Does Anyone Know the Law in California?

WHAT IS THE LAW IN CALIFORNIA THAT DEFINES PROVIDER PRICING and how Medi-Cal should be billed? You probably think that question would be rather easy to answer after you read one of the state statutes that governs pricing relative to Medi-Cal claims. Popularly known among the lab industry as 51501(a), it requires that “no provider shall charge [Medi-Cal] for any service or any article more than would have been charged for the same service or article to other purchasers of comparable services or articles under comparable circumstances.”

This law is commonly referred to as a “best price” statute. In force for more than four decades, it is familiar to lab executives, managers, and lab sales representatives in the Golden State. During all this time, to my knowledge, every hospital in California that operated a laboratory outreach program in competition with commercial lab companies was careful never to bill Medi-Cal at a price higher than what it charged any single client. But a number of the larger independent lab companies in California commonly extended deeply-discounted lab test prices to selected providers while submitting claims to Medi- Cal at a higher price for these assays.

Then came the whistleblower lawsuit filed back in 2005 by Hunter Laboratories, Inc., and Chris Riedel. It alleged that the lab test pricing practices of seven lab companies violated 51501(a) and related state and federal laws. That was certainly a disruption to the status quo. Now, six years later, the California Attorney General (AG) has entered into settlement agreements with two defendants—Quest Diagnostics Incorporated and Laboratory Corporation of America, and released those agreements to the public.

Together, the two lab companies are paying $290.5 million to resolve the qui tam case, while explicitly denying that their deep discount lab test pricing practices were in violation of 51501(a) and the related laws. Moreover, each lab has language in its respective “Settlement Agreement and Release” that appears to allow it to extend lower prices to some providers than the prices at which it submits claims to Medi-Cal, at least through February 1, 2014.

Thus, I think it is fair to ask this question: “Does anyone in California know the law?” Given that all citizens should have equal standing before the law, will the two blood brothers gain competitive advantage from these settlement agreements during the next few years? If anyone knows the answer to this question, I’d like to hear from him or her!


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