Andrew Baker, the former CEO of Unilab and current CEO of Huntingdon Life Sciences, has written an article for The Huffington Post in which he states the federal government needs to stop Quest Diagnostics and LabCorp from continuing to “scam” the Medicare and Medicaid programs of billions of dollars.
You will recall Mr. Baker filed qui tam (whistleblower) lawsuits against Quest in 2005 and LabCorp in 2007, alleging they violated the federal False Claims Act and Anti-Kickback Statutes. Those cases are still making their way through the system. See this post and this one.
In his article, he estimates Quest and LabCorp have cost taxpayers $15 billion since 1996 in the form of false claims stemming from illegal kickbacks to Aetna, Cigna, United Healthcare and Blue Cross.
From the article:
These two labs are breaking federal laws by deeply discounting lab fees to private insurance companies, sometimes charging them for lab work even below their costs. In exchange, the insurance companies pressure doctors in their networks to send all of their patients’ lab work, including Medicare and Medicaid patients, to either Quest or LabCorp.
The labs fund the kickbacks — in the form of lower lab fees for private insurance patients — by charging Medicare and Medicaid patients the highest possible fee, instead of offering them a best price, and pressuring doctors to send all their lab work exclusively to them.
Mr. Baker also mentions Quest’s $241 million settlement with the state of California for violations of CA’s False Claims Act, LabCorp’s $50 million settlement with the state of California for overcharging CA’s Medicaid program and for providing kickbacks to physicians for referrals, and the lawsuit filed against Quest, Blue Cross/Blue Shield of California and Aetna by four California labs I wrote about back in November 2012. Presumably this is for the “where there’s smoke, there’s fire” effect.
The purpose of Mr. Baker’s article appears to be to stimulate discussion about government intervention in laboratory pricing for government programs. He advocates for clarification of the intent of current federal law that would require laboratories to charge Medicare and Medicaid their “best price”, just as California has already done. In other words, labs would only be able to charge Medicare and Medicaid the lowest (read “best”) price they (the labs) charge private insurers.
Because labs would likely not want to take the massive hit to their bottom line this clarification would bring, I imagine the labs would have little choice but to raise the prices it charges private payors. This should then allow smaller labs that have been essentially shut out of the market due to these aggressive marketing strategies the ability to compete with the Quests and LabCorps of the world yet again.
It will be interesting to see if this actually goes anywhere.