Drug Test Lab Pays $4.8 Million for Charging Medicaid above MFN Rate

Case: The U.S. Attorney accused a California-based toxicology lab of overcharging the Connecticut Medicaid program for urine drug testing services performed on substance abuse patients. At issue was Connecticut’s so-called Most Favored Nation (MFN) regulation banning labs from billing Medicaid for services at prices above the lowest price the lab charges third parties for the same or similar services. According to the government, the lab took payments from Medicaid of $38 per tests for urine drug tests that it performed for other payors at $2 to $10.50 per pop. Rather than risk a trial, the lab has agreed to shell out $4.8 million to settle the charges. Significance: Ironically, at least 20 states ban MFN provisions in private health contracts because they stifle competition. But MFN requirements may still be found in Medicaid and private contracts in the other 30 states. So, check your existing lab contracts to determine whether they include MFN clauses. If so, be sure to bill the payor for tests at the MFN price, i.e., the lowest rate you charge any third party for the same or similar test.