Reporters & Investigators Target Fraud in Pain Management Market

In California, state investigators take action against rehab clinics for several types of crimes

PAIN MANAGEMENT IS COMING under increased scrutiny by law enforcement officials and government regulators. Even the national media have begun to notice the fraud and abuse that is rampant in this rapidly-expanding sector of healthcare.

Many pathologists and clinical laboratory managers will welcome increased enforcement by state and federal officials. Over the past decade, lab professionals have become uncomfortable with the sales and marketing schemes of some lab testing companies formed specifically to serve physicians in pain management. Questions have also been raised about the scientific usefulness of the algorithms offered by these labs in conjunction with their urine drug tests.

 Urine Drug Testing Business

Recent events in California may be a sign that the lid is about to come off many of the illegal practices that seem to be common in the pain management industry. Reporting on the urine-drug testing business earlier this month, The New York Times said the increased number of urine drug tests performed follows a similar increase in the number of prescriptions for painkilling opioids. (See sidebar below.) With the increased volume of testing has come questions about whether labs and doctors are exploiting the testing boom financially, the Times said.

To demonstrate the problem, the Times article described a brochure from Liberty Diagnostics, a lab testing company in Pasadena, California. The brochure said physicians could earn an “average of $400 profit per screen” with “No Additional Overhead.”

A chart in the Liberty Diagnostics’ brochure showed the potential profit a physician could earn by ordering just 10 urine screens each week. The Liberty Diagnostics’ brochure said a physician would generate income of $155,000 annually from the tests and additional fees of $133,000 per year for reviewing the test results and discussing them with patients, the Times reported.

Ordering 10 urine screens each week for 52 weeks would total 520 urine screens annually. If those 520 tests generate income totaling $288,000, that would mean the physician would earn $746.15 for ordering each test and discussing the results with patients. The laboratory company declined to discuss the brochure and would not confirm the facts as reported by The New York Times.

Last month, CNN broadcast the results of an investigation it conducted with the Center for Investigative Journalism into drug rehab companies in California. One patient quoted in the investigation was given drug tests and yet said she did not have a drug abuse problem.

CNN said Medi-Cal, California’s Medicaid program, paid $94 million in the past two fiscal years to 56 clinics in Southern California that have shown signs of deception or questionable billing practices. This amount represents half of all public funding for the program, CNN reported.

After the CNN broadcast, officials with the California Department of Health Care Services suspended clinics suspected of using deceptive practices. One official pledged to review every rehab facility in California.

Earlier this year, Massachusetts Attorney General Martha Coakley cited two lab companies in New England as part of a case involving kickbacks related to: a) drugs of abuse testing; b) the collection of illegal fees from patients; and c) illegally prescribing medication to patients diagnosed with opiate addiction.

Coakley has been consistently aggressive in her investigations and prosecutions of drug-testing companies. Last year, Calloway Laboratories, Inc., a drug-testing company in Woburn, Massachusetts, paid $20 million in restitution to resolve allegations of an elaborate kickback scheme that cost MassHealth millions of dollars for unnecessary urine drug screens, Coakley announced.

Since 2004, Coakley has brought enforcement actions and won settlements against the following laboratories offering pain management and drugs of abuse testing: Diagnostic Laboratory Medicine, Inc., Bedford; Clinical Science Laboratory, I n c . , Mansfield; Life Laboratory, Springfield; and Willow Street Medical Laboratory, LLC, Lynn.

Lab Settles Federal Charges

National labs also have drawn scrutiny. In November 2010, Ameritox, LLC, a diagnostic blood testing laboratory, paid $16.4 million to resolve Medicare and Medicaid claims that Ameritox paid cash kickbacks to physicians to induce them to refer Medicare reimbursable drug tests to the lab, the U.S. attorney said.

Also last year, Reuters reported a federal grand jury in Boston was investigat- ing another urine drug testing company for allegations of health care fraud.

Collectively, events in California along with news coverage by CNN, The New York Times, and The Wall Street Journal demonstrate how the explosive growth in pain management services—along with evidence of seedy and illegal business practices—has finally become a problem that public and private payers can no longer ignore.

Legitimate Need to Know if Patients Are Complying

ONE FACTOR DRIVING INCREASED DRUG TESTING is physician concern that patients are not abusing prescription painkilling drugs. Therefore, more doctors are ordering urine-screening tests to learn which drugs patients are taking and not taking.

“The result has been a boom in profits for diagnostic testing laboratories that offer the tests,” wrote the New York Times, citing a report by Frost & Sullivan, a market research and consulting com- pany in Mountain View, California.

As reported by Frost & Sullivan, the drug screening market totals approximately $2 billion in the United States. This is up from about $800 million in 2000. Approximately 75% of this spending is for drugs of abuse testing in medical settings. The remainder takes place in workplaces and in sports. The tests include screens for amphetamines, barbiturates, benzodiazepines, cannabinoids, cocaine, methadone, opiates, phencyclidine, propoxyphene, THC, trycyclic anti- depressants, and acetaminophen.

In its coverage of this market sector, The Wall Street Journal reported that, in 2011, drug-test volume totaled 486 mil- lion tests, an increase of 28% from the 380 million tests done in 2006. It cited reports from Venture Planning Group in New York, adding that, by 2016, volume could total 592 million tests. This is a projected increase of 21% in the drug screening market in just five years.


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