Medi-Cal Auditors to Study Tarzana Pap Smear Lab’s Billing Records

State Medi-Cal auditors Wednesday began reviewing bills of a Tarzana medical laboratory business that has been under fire for allegedly misdiagnosing too many Pap smears.

The five-member audit team will spend about two weeks examining records at Central Pathology Services Medical Group and a sister firm, Central Diagnostic Laboratory, said Norm Hartman, spokesman for the state Department of Health Services.

Hartman said a 1984 state audit concluded that Central Diagnostic had overcharged Medi-Cal by about $1 million--money he said has yet to be repaid due to a continuing dispute over the audit findings.

About 20 medical labs undergo Medi-Cal billing audits per year, Hartman said. He said the Tarzana labs were not chosen because of the previous audit findings but because of “problems with their practices in the laboratory. . . . In view of that, we felt that it would be appropriate to go in and verify the accuracy of their billing practices.”

But, he added, “There is no belief on our part that they have engaged in any improper or fraudulent practices.” State officials notified the labs about the audit in a letter dated April 28.

Central Diagnostic mainly tests blood samples. Central Pathology, Southern California’s largest Pap smear laboratory, was shut down last month by state health officials after a March inspection found an error rate of 21% on its Pap smear diagnoses. Earlier in the year, the U.S. Department of Health and Human Services took Central Pathology off its list of approved Medicare and Medi-Cal vendors because of a purportedly high error rate in reading Pap smears--routine tests used to detect cervical cancer and other ailments in women.

Tested Women to be Contacted

State officials also ordered Central Pathology to contact hundreds of thousands of women whose Pap smears were diagnosed as normal over the last five years and offer to pay for new tests.

Hartman said Central Diagnostic was last audited five years ago, when investigators concluded that the firm had overcharged Medi-Cal by $1 million between February, 1981, and July, 1983. He said auditors examined 1,000 bills and other records, and extrapolated the $1 million in overcharges.

He said the firm challenged the findings and the case has not been resolved.

Martin Cooper, spokesman for Central Pathology and Central Diagnostic, said the dispute is over the validity of the extrapolation method, and the proper fee schedule to be charged Medi-Cal for laboratory work. Cooper said the lab charged Medi-Cal the fees it charged the public, rather than the lower rates it charged doctors who supply most of its work.

Cooper described the new audit as “routine . . . we don’t have a problem with” it, he said. “They have a perfect right to do these inspections, and that’s fine with us.”

Central Pathology is owned by Dr. Allen N. Levy, a pathologist, who also owns 100% of Central Diagnostic’s parent company, Amsterdam International.

Times staff writer Greg Crouch contributed to this story.