Quest, LabCorp currently involved in multi-billion dollar Medicare scam

Quest Diagnostics Incorporated (Quest) and Laboratory Corporation of America (LabCorp), the nation's two largest laboratories, are currently involved in a multi-billion dollar Medicare scam, according to a lengthy and critical expose published in one of the medical laboratory industry's leading trade publications.

The Dark Report revealed recently that the two labs have billed the federal government $14 billion in questionable Medicare fees over a 10-year period and that the practice continues today.

This long-running Medicare and Medicaid fraud has generated billions in profits for the companies, turning them into market leaders at taxpayers' expense, said Karen Hinton, a representative for NPT Associates and Fair Laboratory Practices Associates, plaintiffs in federal lawsuits against Quest and LabCorp.

In addition to The Dark Report's critical coverage, Hinton said the two companies have come under fire from others: a former lab executive has filed two federal lawsuits against the companies, while seven states have taken actions or are investigating what is known in the industry as "pull-through" business. The State of California has settled Medicaid fraud lawsuits against the labs for $291 million, the State of Michigan recently filed its own lawsuit, and U.S. Senators Chuck Grassley and Max Baucus have launched an investigation. Meanwhile, the states of Florida, Georgia, Massachusetts, Nevada and Virginia also are investigating the two labs.

The Dark Report publisher wrote:

"To have anyone who was once CEO of a public laboratory company turn around and file whistleblower cases involving possibly billions of dollars in potential settlements against the nation's two biggest lab testing companies strikes me a bit like a 'man bites dog' story. After all, public company executives are 'in the club.' They tend not to turn on each other in this fashion."

The scam works like this: Quest and LabCorp provide kickbacks to private insurance companies – in the form of deeply-discounted and sometimes below-cost lab fees. In exchange, the insurance companies pressure doctors in their networks to send all of their patients' lab work, including Medicare and Medicaid patients, to either Quest or LabCorp. The labs fund the kickbacks (lower lab fees for private insurance patients) by overcharging Medicare and Medicaid patients anywhere from 70% to 500% higher. For example, Quest charged the State of California $8.59 for a complete blood test, but billed private insurers only $1.43.

The Dark Report and the legal complaints against the two companies describe the deeply-discounted and below-cost lab fees to private insurance companies as "kickbacks." In exchange, the insurance companies pressure doctors in their networks to send all of their patients' lab work, including Medicare and Medicaid patients, to either Quest or LabCorp. The labs fund the kickbacks (lower lab fees for private insurance patients) by overcharging Medicare and Medicaid patients, according to the complaints and The Dark Report. For example, Quest charged the State of California $8.59 for a complete blood test, but billed private insurers only $1.43. See this article.

Andrew Baker, a former CEO of Unilab, a small lab purchased by Quest in 2003, filed qui tam or whistleblower lawsuits against Quest and LabCorp in 2005 and 2007 respectively, charging violations of the Federal False Claims Act and the Federal Anti-Kickback Statute. The lawsuits are in various stages of litigation.

The Dark Report found that Quest and LabCorp have billed Medicare $8.7 billion and $5.4 billion respectively during the past ten years, while providing deeply-discounted prices for lab tests to private insurance companies.

It quoted Baker, saying:

"My belief is that these two companies willingly exploited a way of getting business in total … disregard of a federal law on the books right now….The law clearly states that all providers must offer to the government (meaning the Medicare and Medicaid programs in the states) the best price possible.

"…these two … companies have willfully used discounts—sometimes at a price that was less than the marginal cost of performing the test—for no other reason than to get Medicare business," he said.