Quest Diagnostics agrees to pay $1.8 million to settle duplicate testing allegations

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Quest Diagnostics yesterday agreed to pay $1.8 million to settle a qui tam (whistleblower) lawsuit that was filed in July 2012 by a former Quest phlebotomist who alleged both Quest and LabCorp performed, and billed Medicare for, duplicate laboratory testing.

I first wrote about this suit in October 2014, right after the judge unsealed it. Briefly, Ms. Elisa Martinez used to work as a phlebotomist at Quest’s patient service center (PSC) in Red Bluff California, and during her time at the PSC, she noticed:

…Quest received orders from different physicians to perform the same tests on the same patient and instead of merely sending the results of one set of tests to the ordering physicians, allegedly performed duplicate blood and urine testing and billed Medicare twice.

Ms. Martinez stated she watched a phlebotomist at her PSC pour urine from one specimen cup into a second cup in order to facilitate the duplicate testing, and an employee in the business office confirmed each duplicate test was billed separately.  When she asked one of her supervisors about the matter, she was allegedly told to “listen more and back up everybody”.

Only a few allegations are made in the complaint, and it is important to note Ms. Martinez was not required to present an exhaustive list of all fraudulent acts she witnessed; she only had to present enough to move the case forward.

According to the press release announcing the settlement, the “U.S. Department of Justice investigated and substantiated the allegations” in the suit, but Quest “denied any liability or wrongdoing.”  An article over at Taxpayers Against Fraud says Ms. Martinez will receive $358,000 of the settlement.

I reached out to Mr. Michael Hirst, one of the attorneys representing Ms. Martinez, and he was kind enough to provide me with the following comment about the case:

Ms. Martinez has performed a significant public service by coming forward and blowing the whistle.  Without her courage, none of this would have been exposed.

The performance of medically unnecessary and duplicate tests can put patients at risk and undermine the integrity of the Medicare program.  Government programs like Medicare and Medicaid, which are vital to so many, need to be protected by all.

The amended complaint that was filed on January 30, 2015 does not list LabCorp as a defendant, so at some point LabCorp was dropped from the suit, although I do not know precisely when or why.

BioHealth Medical Laboratory and PB Laboratories file $10 million lawsuit against Cigna

CignaBioHealth Medical Laboratory and PB Laboratories, two clinical laboratories based in Florida, have filed a lawsuit in US District Court in Miami that alleges Cigna has refused to pay them more than $10 million for laboratory testing.

Factual Allegations

Both laboratories claim they have applied several times to join Cigna’s network, but, for reasons not explained to them, have been denied. Nonetheless, the labs routinely receive specimens from Cigna members.  These members, at the time of their doctor visit, sign a consent form which authorizes Cigna to pay the labs for their services.

The labs also state they verify the patient does indeed have coverage before any testing is performed, and that the patient is billed for any applicable co-pays or deductibles once testing is completed.  In addition, the labs make reasonable attempts to collect co-pays and deductibles, and all of the claims at issue were submitted to Cigna in a timely fashion.

The labs first realized Cigna was trying to get out of paying them around January 2014, when Cigna requested documentation supporting the claims submitted by PB Labs.  PB Labs complied, and provided all of the requested documents, but Cigna requested more and more documentation.  This continued into July, when it became clear to PB Labs that Cigna:

… did not intend to pay the claims and was engaged in a scheme designed to overburden PB and force PB to abandon these claims.

In December 2014, Cigna formally accused PB Labs of routinely waiving co-pays and deductibles, despite the fact PB Labs says it provided Cigna with a number of documents showing it had a procedure in place for collecting them.  PB Labs shot back at Cigna and requested the insurer provide evidence supporting its decision to not pay the claims, but no evidence has ever been produced.

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Labor law violation suit against LabCorp remains largely intact after motion to dismiss



A US District judge in California has largely found in favor of the plaintiff in a motion filed by LabCorp to dismiss in its entirety a putative class action lawsuit that alleges the lab giant violated multiple California labor laws.  In addition, LabCorp also filed a motion to strike, which the judge also denied.

This is the second time in about a month I have written about this case.  The first article discussed LabCorp’s success in keeping the case in federal court.

Motion to Dismiss

Failure to pay overtime and minimum wages

The plaintiff, Ms. Rita Varsam, alleged LabCorp failed to schedule an adequate number of Patient Service Technicians (PSTs) and at the same time discouraged employees from accurately clocking overtime hours, which led to employees simply working off the clock.  LabCorp argued mere discouragement is not sufficient to state a claim, but the judge disagreed and said past courts have found employers who make it difficult for employees to take breaks, or those who undermine meal and rest period policies, have violated California labor law.

LabCorp, citing a lawsuit that alleged violation of the federal Fair Labor Standards Act (FLSA), also said Ms. Varsam failed to specify a single “particular instance” in which she worked more than 40 hours in a week and was not paid overtime. Unfortunately for LabCorp, the court in the case it cited also did not require the plaintiff to specify a “particular instance” of unpaid overtime in order to survive a motion to dismiss and move on to discovery, either.  And the reason it gave is quite obvious:

After all, most (if not all) of the detailed information concerning a plaintiff-employee’s compensation and schedule is in the control of the defendants.

LabCorp also cited two other cases in its motion as to why these two claims should be dismissed, but the judge stated the cases LabCorp relied upon pertained only to federal labor law, and not California’s.

Meal and Rest Period Violations

Ms. Varsam alleged that, due to inadequate staffing and LabCorp’s “policy of strongly discouraging any additional hours being worked beyond scheduled shifts”, PSTs were forced to clock out for meals and rest periods, during which they regularly continued to work but were not paid for the time.

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Oxford Immunotec sues Qiagen, Quest Diagnostics, LabCorp for patent infringement

Oxford ImmunotecUnited Kingdom-based Oxford Immnotec has filed a lawsuit in US District court in Massachusetts that alleges Qiagen, Quest Diagnostics and LabCorp are infringing on its patented technology with the QuantiFERON-TB Gold (QFT-Gold) and QuantiFERON-TB Gold Plus (QFT-Plus) tests.

Five of the patents at issue describe a “method of diagnosing in a host infection by or exposure to a mycobacterium which expresses ESAT-6” and are as follows:

A sixth patent (#8,617,821, issued December 31, 2013) describes:

A method of assaying for peptide-specific T-cells comprises adding peptide to a fluid sample of fresh peripheral blood mononuclear cells, and detecting a cytokine such as interferon-γ produced by T-cells that have been pre-sensitized to the peptide.

Oxford uses the methods described in these patents in its T-SPOT.TB test, which received pre-market approval from the FDA in July 2008.

Briefly, a tube of blood is drawn, spun down, and the mononuclear cells are added to a microtiter plate that contains pre-bound antibodies to γ-interferon.  Peptide antigens that are identical to ESAT-6, a protein virulence factor of M. tuberculosis, are introduced, and pre-sensitized T-cells secrete γ-interferon in response.  The free γ-interferon gets bound to the antibodies in the bottom of the well, and after the addition of a visible substrate, is quantified.

Oxford notes in its complaint before it developed its patented technology, the options for identifying patients who had been exposed to or infected with M. tuberculosis were 1) a culture with a six to eight week turn around time, and 2) the unreliable skin PPD test.

QFT-Gold, which also has pre-market approval from the FDA, uses a cocktail of peptides (ESAT-6, CFP-10, and TB7.7(p4)) to stimulate pre-sensitized T-cells to release γ-interferon, which is then measured via ELISA.  QFT-Plus only uses ESAT-6 and CFP-10 as its stimulatory peptides.

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DOJ intervenes against Tonya Mallory, BlueWave HealthCare Consultants and Berkeley HeartLab


On August 7, 2015, the Department of Justice has officially intervened in three separate qui tam (whistleblower) lawsuits against founder and former CEO of Health Diagnostic Laboratory (HDL) Tonya Mallory, BlueWave Healthcare Consultants and its founders/owners Floyd Calhoun Dent and Robert Bradford Johnson, and Berkeley HeartLab (BHL).  The Complaint in Intervention was filed almost four months to the day after the government announced it would intervene against the defendants.

I have discussed the schemes HDL, BlueWave and BHL are alleged to have engaged in before, so what follows is merely a (relatively) short collection of some of the factual allegations contained in the government’s 48 page complaint.

Factual Allegations against Berkeley

  • BHL induced referrals with a “draw fee” of $20 per sample starting in 1999
  • BHL ignored the warnings about per-patient payments contained in OIG Advisory Opinion 05-08, and merely changed the name from “draw fee” to “process and handling fee”, and reduced the amount paid to $7.50 per sample.  Some accounts still received as much as $11.50 per sample
  • BHL paid Dr. Rex Butler tens of thousands of dollars in 2009 in exchange for approx. $384,366.72 in referrals
  • BHL paid Dr. Bodo Brauer tens of thousands of dollars in 2010 in exchange for approx. $570,843.31 in referrals
  • BHL paid Dr. Jeffrey Gladden tens of thousands of dollars in 2010 in exchange for approx. $556,825.98 in referrals
  • Between 2005-2011, BHL paid about $6 million in P&H fees to physicians and physician groups in exchange for about $96 million in Medicare and TRICARE reimbursement
  • BHL executives encouraged their sales force to use the P&H fees during their sales pitches to generate new referrals, and advocated for increasing the amount paid to keep business it was losing to HDL
  • BHL stopped paying P&H fees about 8 months after it was acquired by Quest Diagnostics, and eventually lost so much market share as a result that it “no longer operates as an independent laboratory providing advanced lipid testing.”

Factual Allegations against BlueWave, Johnson and Dent

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Caris Life Sciences screwed over its employees to save on taxes; must pay them $16.3 million

CarisA Delaware judge has ordered Caris Life Sciences to pay its employees $16.3 million after finding Caris breached its Stock Incentive Plan in an attempt to avoid paying taxes on two business units it spun off prior to selling a portion of its business to Miraca Life Sciences.


Caris used to consist of three business units:  Caris Diagnostics, TargetNow, and Carisome.  Caris’ founder, David Halbert, owned 70.4%, while private equity firm JH Whitney Fund VI owned 26.7%.

Caris employees owned the majority of the remaining 2.9% through stock options.  Caris’ Stock Incentive Plan said option holders would receive the difference between the fair market value (as determined by Caris’ board of directors) of the share price and the price at which their options were exercised.

Caris Diagnostics consistently made a lot of money, but TargetNow and Carisome did not, so in early 2011 Caris began exploring its options, and the decision was made to sell Caris Diagnostics.  During the bidding process, a few potential buyers expressed interest in buying TargetNow as well, but in the end, only Caris Diagnostics was sold.

Through a complex maneuver designed to minimize tax liability involving at least four subsidiaries and a newly-created entity in the Cayman Islands, Caris spun off TargetNow and Carisome, which were together valued at $65 million, to its shareholders, and then Miraca paid $725 million for Caris Diagnostics in November 2011.

Halbert and JH Whitney received about $560 million from the merger, and they pumped $100 million into TargetNow and Carisome.

The stock options owned by the employees were cancelled as a result of the merger.  Caris told them they would receive the difference between $5.07 ($4.46 was for Caris Diagnostics, and the remaining $0.61 was for TargetNow and Carisome) and the price at which their options were exercised.  Caris also withheld 8% of the difference and placed it in an escrow account.


Kurt Fox, a former Caris Diagnostics salesman who owned options for 71,600 shares of Caris stock, filed a class action lawsuit and alleged Caris’ executives, and not its board of directors, determined Caris’ fair market value, and that they did so in an “arbitrary and capricious” manner that resulted in undervaluation.  He further alleged Caris’ Stock Incentive Plan did not allow for any option proceeds to be withheld and placed in an escrow account.

Judge’s Findings

The judge stated the central fact at issue in the case is what Halbert, Gerard Martino (Caris’ EVP, CFO and COO), and other Caris principals believed TargetNow and Carisome were truly worth back in the fall of 2011.

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Cigna accuses urine drug toxicology laboratories of fraud, kickback scheme


Health insurer Cigna recently filed a lawsuit against Sky Toxicology Lab Management and urine drug toxicology (UDT) laboratories Sky Toxicology, Frontier Toxicology and Hill Country Toxicology that, among other things, accuses them of engaging in fraud and a lucrative patient-referral kickback scheme.

All three labs are located in San Antonio Texas.  Sky Tox and Frontier Tox are about a block apart from one another, and Hill Country Tox is about a 10 minute drive away.  According to the “About Us” pages on the websites, the three UDT labs share the same executive team:  W. Wade White, MD-CEO and Medical Director; Lance Hupfeld-Chief Sales Officer; Bradley West-Chief Operating Officer.

Sky Toxicology Lab Management is a limited partnership organized in Florida in 2013, according to the Form D on file with the Securities and Exchange Commission.  Its principal place of business has the same address as Sky Toxicology, and it lists Dr. White, Mr. Hupfeld, Mr. West and a fourth individual named Nick Boatman as its executive officers.

Factual Allegations

The vast majority of health insurance plans administered by Cigna are called Administrative Services Only (ASO) plans that are funded by private companies through employee contributions, with Cigna providing claims processing and appeal adjudication services.  Cigna has fiduciary responsibility for these plans, which are also governed by the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that provides protection for individuals with private health insurance plans through a set of minimum standards.

Cigna allows members to choose whether they want to receive care from health care providers (including laboratories) that are in Cigna’s network or outside of Cigna’s network.  If the member chooses an out-of-network provider, the member will incur more financial responsibility through higher co-pays, deductibles and co-insurance than if they had used an in-network provider.

The member can also be balance billed, which is when the out-of-network provider bills the patient for the difference between what they charged for their services and what the insurance company paid.

Cigna claims it is “widely-known” that patients who pay for even a small portion of their health care out-of-pocket will make “more informed choices regarding medical care, and choose care that is medically necessary, and not simply free of charge.”

Since July 2011, Cigna has paid more than $17.5 million to Sky Tox for over 40,000 processed claims, more than $3.4 million to Frontier Tox for over 5,900 claims, and more than $1.8 million to Hill Country Tox for over 3,400 claims. The overwhelming majority of these claims were submitted under ASO plans.

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Negligence suit against Creighton dermatopathologist Dr. Deba Sarma will continue in Illinois

Scales of Justice

A US District Court judge has ruled a negligence lawsuit filed in Illinois against Creighton University and now-retired Creighton dermatopathologist Dr. Deba Sarma will be allowed to continue in Illinois.

Factual Allegations

Ms. Kayla Johnson had a 1 cm lesion on her left leg excised by Dr. Damian Grivetti on January 31, 2011 at St. Margaret’s Health Center in Peru, Illinois. The specimen was sent to the pathology department and examined by pathologist Dr. Eric Santos.  Dr. Santos felt the lesion represented an “atypical compound melanocytic proliferation” and that the differential diagnosis was between an atypical Spitz nevus and malignant spitzoid melanoma.

Prior to signing the case out, Dr. Santos sent the slide to Creighton University, where it was examined by Dr. Tracey Harbert, who at the time was a second year pathology resident, and attending dermatopathologist Dr. Deba Sarma, Director of Dermatopathology until his retirement in 2012.

Dr. Sarma signed out Ms. Johnson’s specimen as a Spitz nevus with clear margins and stated there was “no suggestion of melanoma”.  Dr. Sarma must have said the nevus demonstrated cytologic and/or architectural atypia, as there was also apparently a comment in the report that said the “atypia may be treated with a wider conservative excision” but no residual tumor was expected to be found.

Dr. Sarma reportedly called Dr. Santos to discuss the case with him, and Dr. Santos subsequently “included and adopted” Dr. Sarma’s findings into his final report.  Ms. Johnson was later told by an unnamed person at St. Margaret’s that no additional treatment was necessary.

Around August 29, 2012, Ms. Johnson was diagnosed with Stage III melanoma. She was pregnant at the time and either could not, or elected to not, receive therapy during her pregnancy.  Unfortunately, by the time she began treatment, she had progressed to Stage IV.

The slides from her original excision were reviewed by dermatopathologist Dr. Kelli Ann Hutchens at Loyola University in October 2013.  Dr. Hutchens reported the differential diagnosis of the lesion included either a 1.6 mm malignant melanoma or an atypical Spitz nevus, and given the patient’s history of metastatic melanoma, malignant melanoma was favored.

Ms. Johnson filed a lawsuit in US District Court in Illinois on June 19, 2014 that accused Drs. Sarma and Harbert of negligence and Creighton University of vicarious liability.  At some point, Ms. Johnson dropped Dr. Harbert from the lawsuit.

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Dr. Franklin Cockerill now CEO of Analyte Health, defendant in stolen trade secrets lawsuit

Analyte Health LogoDr. Franklin Cockerill, the former chairman of the Department of Laboratory Medicine and Pathology at the Mayo Clinic in Rochester Minnesota who was accused of misappropriating Mayo’s trade secrets, has recently been named CEO of Analyte Health, one of the defendants in an ongoing trade secret violation lawsuit.

Those interested in learning more about the trade secret misappropriation allegations leveled against Dr. Cockerill by the Mayo Clinic can do so here; they certainly make for entertaining reading.

It is important to note the lawsuit against Analyte was originally filed in June 2013, and the alleged acts took place between 2007-2009, long before Dr. Cockerill had anything to do with Analyte.  But it is interesting nonetheless that Dr. Cockerill’s days of dealing with trade secret violation allegations are not yet over.

The Players


Mark Romz and Charles Dorfman in 2003 began work on developing an internet-based company that would perform confidential sexually transmitted disease (STD) testing without the need for a doctor’s visit.  The fruits of their labor was found at, and according to the complaint, was the industry leader by 2007.


Analyte Health is a self-described “diagnostic triage company” that provides “convenient access to education, diagnostic testing, personalized results and recommendations to consumers through our online clinics.”

Daniel Malven, Dan Bodde, Michelle Sobel, and Jonathan Kawa are or were shareholders in Analyte.  In addition, Malven used to be an officer at Analyte, and Sobel is currently VP of New Services.

Malven, Bodde, Sobel and Kawa all used to work for an entity called Ajuga Media, which will be discussed in more detail below.

Factual Allegations

Dorfman and Romz purchased advertising from major internet search engines (like Google AdWords) that would cause ads for tSTD to appear on web pages when prospective patients performed online searches for various STDs. They purchased these ads by “bidding on certain key words, combinations, permutations, and even misspellings of words, in on-line auctions”.  They spent “thousands of hours of trial and error and hundreds of thousands of dollars” to develop their online advertising campaign that would also cause tSTD to appear at the top of search engine results.

The ads would direct the patient to tSTD’s website, where they could (with or without a counselor’s help) select what STD testing they needed, and where they wanted their blood drawn.  The patient was then provided with an identification number that allowed them to confidentially review their results online, and could discuss those results with a tSTD counselor.

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LabCorp succeeds in keeping labor law violations class action suit in federal court


A US District Court in California has denied a motion to remand the case to state court filed by the lead plaintiff in a putative class action lawsuit that alleges LabCorp failed to pay employees for overtime and meal allowances.


Ms. Rita Varsam filed this suit on behalf of herself and “all persons who worked as non-exempt Patient Service Technicians for Defendants in California, within four years prior to the filing of this complaint until date of certification” in the Superior Court of California, County of San Diego on June 3, 2014.

She alleged eight causes of action:

  1. Violation of California Labor Code §§ 510 and 1198 (unpaid overtime)
  2. Violation of California Labor Code §§ 1194, 1197, and 1197.1 (unpaid minimum wages)
  3. Violation of California Labor Code §§ 226.7 and 512(a) (unpaid meal period premiums)
  4. Violation of California Labor Code § 226.7 (unpaid rest period premiums)
  5. Violation of California Labor Code §§ 201 and 202 (wages not timely paid upon termination)
  6. Violation of California Labor Code § 226(a) (non-complaint wage statements)
  7. Violation of California Labor Code §§ 2698, et seq. (Private Attorney General’s Act or “PAGA”)
  8. Violation of California Business & Professions Code §§ 17200, et seq. (unfair and harmful business practices)

LabCorp removed the case to federal court in November 2014 pursuant to the Class Action Fairness Act of 2005 (CAFA) due to the fact LabCorp is a citizen of Delaware and North Carolina and the plaintiff is a California citizen, the proposed class has more than 100 members, and the amount in controversy exceeds $5 million.

Ms. Varsam filed a motion to remand the case back to California court, arguing LabCorp failed to prove both the amount in controversy is greater than $5 million and that there is “minimal diversity of citizenship”.


The judge relied on the deposition of the lead plaintiff and the declarations of Daniel Lontay, an expert for LabCorp who analyzed time and pay data, and Joseph Martin, LabCorp’s Senior Human Resources Information Management Specialist, to determine the amount in controversy.  Mr. Martin apparently already had put time and pay data together for another California class action lawsuit against LabCorp, and that data overlapped with the time period at issue here.

Ms. Varsam alleges class members were “required to work for periods longer than five (5) hours without a meal period of not less than thirty (30) minutes”. Employers that violate this California labor law must pay the employee an extra hour of wages.  Mr. Lontay determined that between June 3, 2010 and April 24, 2014, there were 145,723 shifts in which a LabCorp patient service technician (PST) ate a meal after the fifth hour of the shift, the meal break was less than 30 minutes in duration, or a meal break was not recorded at all. This represented about 25% of all PST shifts greater than six hours in duration.  Given the average hourly wage of LabCorp PSTs of $17.48, the amount in controversy for this claim is at least $2.547 million.

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