Tarzana Firm Among Three Subpoenaed as Medicare-Medicaid Fraud Probe Widens
A federal probe into abuses of Medicare and Medicaid claims widened Friday as three companies that provide medical tests to doctors said they were subpoenaed.
Tarzana-based Unilab Corp., Philadelphia-based SmithKline Beecham Clinical Laboratories and Teterboro, N.J.-based Metpath, a unit of Corning Inc., said they received subpoenas from the U.S. Department of Health and Human Services.
Investigators are seeking information about possible false or improper Medicare and Medicaid claims in the $32 billion worth of tests that American doctors order annually. U.S. labs perform about 2.6 billion tests each year on blood, urine and tissue.
On Thursday, San Juan Capistrano-based Nichols Institute and Nashville, Tenn.-based Allied Clinical Laboratories Inc. said they were told to expect subpoenas.
“You would have to believe that the nation’s health care companies are brutally unethical if you believe some of the signals this sends,” said Richard Jabbour, an analyst with Edward D. Jones & Co. in Maryland Heights, Mo. He said he believes the companies are ethical.
In over-the-counter trading Friday, Unilab shares fell $1.25 to close at $6 on volume of 1.5 million shares, compared to three-month average daily trading of 161,000 shares.
SmithKline’s ADR unit depository receipts were unchanged at $30.75. National Health fell 25 cents to $16.375.
Allied Clinical Labs lost $1.50 to close at $17.25. Corning fell 37.5 cents to $31.875. Meris lost 37.5 cents to close at $7. Nichols fell 62.5 cents to $5.375.
Jabbour said the investigation may have been spurred by a federal investigation of La Jolla-based National Health Laboratories Inc.
National Health in December said it agreed to pay $111.4 million to the government after pleading guilty to filing false claims to Medicaid and the Civilian Health and Medical Program of the Uniformed Services.
Joseph Millsap, an analyst with Morgan Keegan & Co. in Memphis, Tenn., said government investigators are trying to determine if labs encouraged doctors to order extra tests by promising they would be included free in a package of tests.
The laboratories may then have billed the tests to the government in a practice known as gaming, Millsap said.
The investigation is “an audit of an industry to ascertain the extent that gaming of the system at the expense of the taxpayer has occurred,” Millsap said.
Medical-testing companies get about 20% to 35% of their revenue from Medicare and Medicaid, said Hemant Shah, an independent analyst in Warren, N.J.
Unilab previously said it is under investigation by the Justice Department for billing practices similar to ones covered by the Health and Human Services subpoena.
The company received less than a third of its $214 million in revenue last year from Medicare and Medicaid reimbursements, said Richard A. Michaelson, vice president of finance.
“It’s hard to know what to defend,” he said. “We haven’t been charged with anything. The request for information is an extremely broad one.”
