Medical labs accused of fraud

BURBANK — Seven private medical laboratories, including two based in Burbank, are accused by the state attorney general’s office of swindling the state out of hundreds of millions of dollars by overcharging the Medi-Cal program for various tests.

The seven companies included five from Los Angeles County that allegedly charged the state at least six times more than they did other customers for procedures such as blood and urine tests. Medi-Cal provides discounted health care to the poor and disadvantaged.

Defendants in the suit filed last month include Health Line Clinical Laboratories, now known as Taurus West Inc., and Physicians Immunodiagnostic Laboratory, both of Burbank.

Taurus West began overcharging the Department of Health Care Services in 1995, according to the lawsuit. A former sales representative confirmed that Taurus West’s usual billing policy was to negotiate and charge independent physicians discounted prices while billing Medi-Cal, Medicare, insurance companies and patients up to twice the rates on Medi-Cal’s maximum reimbursement schedule, according to the suit.

“In the face of declining state revenues, these medical laboratories have siphoned off hundreds of millions of dollars from programs intended for the most vulnerable California families,” Atty. Gen. Jerry Brown said at a news conference last week revealing the civil suit filed in San Mateo County. “Such a pattern of massive Medi-Cal fraud and kickbacks cannot be tolerated.”

In one instance, Taurus West fleeced the state by as much as 605% on a DNA probe, billing Medi-Cal $77.60 per test where it regularly charged $11, according to the suit. The lab also charged Medi-Cal $31.83 for a $15.75 lipid panel, and $38.80 for a $20 human papilloma virus screening, according to the suit.

The defendants, in exchange for the deep discounts to independent physicians, expected clients to refer their Medi-Cal and Medicare patients to the laboratories, according to the suit. Under state law, the suit alleges, the actions amounted to illegal kickbacks.

As of press time Tuesday, representatives of the company failed to return repeated calls seeking comment. However, Brown indicated that if the state were to offer a $100-million settlement deal to the defendants, attorneys for the medical laboratories would be interested.

The lawsuit seeks three times the amount of California’s damages, civil penalties of $10,000 for each false claim and recovery of attorneys’ fees and expenses. In all, the state stands to receive several hundred million dollars in damages.

Physicians Immunodiagnostic, the other local laboratory named in the lawsuit, has for the last 13 years offered and charged lower rates to purchasers than it has to the Department of Health Care Services for Medi-Cal, according to the suit. As of press time Tuesday, representatives of the company failed to return repeated calls seeking comment.

Anthony Cava, a spokesman for the Department of Health Care Services, said the department is working with the attorney general’s office to investigate the matter.

“[The department] has a zero tolerance policy for fraud, waste and abuse. Any loss of Medi-Cal funds is unacceptable. California’s Medi-Cal anti-fraud efforts are the most comprehensive of any state Medicaid program in the nation. We will continue to aggressively work to stamp out all types of fraud to protect scarce state resources and protect the fiscal integrity of the Medi-Cal program.”

The state attorney general’s office began investigating the alleged fraud three years ago after an executive with a competing medical lab filed a private false-claims action under seal. Chris Riedel, the chief executive of Hunter Laboratories, stands to receive a portion of the damages.

“I confirmed with the California Department of Health Care Services that these practices were illegal. We then had a choice — either join the other labs in violating the law or be unable to compete for business. We choose to suffer the financial consequence, and follow the law,” he said in a prepared statement.

The other defendants include Whitefield Medical Laboratory Inc., of Pomona; Santa Ana-based Westcliff Medical Laboratories; Seacliff Diagnostics Medical Group, based in Monterey Park; Quest Diagnostics Inc., based in Madison, N.J., and five of its affiliates, including Specialty Laboratories Inc., based in Valencia; and Laboratory Corporation of America, based in Burlington, N.C.

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