Aetna Files Suit against NJ Lab, Plans to Sue Two More Labs

By the end of October, insurer says it plans to file legal complaints alleging other labs committed fraud

FINALLY, A MAJOR HEALTH INSURER IS taking a hard line against clinical laboratories it suspects of committing fraud. Aetna Health, Inc., and Aetna Life Insurance Company, of Hartford, Connecticut, have sued one lab company and included physicians as defendants in that case. Aetna officials indicate that other lawsuits against labs can be expected.

At a minimum, the filing of this case should put both clinical labs and physicians on notice that there are consequences from participating in schemes involving inducements and kickbacks that violate federal and state laws.

In July, Aetna filed a civil suit against Biodiagnostic Laboratory Services, LLC, of Parsippany, New Jersey, seeking $15 million in damages. In the suit filed in New Jersey Superior Court in Camden, Aetna listed Biodiagnostic Lab and at least 100 individual referring physicians and at least 100 companies as defendants. Aetna said they conspired to submit false and fraudulent insurance claims to Aetna.

Aetna’s legal move follows the successful prosecution of BLS by the U.S attorney in New Jersey. In that case, more than 29 individuals, including 14 referring physicians, have already pled guilty in federal court in Newark to paying or accepting bribes to refer patients to BLS for unnecessary and inflated tests, the court records show.

In an interview with THE DARK REPORT, Ed Neugebauer, the head of litigation for Aetna, Inc., said the health insurer would bring civil suits against at least two other clinical laboratories by the end of October. “There are several labs we’re currently looking at,” he said. “Probably before Halloween we’re going to have a couple more cases against labs that we will bring to court.”

One common type of fraud involves getting referrals for clinical laboratory testing by offering some form of payment to referring physicians. The case against Biodiagnostic Laboratory Services involved this type of fraud, noted Neugebauer. “We find that providers will pick an insurer and try to maximize their revenue from that payer. When the strategy is successful, they just keep doing it.”

Cash for Referrals

According to Aetna’s suit against BLS, the fraud started at least eight years ago. “Beginning at least as early as 2006, BLS bribed physicians and medical practices with illegal kickbacks in the form of cash payments and other remuneration in order to induce them to refer Aetna members to BLS,” the court documents show. “BLS then misrepresented its actual charges for services, double-billed for the same services and violated the disclosure requirements of CLIA.

“BLS coupled its bribery with a policy of waiving patient financial responsibility to induce the physicians, medical practices, and patients to consent to the referrals in order to assure its access to the Aetna member base, said documents filed with the court, also stating, “The financial inducements were concealed under the guise of facility use and services agreements that put money in the hands of physicians solely to reward them for directing patients to BLS.”

For clinical laboratories, one important factor in this case is that Aetna not only filed the complaint against BLS and the lab’s owners, David Nicoll, Susan Nicoll, and Robert Kerekes, but also against 14 named physicians and against 100 unnamed physicians, known as “Defendants John Does” in the court papers and 100 unnamed corporations known as “Defendants ABC Corporations.”

Claims Against Defendants

The defendants offered, paid, and accepted referral fees and other remuneration through facility use agreements to induce referrals of patients who were Aetna members, the court documents show. In so doing, the defendants violated New Jersey’s Commercial Bribery Statute, according to records.

Aetna paid the defendants more than $9 million for false and fraudulent claims submitted to Aetna. The defendants submitted multiple claims for some services, claims for unnecessary services, and double billed for some services. Defendants also waived more than $5.4 million in deductibles and coinsurance to induce members to use BLS serv- ices, the court records show.

Patient Billing Policy

An interesting aspect of Aetna’s lawsuit against Biodiagnostic Laboratory services involves the lab’s statements to physicians that it would not bill patients. In the federal investigation against Health Diagnostic Laboratories (see pages 3-7), there is evidence that this lab company also told physicians that it would not bill patients. Such actions are not consistent with compliance requirements and payer contracts with doctors and labs.

Could Aetna’s Lawsuit Encourage Similar Suits?

ONE REASON WHY ILLEGAL SCHEMES designed to transfer money to physicians in exchange for lab test referrals continue to be seen regularly in the marketplace is the lack of effective enforcement by government regulators and what has seemed to be a hands-off attitude by private payers.

Thus, it may be a significant development that Aetna has filed a lawsuit against the principals of Biodiagnostic Laboratory Services and certain physicians who accepted money from BLS in arrangements that the U.S. Attorney from New Jersey determined to have violated federal antikickback laws.

Aetna does have a legal road map it can follow because of the federal prosecutions of BLS and certain physicians who participated in these inducement schemes. As well, substantial money is at stake.

It was reported that, in its short business life of seven years (2006-2013,) Biodiagnostics pulled in revenue of more than $200 million and its president personally took $33 million in cash distributions out of the lab company during that time. This shows the magnitude of the fraud, because private insurers were billed, along with the Medicare and Medicaid programs.

How is it possible for scamster lab companies to grow into multi-hundred-million- dollar businesses in just a few short years? The simple reason is that private health insurers and the government Medicare and Medicaid programs are not good at watching incoming claims and identifying patterns consistent with fraud and abuse in real time.

Further, once such fraud is uncovered, the culprits often face few legal consequences for their actions. Thus, Aetna’s legal action against BLS and certain physicians— on the heels of the federal criminal prosecutions—should encourage law-abiding pathologists and lab leaders everywhere.



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