Legal Updates

Lab Briefs

QUEST SETTLES TEST-PRICING CASE WITH FOUR CALIFORNIA LABS

LAST WEEK, A CALIFORNIA JUDGE APPROVED the settlement of a lawsuit that claimed Quest Diagnostics Incorporated had violated a state law that forbids selling services (in this case, lab testing) below cost.

In a decision last week, U.S. District Court Judge William H. Orrick approved an agreement between Quest and four California clinical laboratories that stemmed from a suit filed in 2012. In the suit, the plaintiff labs were Hunter Laboratories LLC, Rheumatology Diagnostics, Pacific Breast Pathology Medical Corp., and Surgical Pathology Associates.
The plaintiffs charged that Quest and its codefendants Aetna Inc. and Blue Cross Blue Shield Association prevented the labs from competing for the insurers’ business. They also charged that the insurers aided Quest’s plan to drive the labs out of business, Law360 reported.

In the case, the labs alleged that Quest Diagnostics violated antitrust law by selling lab tests below costs to physician groups. By contracting for testing below cost, Quest sought to drive testing away from the plaintiff labs and to get the physicians to refer their Medicare and Medicaid patients to Quest for lab testing, Law360 wrote.

By settling, the parties avoided a trial, which was scheduled to begin in the U.S. District Court for the Northern District of California on August 17. Unfortunately for lab executives in California watching this case, no details of the settlement were released.

Attorneys for the plaintiff labs said the parties agreed not to comment on the settlement. The agreement not to comment deprives other lab executives of the details
about the strength of each parties’ case in this lawsuit involving lab test pricing under California law.

MORE TROUBLE FOR MILLENNIUM HEALTH OVER TOXICOLOGY TESTING

IT’S ANOTHER EXAMPLE OF PRIVATE INSURERS cracking down on the billing practices of lab companies that do toxicology and pain management tests. The nation’s largest drug-testing lab, Millennium Health LLC of San Diego, is in a legal dispute with Humana Inc. of Lexington, Kentucky. (See intelligence briefings about how Cigna is auditing labs that bill for toxicology tests.)

Humana seeks monetary damages from Millennium. Bloomberg News reported that Millennium allegedly filed unlawful insurance claims and Humana sought damages along with an injunction while seeking to arbitrate the matter.

The Wall Street Journal reported in June that Millennium was talking with investigators for the U.S. Department of Justice over allegations that the drug testing company overbilled federal health care programs for lab tests. Federal officials threatened to rescind Millennium’s ability to bill Medicare and Medicaid because of billing irregularities, including urine tests the lab never performed and tests for dead people, Bloomberg said. Under a settlement proposal, Millennium may pay a $250 million fine in four installments, Bloomberg reported.

Lab administrators and pathologists working in hospital and health system laboratories should take notice of these developments. If it is true that there has been significant fraud and abuse in toxicology and pain management testing, then both the Medicare program and private payers may implement tougher billing requirements for these tests.

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