuit, Cigna says that one way it controls costs is by entering into agreements with health care providers under which the providers agree to accept fixed rates for services in consideration of other benefits, including access to plan members. Members are then encouraged to use in-network providers, including labs. When members use out-of-network labs, they must bear a portion of the costs either through copayment, coinsurance, or deductible obligations.
The complaint alleges that HDL, which does not participate in Cigna’s provider networks, undermines these safeguards by means of a fraudulent fee-forgiving scheme. “HDL lures patients from health plans that are administered or insured by Cigna by misrepresenting those patients’ responsibilities under the plans, by promising not to collect any co-payment, co-insurance, or deductible obligation, and by further promising not to seek reimbursement for any other portion of the bill that the plan does not cover,” reads the complaint. “HDL then misleadingly bills the plans themselves at exorbitant and unjustified ‘phantom’ rates—rates that misrepresent what HDL actually intended to collect.”
For example, for one patient, HDL submitted “charges” of $2,979 to Cigna. Based on these charges, the patient’s cost-sharing responsibility under the plan was $649. However, HDL charged the patient nothing. “’Fee forgiving’ of this kind has long been recognized as a variety of medical billing fraud,” says the lawsuit. “More than two decades ago, the American Medical Association advised its members ‘[P]hysicians should be aware that . . . [r]outine forgiveness of waiver or copayments may constitute fraud under state and federal law.’”
The OIG reached the same conclusion, saying in a 1994 fraud alert that routine waiver of deductibles and copayment by charge-based providers, practitioners, or suppliers is unlawful because it results in . . . false claims . . . [and] excessive utilization of items and services paid for by Medicare.
Takeaway: Routine waiver of patient obligations can land a lab in hot water.
