Lab Market Update

Quest Subsidiary Acquires True Health Assets for $8.5M

BANKRUPT LAB COMPANY TRUEHEALTH DIAGNOSTICS AGREED TO SELL some remaining assets priced at $8.5 million to Cleveland HeartLab, a subsidiary of Quest Diagnostics. True Health, with labs in Richmond, Va., and Frisco, Texas, filed a bankruptcy action in July.

Quest said it will use the acquired assets to expand its cardio-metabolic diagnostic services to new patients and physicians. Cleveland HeartLab will not acquire any of True Health’s facilities or hire any of the company’s remaining employees, a Quest spokesman said.

True Health’s parent company, THG Holdings LLC, completed the deal on Oct. 1, the Richmond Times Dispatch reported. In September, a U.S. Bankruptcy Court judge approved a proposal from Quest and its Cleveland HeartLab subsidiary to buy the assets.

In July, True Health filed for Chapter 11 bankruptcy protection after the federal Centers for Medicare and Medicaid Services said auditors found “credible allegations of fraud,” prompting CMS to stop paying any of True Health’s claims. The dispute began in 2017. As of July of this year, True Health argued that the total loss in payments over two years came to more than $20 million. (See “After Two-Year Battle With CMS, True Health Diagnostics on Verge of Collapse,” TDR, Aug. 12.)

On Oct. 1, the Times Dispatch reported that while True Health was selling assets, it had only about 130 employees remaining at its lab in Richmond and was expected to lay off more employees this month. In July, True Health notified state officials that 392 employees could be laid off because of the bankruptcy filing. Among those 392 workers were 90 phlebotomists who worked across the country, the newspaper reported.

Since late July, True Health has laid off or accepted the resignations of about 250 employees, the Times Dispatch reported. Clifford Zucker, the lab company’s chief restructuring officer, told the paper those employees who remain are mostly in Richmond because almost all of the company’s employees in its corporate offices in Frisco have left the company.

Founded in 2014, True Health bought most of the assets of Health Diagnostic Laboratory in 2015 after HDL filed for bankruptcy protection in June of that year. Among the assets True Health acquired were HDL’s large laboratory facility in Richmond. HDL itself filed for bankruptcy protection after a federal investigation into the way it paid physicians for lab test referrals.

In September 2015, True Health bid $37.1 million for HDL’s assets. But at the time some observers questioned the deal, saying ties existed between True Health and HDL and individuals who had worked for HDL’s former sales firm, BlueWave Healthcare Consultants Inc. (See “True Health to Buy HDL Pending Court Approval,” TDR, Sept. 14, 2015.)

In 2015 HDL had agreed with the U.S. Department of Justice to pay $100 million to settle allegations that it had violated the Anti-Kickback Statute and the False Claims Act between 2010 and 2014. After the DOJ settlement, two health insurers—Aetna and UnitedHealthcare—stopped paying HDL’s claims. The loss of revenue forced HDL to file for bankruptcy.

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