Private Insurers Sue SmithKline, Feds Pursue Labs In Six States

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FRAUD AND ABUSE for laboratory billing is an issue which refuses to disappear. Private insurers filed a lawsuit against SmithKline Beecham last Thursday, seeking unspecified damages related to overcharging for laboratory testing during the years 1989-1995.

At the same time, news emerged last week that government prosecutors recently sent letters to hospitals in six states requesting a self-audit of reimbursement claims relating to Medicare/Medicaid laboratory tests.

Both developments confirm predictions of THE DARK REPORT that virtually every laboratory, whether commercial or hospital-based, will be affected by the federal government’s efforts to dun the laboratory industry for past billing sins.

The surprise in the SmithKline case is that private insurers are pursuing recovery of reimbursements paid for laboratory testing during the period of 1989-1995. A consortium of large insurers claims that SmithKline overcharged them for laboratory tests. They also allege that SmithKline violated federal racketeering statues in a conscious plan to defraud private payers.

By filing charges under the RICO act (Racketeer Influenced and Corrupt Organizations act), the insurers could collect treble damages if they prevail. The potential recovery is immense. Analysts estimate insurers are seeking more than $1.5 billion in potential claims under the RICO act.

Should private insurers prevail against SmithKline, expect to see this industry consortium file similar suits against other large commercial laboratories. Once the legal precedent is established, private payers may find it worthwhile to pursue recovery from as many clinical laboratories as possible.

On the government side, dozens of hospitals in Georgia, Maine, Mississippi, Rhode Island, Vermont, Virginia and the District of Columbia were sent letters from federal prosecutors requesting a self-audit of laboratory test claims submitted to Medicare. The process is similar to the federal investigation of hospital laboratory billing practices in Ohio reported by THE DARK REPORT during the past year.

The announcement that private insurers are willing to pursue legal claims against laboratories, combined with the federal prosecutor’s expansion of the hospital laboratory billing initiative, signals that the laboratory industry will undergo more years of investigation and litigation.

What is significant about both developments is that even small laboratories may find themselves the targets of government efforts to extract a settlement involving laboratory billing issues. The additional threat is that insurers, assuming they are successful in their claims against SmithKline, could mount their own widespread campaign to collect “over reimbursement” from clinical lab- oratories throughout the country.

For laboratory executives, such actions by private insurers and government prosecutors should not be treated lightly. It is the belief of THE DARK REPORT that a sizeable number of laboratories will find themselves dealing with both the Department of Justice and private payers during the coming years.

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