LabOne Speaks Out About Use of “Free Testing”

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In the August 26, 2002 issue of THE DARK REPORT, an article appeared entitled, “Two Blood Brothers Use ‘Free Testing’ Strategy.”

In markets that we are “in-network” with various payers, this tactic of providing free testing is increasingly prevalent. While the competitive injury inflicted on other providers by this questionable practice is obvious, the damage to payers also is substantial yet more insidious. Statistical data provided to payers from authorized in-network providers becomes skewed, thereby challenging the completeness of HEDIS reporting, utilization monitoring and outcomes measurements.

Further damage is caused to payers in such markets where the “Blood Brothers” are in network, such as Medicare, which are paying for laboratory testing while other payers are seemingly getting a “free ride.” Such practices also serve to validate Medicare’s concern that it is paying too much for laboratory testing in comparison to payments by other payers and provides a justification to drive policies like the proposed “usual charges” regulation.

As a laboratory concerned about such questionable practices, we have avoided them. However, as the marketplace is distorted by national laboratories that have the apparent economic capability to offer such “free testing,” we are becoming increasingly concerned. Please advise us whether you have had any further discussions with the Centers for Medicare and Medicaid Services (CMS), about this competitive strategy, or if you have additional information concerning its legality.

John McCarty
Chief Financial Officer
LabOne, Inc.
Lenexa, Kansas

Mr. McCarty is describing the marketing strategy that involves use of the “Waiver of Charges to Managed Care Patients” method as outlined in a December 1994 fraud alert issued by the Office of the Investigator General (OIG).

Use of the “free testing” strategy in Tennessee was covered in the previous issue of THE DARK REPORT (December 1, 2003). Attorneys who specialize in Medicare compliance issues affecting laboratories and pathology group practices state that little detailed guidance on the subject of “free testing” has been issued by the OIG. If the “free testing” strategy becomes more common, it may spur the OIG to issue more guidance–Ed.


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