Inquiries Into Medical Labs Study Possible Testing Frauds

Federal and state investigators are looking into allegations that Southern California medical diagnostic labs have billed insurance companies millions of dollars for unnecessary tests, often on healthy patients.

For more than a year, federal and state investigators have been targeting businessmen and doctors connected with about 80 diagnostic labs that are suspected of fraudulent testing. Involved in the investigation are the U.S. attorney’s office in Los Angeles, the FBI, the inspector general’s office of the U.S. Department of Health and Human Services, the state Department of Insurance fraud division and the state Board of Medical Quality Assurance.

Orange County Inquiry

In a separate inquiry, the Orange County district attorney’s office has been investigating similar complaints against four diagnostic labs.

Insurance officials say a disturbing pattern has developed in the last three to four years, involving several hundred Southern California diagnostic labs that allegedly solicit patients for sometimes unnecessary testing through health clubs, at chiropractor’s offices or by random phone calls. Some insurance officials have dubbed these firms “rolling labs” because some use portable equipment and operate out of a van.

While insurance policies generally do not cover medical screenings of healthy policyholders, company executives say, billings and computer-coded diagnoses from these labs nonetheless have resulted in many payments that should not have been made. That means higher insurance costs for all consumers, said Jan Meisels, associate director for a Washington-based insurance industry association, the Health Insurance Assn. of America.

In the last 18 months, federal civil suits have been filed by Aetna Life Insurance, Metropolitan Life Insurance and the Motion Picture Health and Welfare Fund against David and Michael Smuskevich. The suits accuse the Smuskevich brothers of fraud for operating as many as 42 labs in Los Angeles and Orange counties that allegedly billed insurance companies for unnecessary tests.

Termed ‘Fabrications’

According to Metropolitan’s lawsuit, the company received claims for thousands of dollars in tests that indicated their clients were suffering from illness, when “often the diagnoses stated on the claims were simple fabrications, obtained from historical information received from the insured . . . to facilitate the payment of the claim.”

The Aetna suit claimed that the company was billed for expensive diagnostic tests “that, in some instances, were never rendered.” It cited the case of a woman who was solicited at a health club, made an appointment for testing but never showed up. Nevertheless, the suit claimed, in May, 1985, Aetna was billed for $2,400 in tests by three diagnostic labs allegedly controlled by the Smuskevich brothers.

Michael J. Schroeder, an attorney for the Smuskevich brothers, said Aetna’s claim that patients were billed for tests that were never administered was false. He described all three lawsuits as “without merit.”

“The real problem is that they just don’t want to pay for these tests,” Schroeder said of the insurance companies. “They don’t believe in preventive medicine.”

Schroeder said each of the insurance companies sued his clients only after the Smuskevich brothers had sued them first in state court for failing to pay thousands of dollars in fees for lab tests.

On Doctors’ Orders

In every case, Schroeder said, the tests were administered correctly--on the written order of a doctor who was not compensated by the Smuskevich labs.

“A diagnostic lab is kind of like a gas station,” Schroeder explained. Just as a gas station fills a customer’s request for gas, a diagnostic lab simply follows a doctor’s order and runs a test. “You don’t turn around and say ‘Do you need gasoline?’ That’s not the diagnostic labs’ role.”

However, Adam Radinsky, an attorney for the Motion Picture Health and Welfare Fund, claimed that some doctors who prescribed the tests were involved in a “fraudulent relationship” with the labs. The doctors “were being paid by the Smuskevich entities” and were sometimes told what tests to prescribe, Radinsky said.

The Motion Picture Health and Welfare Fund lawsuit alleges a conspiracy between doctors and certain diagnostic labs.

Schroeder flatly denied Radinsky’s claims.

Brother in Prison

He also noted that the older Smuskevich brother, David, 36, is not now involved in any of the labs. Since May, he has been serving a three-year federal prison term in Boron after his conviction for soliciting kickbacks in connection with a Norwalk diagnostic lab. But insurance company executives from Metropolitan, the Prudential Insurance Co. of America and other major firms contend their problems with diagnostic labs extend far beyond the alleged fraud involving the Smuskevich brothers.

The insurance company executives, frustrated by the continuing diagnostic lab operations, were eager to talk about their problems. But most officials from the federal and state investigative agencies said they could not comment.

Judy Holtz, a spokeswoman for the inspector general’s office of the U.S. Department of Health and Human Services did confirm that an investigation was under way. A state government source also confirmed that a federal-state task force has been investigating the labs.

The labs’ pitch to health-conscious Californians sounds appealing, said Gail Love, public information director of Hoag Memorial Hospital Presbyterian, who in November received a call from a firm offering free testing.

The telephone solicitor verified that Love had insurance, then offered “valuable diagnostic services . . . that could save my life,” including ultrasound exams and a test that “could diagnose cancer anywhere in my body,” she said.

Skeptical, Love said she didn’t have time for the test, but she reported the solicitation to hospital executives as misleading.

Insurers’ Complaints

Insurers complain that the tests--which often include unusual vascular flow studies, ultrasound exams and cardiac studies for minor problems like high blood pressure--are billed at $2,000 to $12,000 a patient.

They say many patients don’t know about the high charges because the bills--and sometimes the test results as well--usually are sent only to the patient’s insurance company.

Although insurance companies are aggressively monitoring claims and rejecting many, the problem labs are hard to keep track of, company executives said.

“What they do is they change names and they change locations every week,” said Rhenn Darensburg, director of claims for Prudential Insurance in Woodland Hills. Darensburg said he knew of 350 labs in Southern California with questionable claims.

Some insurers say they are reluctant to reject such claims completely for fear of being sued, so they often pay a portion of a questionable claim. That practice often has made it difficult for officials to pursue fraud charges, one federal investigator said.

Times staff writers Jim Carlton and George Frank also contributed to this story.