Legal Update

UnitedHealth Sues 5 Tox Labs, Says It Was Defrauded of $50M

FLORIDA IS ONCE AGAIN GROUND ZERO for a major case of lab testing fraud. UnitedHealthcare has filed suit against five toxicology laboratory companies, three general partners in those companies, eight urinalysis referral sources, and other entities, claiming the defendants defrauded the health insurer of more than $50 million.

Filed last month in U.S. District Court for the Southern District of Florida, UHC’s lawsuit named Sky Toxicology, Frontier Toxicology, Hill Country Toxicology, Eclipse Toxicology, and Axis Diagnostics as the defendant lab companies. UHC named Sky Toxicology Lab Management, FT Lab Management, and Eclipse Lab Management as general partner defendants.

In the lawsuit, UHC also named William “Wade” White, MD (the chief executive officer for each lab defendant); Lance Hupfeld (the chief sales officer for each lab defendant); Bradley West (chief operating officer of each lab defendant).

The referral sources named as defendants are Elements Behavioral Health, South Florida Recovery Center, Solid Landings, Kory Avarell, Stephen Fennelly, Elizabeth Perry, Ferriel Consulting Group, Jeffrey L. Cohen, and LLJ Consultants Inc., the suit says. Also named as defendants were 150 individuals referred to as John and Jane Does.

In the lawsuit, UHC said the defendants defrauded UnitedHealthcare, “through a pattern of deceptive and unfair trade practices related to health insurance claims for urinalysis tests.” The labs offered kickbacks to referral sources to refer large quantities of urinalysis (UA)

tests to the defendant labs, the lawsuit said, adding that, “to disguise the kick- backs, referring defendants ‘invest’ in the lab defendants by purchasing limited partnership shares in the lab to which they refer UA tests. The referring defendants then receive monthly distributions of tens of thousands of dollars, based on their limited partnership shares.”

Kickbacks Disguised

The toxicology labs also encouraged and demanded that referral sources increased UA test volume by referring unnecessary or unauthorized UA tests, the suit explained.

In the scheme, the labs waived UHC members’ responsibilities to pay part of the fee for the lab test work and the labs then submitted claims but did not disclose that fees were waived, the lawsuit said. Florida law identifies the waiving of fees for lab tests “as a species of fraud,” it added.

“United makes payments to lab defendants based on the fraudulent claims and then individual defendants funnel the money back to the referring defendants and themselves through limited partnership shares in lab defendants and/or their respective general partner. Defendants have created and utilize myriad entities to dis- guise and add layers to the kickback scheme, which is calculated to make tracing funds more difficult,” the lawsuit explained.

UnitedHealthcare’s lawsuit is a sign that insurers are becoming more aggressive in taking legal action against this type of fraud in toxicology testing. This current lawsuit shows that one major payer is also ready to pursue the providers as well as labs.

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