CEO SUMMARY: It was a surprise to the Florida Attorney General that a bill had surfaced in the Florida Legislature to amend the existing state law’s definition of usual and customary pricing to the Medicaid program. The bill would even make that change in definition retroactive. If this bill clears the legislature and becomes law, it would render moot an ongoing whistleblower lawsuit that accuses the two national lab companies of overcharging the Florida Medicaid program.
WHAT IS A LAB COMPANY TO DO when it is a defendant in a lawsuit accusing it of violating state Medicaid laws governing discounted pricing for lab tests? Why, simply go to that state’s legislature and get a bill passed that retroactively makes your lab company’s pricing practices legal—thus making the ongoing lawsuit moot!
This appears to be exactly what Laboratory Corporation of America and Quest Diagnostics Incorporated are attempting to do in Florida. The two lab companies are defendants in a qui tam case alleging that they violated Florida law in how they charged the Medicaid program for laboratory tests.
Representatives of the two lab companies recently appeared at a house committee hearing on January 13 to support the bill in question, HB 421 or SB 526, Reimbursement of Medicaid Providers. This bill would change the existing language defining “usual and customary charges” to now mean “the amount routinely billed by a provider or supplier to an uninsured consumer for services or goods before application of any discount, rebate, or supplemental plan. The term does not include free or discounted charges for services or goods based upon a person’s uninsured or indigent status or other financial hardship.”
Also attending this House committee hearing was Pam Bondi, Attorney General for Florida. She minced no words in telling the committee not to advance a bill that would undermine the ongoing state qui tam lawsuit against LabCorp and Quest Diagnostics.
At stake are millions of dollars from a scheme to defraud the state’s Medicaid program, Bondi declared in her testimony. Bondi interprets existing Florida law as requiring providers to charge the state Medicaid program the lowest rate they receive from any third-party payer.
The qui tam case in question was filed by Chris Riedel and Hunter Laboratories against Quest Diagnostics and against LabCorp. The State of Florida has joined the case as a plaintiff against the two labs. The case is State of Florida ex rel. Hunter Laboratories, LLC, and Chris Riedel v. Quest Diagnostics, Inc., et al, in the Circuit Court for the Second Judicial Circuit in and for Leon County, case number 2007- CA-003549.
Millions of Dollars at Stake
In her statements, Bondi alleged that Florida House Bill 0421 would undermine her case against Quest and LabCorp. An identical bill, Senate Bill 526, is pending in the Florida Senate.
During the hearing conducted by the House Health Innovations Subcommittee on January 13, Bondi said that if the bill becomes law, it would cost Florida taxpayers tens of millions of dollars. The committee took no action that day, deciding to temporarily postpone a vote on the bill. As of press time, committees in the House and Senate had not acted on the bill.
“I am here to tell you today that, as your chief legal officer for the state of Florida, I have an obligation to be standing here in front of every one of you here today and tell you that we have very active litigation pending involving massive healthcare fraud,” Bondi told the members of the Health Innovations subcommittee.
“You would be legislating one case pending in Florida currently and it’s by LabCorp and Quest,” she said. “And Mr. Huey, who I respect, is here representing LabCorp and this is his legislation.” J. Michael Huey, an attorney with Gray Robinson in Tallahassee, represents LabCorp in the case of State of Florida ex rel. Hunter Laboratories, LLC, and Chris Riedel v. Quest Diagnostics, Inc., et al.
‘Defrauding Your Taxpayers’
“So if this bill passes your committee, you will be an unwitting facilitator to potentially costing our taxpayers millions of dollars. Millions!” emphasized Bondi. “This is big because these two companies are defrauding your taxpayers.
“We are alleging tens of millions of dollars [of fraud] here in Florida,” she continued. “You all know we are a bellwether state and I am telling you now the eyes of the entire country are on us because LabCorp and Quest know other states in the rest of the country are looking at this.
“This is very active litigation. In my five years I have never seen anything like this about to happen,” she explained. “The proper forum for this to be heard is in sworn court testimony where it [this lawsuit] is ongoing.
“This [bill] is an end-run, desperate attempt… in a potentially multimillion case that impacts Florida and other states around the country,” commented Bondi. “This is very serious. And you also need to know that there is a federal component to our case.
‘To kill active Litigation’
“I am confident this [proposed bill] is being done… to kill our active litigation,” she continued. “It is highly inappropriate to be handled in the middle of litigation that affects all of our constituents and our taxpayers especially.
“By passing this bill, by voting yes today, you will be giving these companies an open checkbook to raid our Medicaid program,” Bondi charged.
Also, she addressed an amendment that was added to the bill to make any change in state law regarding usual and customary charges retroactive. “The amendment is the icing on the cake. It’s not even hiding anymore. They [the defendant lab companies] want it to be retroactive. This [law] alone would be damaging enough. But to make it retroactive, it’s basically in your face saying it’s about our litigation,” added Bondi.
Bondi went on to explain that attorneys general in other states, such as California and Nevada, have settled similar cases for hundreds of millions of dollars. Lab directors and pathologists are familiar with the similar case in California. In 2011, Quest Diagnostics agreed to pay $241 million to settle allegations that it overcharged Medi-Cal, California’s Medicaid program. That same year, LabCorp agreed to pay $49.5 million to California in a similar settlement. Neither company admitted guilt.
Following Bondi’s statement, Huey addressed the committee, saying health-care providers in Florida are under no obligation to charge the state Medicaid program the lowest amount that they receive from any third-party payer. He stated that he had never heard of the definition of usual and customary in which all providers—including labs, physicians, hospitals, and others—would have to bill Medicaid the lowest charge that was paid by any third-party payer.
In his comments, Huey said, “When LabCorp came to me, they asked, ‘What do you know about this? We’re being sued on a Medicaid fraud claim.’ I have been representing providers in Florida for over 40 years and I’ve never heard of this.”
Looking into the issue raised by LabCorp, Huey said that he asked other provider organizations about how they handled usual and customary charges. “Hospitals use their charge master rate. The doctors use whatever their normal charges are. They get paid the Medicaid rate because Medicaid establishes a rate for every service for every provider,” he told the House committee members.
Huey further stated that, twice he took his findings to the state’s administrative court and an administrative law judge ruled in his favor each time. Yet, stated Huey, after each ruling, Attorney General Bondi sought to insert her definition of usual and customary as a rule for the state’s Medicaid department, the Agency for Health Care Administration, he said. It was for this reason that he brought the matter to the legislature and asked for this bill, concluded Huey.
During this committee hearing, Doug Russell, the representative from Quest Diagnostics stated that “Quest waives its support for this bill.” As of press time, there no additional developments regarding this bill.
Defining the Meaning of ‘Usual and Customary’
AT ISSUE IN THE WHISTLEBLOWER LAWSUIT that Florida Attorney General Pam Bondi joined is the definition of “usual and customary” charges. Under state law, the term, “usual and customary” is defined as noted below.
Florida statute 59G-5.110(2) took effect May 9, 1999. It is also known as the “lowest charge rule” and says:
“Charges for services or goods billed to the Medicaid program shall not exceed the provider’s lowest charge to any other third party payment source for the same or equivalent medical and allied care, goods, or services provided to persons who are not Medicaid recipients.
“Any services or goods customarily provided free of charge to patients may not be billed to Medicaid when provided to Medicaid recipients. Any payment made by Medicaid for services or goods not fur- nished in accordance with these provisions is subject to recoupment and the agency may, in such instances, initiate other appropriate administrative or legal action.”