Medicaid Suits in Two States Accuse Quest, LabCorp of Fraud

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RECENTLY TWO WHISTLEBLOWER LAWSUITS, each alleging Medicaid fraud by Quest Diagnostics Incorporated and Laboratory Corporation of America, have become public knowledge. One case is in Virginia and the other case is in Georgia.

Both lawsuits were filed by Hunter Laboratories, LLC, of Campbell, California, and its CEO Chris Riedel. Both lawsuits involve charges of alleged fraud to state Medicaid programs and are similar to the Medi-Cal fraud charges Riedel brought against these same companies in California years earlier.

In one case, a lawsuit is pending in Virginia against Quest Diagnostics Incorporated and LabCorp. It is alleged that the lab companies defrauded the state’s Medicaid program in violation of Virginia law by billing Medicaid at rates much higher than what it billed other companies. Riedel filed this case in December 2007 under the Virginia Fraud Against Taxpayers Act, according to Bloomberg News. The court records were unsealed in August.

Medicaid Patients in Virginia

In the court records, the two companies are required to provide services to Medicaid patients in Virginia at the same rates that they billed other payers, according to Bloomberg News.

A news story published by Health Care Payer News reported that Quest Diagnostics filed a motion to dismiss the whistleblower complaint and stated that clinical laboratory companies in Virginia are “not required to give Medicaid negotiated discounts to particular customers, but rather its charge to the general public—meaning its list price to cash-paying patients.”

In the second case, Hunter Laboratories, Riedel, and the State of Georgia are listed as plaintiffs against Quest Diagnostics, Nichols Institute, LabCorp, and Specialty Laboratories, Inc. The case was filed in May and the plaintiffs assert two different theories by which the defendants’ allegedly violated Georgia law. These theories are similar to those used in the California Medi-Cal cases.

Allegations of False Claims

Under one theory, the plaintiffs allege that the laboratories knowingly made false claims to Medicaid by submitting claims for payment that reflect prices higher than the maximum reimbursement rates allowed under state Medicaid rules, court papers show. Georgia requires that Medicaid be paid the lowest price the labs charge any payer, the court papers show.

Under the second theory, the plaintiffs allege that the defendants “provided kickbacks in the form of deeply discounted private rates to draw in large volumes of ‘pull through’ Medicaid and other referrals.” These discounting practices violate the federal Anti-Kickback Statute, the plaintiffs allege, according to the court filings.

The two lab companies each deny the allegations in both whistleblower lawsuits.

The whistleblower case in California, filed in 2005 by Hunter Labs and Riedel, reached a settlement in 2011 when Quest Diagnostics paid $241 million and LabCorp paid $49.5 million to the state to resolve the charges.

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