Lawsuit Against Quest Diagnostics Alleges Medicare Fraud Costs Taxpayers Over $1 Billion, Says Fair Laboratory Practices Associates; Industry Wide As Much As $15 Billion

Whistleblowers Continue Fight Against Quest In Appeals Court Call On U.S. Department of Justice To Intervene

NEW YORK, July 5, 2011 /PRNewswire-USNewswire/ -- As the nation's leaders struggle to address steep health care costs, a Medicare scam is being orchestrated right under their noses and no one is doing anything to stop it, said former medical laboratory executives who have filed a lawsuit against Quest Diagnostics, Inc., accusing the company of overcharging the federal government by over $1 billion.

The individuals suing Quest called on the U.S. Department of Justice to intervene in their lawsuit, which alleges that the scam industry wide among medical labs is costing taxpayers as much as $15 billion in Medicare and Medicaid overcharges. This particular fraud, known in the industry as "pull-through" business, is featured in the July 4th-10th edition of Bloomberg Businessweek.

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, the nation's largest lab testing company 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.

"Quest and other labs are ripping off taxpayers, yet the federal government has done nothing. Despite our lawsuit, the scam continues and will until the government makes them pay damages," said Andrew Baker, one of three former executives of Unilab, purchased by Quest in 2003, who brought the lawsuit.

The details of the fraud can be found in Fair Laboratory Practices Associates vs. Quest Diagnostics, Inc., filed in 2005 under seal before the Southern District Court of New York. The federal 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.

Baker wonders why the federal government has not joined his lawsuit, especially since just last month Quest settled a remarkably similar California state claim for $241 million in overcharges to the state's Medicaid program.  In March 2009, California Attorney General Jerry Brown intervened in that case and a settlement soon followed, returning hundreds of millions of dollars to the state's coffers.  Baker asserts billions are waiting to be returned to the federal government if the U.S. Department of Justice would join the FLPA case.

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.

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.

While Baker's lawsuit names only Quest, the FLPA plaintiffs believe the practice of overbilling Medicare and Medicaid has become widespread throughout the industry, resulting in overpayments of as much as $15 billion. 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.  

The Quest scam could be the largest Medicare fraud committed by one company. In February 1999, the Office of Inspector General for the U.S. Department of Health and Human Services warned against the "pull-through" practice.

Contact: Karen Hinton, 703-798-3109, [email protected]

SOURCE Fair Laboratory Practices Associates