2 senators probe insurers and labs for possible kickback violations

An earlier settlement between California and Quest Diagnostics involved questions about insurers sending tests to certain laboratories in exchange for discounts.

By Doug Trapp — Posted Nov. 21, 2011

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Two senators known for scrutinizing potential Medicare fraud are examining contractual relationships between health insurers and clinical laboratories that the lawmakers believe may skirt or violate federal anti-kickback laws.

Senate Finance Committee Chair Max Baucus (D, Mont.) and Sen. Charles Grassley (R, Iowa) -- the highest-ranking GOP member on the Senate Judiciary Committee -- are looking into the practice of health insurers steering tests to certain labs in exchange for discounts or payments from these labs, also known as "pull through." The senators on Nov. 8 sent letters to three health insurance companies and two medical lab firms seeking a variety of information by Dec. 1.

The letters went to clinical labs Quest Diagnostics and Laboratory Corp. of America and health insurers Cigna, Aetna and UnitedHealth Group. Among other requests, the letters ask the companies for copies of their contracts with high-volume clients, including pricing details and other information.

Quest Diagnostics spokeswoman Wendy Bost said her company plans to cooperate with Baucus' and Grassley's request. Similar letters from lawmakers to business leaders are not uncommon, she said.

Representatives for Cigna, UnitedHealth Group and Aetna said their companies are reviewing the request and will respond appropriately. LabCorp representatives did not respond to requests for comment by this article's deadline.

Baucus' and Grassley's interest in pull through was prompted by a number of recent developments, including a lawsuit in New York and a historic legal settlement in California, said a Grassley aide, who asked not to be identified. The Medicare Payment Advisory Commission has suggested that Medicare overpays for clinical testing services, the aide said. Also, the Dept. of Health and Human Services Office of Inspector General has issued three advisory opinions, raising concerns about pull-through arrangements.

Any pull-through arrangements between insurers and clinical labs would be violations of federal anti-kickback laws, the aide said. These laws prohibit -- with certain exceptions -- anyone from knowingly and willfully receiving or paying anything of value to influence the referral of federal health care program business, including Medicare and Medicaid, according to the OIG. Violations are felony offenses.

Two of the five companies had scheduled meetings with Baucus and Grassley staff on Nov. 15 to clarify the senators' requests, the aide said.

In May, Quest Diagnostics agreed to a $241 million settlement with the state of California over a whistle-blower lawsuit. Quest, the state's largest provider of medical lab testing, was accused of systematically overcharging the state's Medicaid program for more than 15 years and giving illegal kickbacks in the form of discounted or free testing to doctors, hospitals and clinics that referred Medicaid patients and others to the labs, according to a May 19 statement by California Attorney General Kamala D. Harris. Quest did not admit any wrongdoing in the settlement and said its testing services were priced appropriately.

The California settlement is the largest recovery in the history of the state's False Claims Act. The act allows any person with previously undisclosed information about a fraud, overcharge or other false claim to file a sealed lawsuit on behalf of California to recover the losses, according to Harris' office. A whistle-blower filed the Quest lawsuit in 2005, and California is pursuing similar cases against other clinical lab companies.

Another whistle-blower lawsuit alleging similar pull-through practices by LabCorp and UnitedHealth Group was filed in August in the Southern District of New York by the head of NPT Associates, a clinical lab company.

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Senators seek records of insurers' links with labs

Senate Finance Committee Chair Max Baucus (D, Mont.) and Sen. Charles Grassley (R, Iowa) are seeking information from three health insurance companies and two clinical laboratories regarding the practice of steering tests to certain labs in exchange for discounts, also known as "pull through." The senators sent letters asking for:

  • Copies of the health plans' agreements with their five largest clinical lab testing providers, including correspondence about contract negotiations, especially regarding prices. The senators also asked the clinical labs to disclose their five largest contracts with managed care organizations.
  • All presentations at meetings between health plans and clinical lab testing providers, consultants or others dealing with pull-through practices.
  • Health plans' correspondence with network physicians and potential network physicians about bonus fees relating to clinical labs, plus data on physician utilization of in-network and out-of-network labs.
  • Clinical labs' correspondence with physicians about their utilization of other labs.
  • Amounts of clinical labs' past five years of revenue from Medicare, private health plans and other sources.
  • Clinical labs' prices for the 10 most-ordered tests, prices charged to the labs' five most common insurer clients and prices charged to Medicare.

Source: Senate Finance Committee, November

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