A whistleblower lawsuit against the nation’s two largest laboratories was unsealed in federal court in Virginia earlier this month, accusing them of practices that defrauded the state’s Medicaid program while also proving anti-competitive to other labs. The suit was originally filed in Virginia state court by Hunter Laboratories, the California-based firm that recently sold the bulk of its clinical operations to Bio-Reference Laboratories but is continuing to aggressively pursue litigation against its former competitors. The other named plaintiff is former Hunter CEO Chris Riedel. He is now CEO of HunterHeart, Inc. Court records indicate the suit was originally filed in late 2007, although the Virginia attorney general only recently joined the litigation. The suit accuses Quest, LabCorp, and a variety of their corporate affiliates of offering steeply discounted test prices for some procedures to providers in order to guarantee a large volume of pull-through of commercial and Medicaid business in order to cover their losses on those tests. The suit alleges the labs would then bill the Medicaid program directly and charge their normal commercial rates—a violation of state regulations requiring that the Medicaid program be charged no more than any provider for a procedure. According to the litigation, this […]
A whistleblower lawsuit against the nation’s two largest laboratories was unsealed in federal court in Virginia earlier this month, accusing them of practices that defrauded the state’s Medicaid program while also proving anti-competitive to other labs.
The suit was originally filed in Virginia state court by Hunter Laboratories, the California-based firm that recently sold the bulk of its clinical operations to Bio-Reference Laboratories but is continuing to aggressively pursue litigation against its former competitors. The other named plaintiff is former Hunter CEO Chris Riedel. He is now CEO of HunterHeart, Inc.
Court records indicate the suit was originally filed in late 2007, although the Virginia attorney general only recently joined the litigation.
The suit accuses Quest, LabCorp, and a variety of their corporate affiliates of offering steeply discounted test prices for some procedures to providers in order to guarantee a large volume of pull-through of commercial and Medicaid business in order to cover their losses on those tests.
The suit alleges the labs would then bill the Medicaid program directly and charge their normal commercial rates—a violation of state regulations requiring that the Medicaid program be charged no more than any provider for a procedure.
According to the litigation, this led to price inflation for Medicaid providers by more than 600 percent in some instances. Quest is alleged to have charged $1.43 for a CBC and platelet test, CPT code 85023, to non-Medicaid providers, while charging its full commercial rate, $10.53, to Medicaid providers. For LabCorp, the discounted rate for a ferritin test, CPT code 82728, would be $3.68, but it would charge Medicaid $18.83.
The suit, which was recently moved to federal court because some of the legal issues being contested cross state lines, is seeking treble damages to the state of Virginia because of the alleged antitrust violations, $11,000 per each violation, as well as legal costs.
Typically civil plaintiffs in such whistleblower actions receive 15 percent of any settlement or judgment.
Previous Settlement
Riedel won a settlement against Quest and LabCorp in 2005, claiming they overbilled California’s Medicaid program. The two labs eventually settled the suit for a combined $290.5 million. Another suit against Quest in Nevada is scheduled to go to trial shortly, according to Riedel.
Quest responded to the developments in Virginia with a written statement: “The allegations have been made by Hunter Laboratories, a Quest . . . competitor. We believe these allegations lack merit, and our testing services are priced appropriately. We comply with the laws and regulations governing our business, including Medicaid pricing requirements, not only as a legal obligation, but also because it is the right thing to do. As always, Quest Diagnostics remains firmly focused on putting patients first and serving their needs.”
LabCorp, which very rarely responds to media requests for comment, issued a much briefer but blunter statement: “We do not comment on pending litigation, but we intend to vigorously defend this lawsuit. LabCorp believes that the allegations are wholly without merit.”
Riedel said he expected a trial in the matter to take place as early as next spring. He added that Virginia is often referred to in the legal profession as the “docket rocket” because of the relatively quick pace of civil litigation in that jurisdiction.
Takeaway: Quest Diagnostics and LabCorp could be enmeshed in qui tam litigation for years to come as Chris Riedel has made clear he intends to continue pursuing lawsuits against the companies.
