Legal Update

NJ Lab Sues to Challenge Payers About Its Out-of-Network Status

MDL sues Independence Blue Cross of Philadelphia and LabCorp over exclusion as network provider

ONE WAY THAT A CLINICAL LAB can fight back against insurers who refuse to pay lab test claims is to sue them. That’s exactly what Medical Diagnostic Laboratories of Hamilton, N.J. is doing!

Not only has MDL filed lawsuits against two major health insurance companies, but in one lawsuit, it named a national lab company as a co-defendant. In August, MDL filed suit in U.S. District Court for the Western District of Oklahoma against HCSC, a managed care company that operates Blue Cross Blue Shield plans in Illinois, Montana, New Mexico, Oklahoma, and Texas.

In this lawsuit, MDL said HCSC operated in a heavy-handed, arbitrary, and capricious manner to keep MDL from serving as an in-network laboratory provider in Oklahoma, even though HCSC has approved MDL as an in-network provider for its operations in Illinois and Texas.

Then in November, MDL filed an antitrust lawsuit in U.S. District Court for the Eastern District of Pennsylvania against Independence Blue Cross of Philadelphia and Laboratory Corporation of America. MDL seeks triple damages for what it claims were strategies by the two defendants to limit competition in Southeastern Pennsylvania by excluding MDL from being an in-network provider for infectious disease testing.

In the lawsuit, MDL cited four counts: violation of the Sherman Act, tortious interference with existing business relations, tortious interference with prospective business relations, and unfair competition. In the lawsuit, MDL seeks an injunction against IBC and LabCorp and punitive and compensatory damages.

Founded in 1997, MDL specializes in infectious disease testing and has 670 employees in its CLIA-certified and CAP- accredited lab in Hamilton. MDL said it has provider agreements with 32 of the nation’s 38 Blue Cross Blue Shield plans.

philly Market Dominance

In the lawsuit, MDL charged that IBC controls 67.5% of the insurance market in Southeastern Pennsylvania, thus making it impossible for labs and other health care providers to be economically viable without in-network status. “Through repeated and ongoing exclusionary and threatening conduct, defendants have violated federal and Pennsylvania law by preventing MDL’s ability to retain current, and obtain new, clientele…” the lawsuit said.

The defendants threatened to impose penalties and other sanctions and expel healthcare providers from its network if they referred lab tests to MDL, court documents showed.

In one case, in the summer of 2016, IBC telephoned and wrote to a healthcare provider, threatening that if the provider continued to use out-of-network providers, including MDL, it would not be paid for its services and would face other penalties too, the suit said.

The purpose of excluding MDL was to allow LabCorp to dominate the laboratory services market in Southeastern Pennsylvania, including the counties of Bucks, Delaware, Lancaster, Lebanon, Montgomery, Northampton, and Philadelphia, the suit said. As a result, MDL said it suffered serious losses of business and profits.

anticompetitive agreements

“As alleged herein, defendants entered into anticompetitive agreements with each other by which, through the exercise of IBC’s market power in the Southeastern Pennsylvania health insurance market, they restrained trade in the STI specialty testing market…” the lawsuit said.

One interesting aspect of the lawsuit is that it explained the network for lab services that IBC uses today. For example, the lawsuit said, IBC entered into an agreement with LabCorp on July 1, 2014, to make LabCorp its exclusive, national provider of outpatient laboratory testing services.

“When IBC entered into this agreement with LabCorp, it expressly represented that in-network providers of laboratory services would remain in-network,” the lawsuit said. “In fact, to this day, IBC’s website, in discussing the effect of IBC’s arrangement with LabCorp, expressly states that ‘all other laboratories’ currently in Independence’s network will remain in-network providers with the exception of Quest Diagnostics Incorporated.

In 2014, THE DARK REPORT reported on the exclusive arrangement that IBC developed with LabCorp and how that arrangement excluded Quest Diagnostics.

The lawsuit continued, saying, that the statement that all other labs would remain in-network is false because LabCorp owns all of IBC’s in-network laboratories within 200 miles of Philadelphia, the lawsuit said.

Drop In Specimen Volume

In 2014, MDL’s specimen volume began to drop and dropped dramatically in 2015 and early 2016, the lawsuit said. The reason for the decline in specimen volume was coercion by IBC and LabCorp against in-network providers to get them to stop using MDL, the lawsuit said.

MDL documented in the lawsuit how it contacted nine healthcare providers that had stopped using its services to inquire about why the providers had done so. In each case, the providers said that they felt threatened if they did not discontinue using MDL.

In making its case, lawyers for MDL explained in the lawsuit that MDL provides reflex antibiotic resistance and susceptibility testing for four specific forms of infection, and MDL is the only lab whose antibiotic-susceptibility testing (AST) services are performed for three of those infections at the time the infection is detected. “This allows the physician to prescribe the correct antibiotic and prevent the spread of the infection,” the lawsuit said.

requirements For Testing

LabCorp does not perform such AST testing for these four infections, the suit claimed. LabCorp will perform AST if the physician orders such testing, but that means the physician must first get the initial test result or wait until the patient fails treatment based on the antibiotic the physician chooses.

Correctly identifying the pathogen during initial testing ensures that patients are prescribed the most effective and appropriate medications for their conditions, improving patient care and helping to prevent the spread of the infection, the court documents stated.

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