FLPA: U.S. Department of Justice Fails to Halt Massive Medicare Fraud

Whistleblowers Continue Court Fight Against Quest Diagnostics

Federal Government Could Recoup Hundreds of Millions – if not Billions -- in Damages, Says Fair Laboratory Practices Associates

NEW YORK, July 8, 2011 /PRNewswire-USNewswire/ -- The U.S. Department of Justice is allowing the nation's largest medical laboratory, Quest Diagnostics, Inc., to rip off taxpayers by hundreds of millions, if not billions, of dollars in a massive Medicare fraud scheme by not intervening in an anti-kickback and false claims lawsuit against the company, said the three former medical laboratory executives who filed the lawsuit.

"This fraud involves staggering amounts of money. Clearly the Justice Department must believe Quest is too big to go after and is saving its energy to muscle small-time doctors instead," said Andrew Baker, one of the former executives of Unilab, purchased by Quest in 2003.

"We will continue to fight Quest in court, with or without the Justice Department," said Baker.

The Justice Department publicly filed its notice yesterday with the Southern District Court of New York not to intervene in the case; however, the court granted DOJ’s request for the right to intervene at a later time.

Citing today's New York Times' front-page article on a little-known, relatively new DOJ policy to be more lenient on corporate fraud, Baker said DOJ's Tony West is "sitting on his hands, doing nothing" about major corporate health care fraud. West is an Assistant Attorney General for the Civil Division.

According to a joint DOJ and U.S. Department of Health and Human Services letter to U.S. Senator Chuck Grassley, Justice has over 1,300 qui tam (whistleblower) cases under investigation with no decision on whether the agency will intervene. Of those, 885 allege health care fraud, and 98% of those involves Medicare or Medicaid.

The New York Times' front-page article detailed a DOJ policy on corporate fraud that allows corporations to investigate themselves and then promise to end the fraudulent behavior. One academic described the new policy as "… creat(ing) no disincentives for committing fraud or white-collar crime…"

If Congress and the Administration are serious about cutting Medicare costs, the DOJ has to "man and woman up and go after systemic Medicare fraud, not just small medical operations," said Baker. "Justice is basically outgunned by corporate lawyers and overwhelmed by whistleblower lawsuits."

Quest, Baker said, is a "habitual bad player," having recently settled for $300 million a lawsuit involving allegedly faulty hormone test kits that a Quest subsidiary sold to hospitals and doctors. Quest currently operates under a five-year "Corporate Integrity Agreement" with HHS' Office of the Inspector General, resulting from this lawsuit.

Recently, the International Brotherhood of Teamsters filed a separate class-action racketeering lawsuit against Quest for selling the faulty hormone tests that produced incorrectly elevated results, leading to thousands of unnecessary surgeries on patients.

Baker said it's "mystifying" why Justice refuses to intervene, given that Quest recently settled for $241 million a California lawsuit for overcharging the state's Medicaid program. The California Attorney General's Office negotiated the settlement with Quest.

The California lawsuit alleged Quest overcharged the state by as much as 400 percent for blood, urine and other tests conducted on Medicaid patients. For example, Quest charged the State of California $8.59 for a complete blood test, but billed private insurers only $1.43.

"This is essentially the same case, except that it involves Medicare and Medicaid across the country. If former California Attorney General Jerry Brown can find enough evidence of fraud to intervene, then Attorney General Eric Holder and Assistant Attorney General Tony West should be able to do the same," said Baker.

Baker's lawsuit accuses Quest of overcharging the federal government by at least $1 billion and Baker believes that the scam involves other medical labs, costing taxpayers as much as $15 billion industry wide in Medicare and Medicaid overcharges.

An expose on this particular fraud, known in the industry as "pull-through" business, is featured in the July 4th-10th edition of Bloomberg Businessweek.

The FLPA lawsuit alleges that since 1996, the federal government has paid more – sometimes as much as 400 to 500 percent more – than private insurers for some Medicare and Medicaid patients' lab work conducted by Quest, based in Madison, NJ. The lawsuit claims that billions of dollars in lab fees have been siphoned into illegal kickbacks to private insurers, such as Aetna and Cigna, which are among Quest's largest contract providers.

As described in the lawsuit, the fraud is simple: Quest pressures private insurers to lean on doctors to send all their lab work to Quest, for patients insured privately and by Medicare and Medicaid. In return, the private insurers benefit from lower and, in many cases, below-cost, lab fees, effectively subsidized by higher fees for the Medicare and Medicaid patients. Insurers threaten to throw doctors out of their networks if they refuse to send their tests for Medicare and Medicaid patients to Quest.

Filed in 2005 under seal before the Southern District Court of New York, the court recently unsealed an amended complaint that charges Quest with violations of the Federal False Claims Act and the Federal Anti-Kickback Statute. It can be found here.

FLPA has appealed a lower court dismissal of their claims based on procedural grounds. The lower court did not rule on the merits of the case.  

SOURCE Fair Laboratory Practices Associates