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Medicare Pays Labs Top Dollars In San Diego County

Above: A photo illustration shows dollar signs falling out of a broken pill capsule.

Clinical laboratories were among the top San Diego County recipients of Medicare reimbursements in 2012, according to an inewsource analysis of national reimbursement data.

Aired 8/5/14 on KPBS News.

A clinical laboratory that recently lost a $15 million lawsuit was the top San Diego-area recipient of Medicare reimbursements in 2012.

Four labs were in the top 10, including locally headquartered Millennium Laboratories of California, which made headlines in Florida recently when a jury hit the company with a $15 million judgment in a lawsuit alleging unfair competition.

Ameritox, a Texas-based competitor to Millennium, sued the lab in April 2011, claiming that Millennium “engages in a pattern and practice of offering and providing inducements, kickbacks and other improper financial inducements to health care providers and health care consumers in exchange for the referral of business.”

INTERACTIVE: Search 2012 Medicare payments to San Diego-area hospitals, doctors’ private practices and other medical establishments.

Ameritox claimed that Millennium — in an attempt to increase its market share — provides referring physicians with free or reduced-cost testing supplies. According to Ameritox, physicians use these supplies to test their patients and then bill Medicare, Medicaid and private insurance for reimbursement. They also use Millennium for follow-up testing. Millennium then bills Medicare, Medicaid and private insurance for reimbursement.

The jury found that Millennium provided urine testing cups to doctors for free with the understanding that doctors would use Millennium to test a minimum number of samples.

Jurors awarded Ameritox $2,755,000 in actual damages and $12 million in punitive damages. They dismissed all claims Millennium filed against Ameritox in a countersuit.

After initially agreeing to an interview about the case and Millennium’s billing practices, a spokeswoman for the lab referred questions to a statement issued the day of the verdict.

In that statement, Millennium “vehemently” disagreed with the verdict and vowed to appeal.

“Millennium takes compliance very seriously,” the statement read in part. “Ethical business practices and compliance with state and federal healthcare laws have been, and always will be, vitally important to us.”

Lon Wagner, spokesman for Ameritox, said the lab was pleased with the jury’s findings.

“That had been a case that had been in the works for three years and we were pleased about the outcome,” Wagner said. “And we’re also pleased that the jury didn’t find any merit to Millennium’s counter claims that they filed against us.”

Millennium was San Diego County’s largest recipient of Medicare reimbursements in 2012, according to data released by the Centers for Medicare and Medicaid Services in April. The company received at least $190 million in payments for performing nearly 8.7 million services.

Among the services Millennium billed Medicare the most for in 2012 were tests for a host of drugs — including opiates, barbiturates, cocaine and amphetamines.

The Medicare data, released after the Wall Street Journal challenged a three-decade-old injunction against releasing it, provides details for every provider who received Medicare payments under the program’s Part B, which excludes payments to hospitals and other institutions.

The release of the payments data was opposed by the American Medical Association, whose president warned that “releasing the data without context will likely lead to inaccuracies, misinterpretations, false conclusions and other unintended consequences.”

In a letter to the association, Department of Health and Human Services Deputy Administrator Jonathan Blum claimed that the data would “serve a significant public interest by increasing transparency of Medicare payments to physicians … and shed light on Medicare fraud, waste and abuse.”

News organizations have used the data to report on the high cost of particular medications and the political ties of top-billing doctors.

Nationally, ophthalmologists, oncologists and pathologists dominated the ranks of the highest-grossing specialties.

But in San Diego County, the top three recipients of Medicare reimbursements in 2012 were clinical laboratories.

Debbie Wang, a senior equity analyst at Morningstar who studies clinical laboratories, said the market is “fractured.”

Among labs not affiliated with specific hospital chains, two companies — Laboratory Corporation of America and Quest Diagnostics — control 22 percent of the market.

The size of these larger labs allows them to negotiate higher per-test reimbursement rates from private health insurers.

Because smaller labs can’t secure those large insurance contracts, “their bread and butter comes down to convincing individual doctors and their practices to send volume their way,” Wang said. “So, the conditions are ripe for more of that kind of unethical behavior.”

Ameritox itself paid $16.3 million to the federal government in 2010 to settle claims it had provided kickbacks to doctors as a means of attracting their business. The settlement came in response to a 2007 whistle-blower lawsuit filed by a former Ameritox sales representative.

Wagner, Ameritox’s spokesman, said that program had occurred under a previous management team and that the company had learned from the mistakes.

“We learned of that practice in-house and we voluntarily discontinued those practices and then we settled with the Department of Justice and now we have the most rigorous compliance program in the industry,” Wagner said.

The Florida case isn’t the only recently concluded legal action between the two clinical labs.

In July 2013, Millennium sued Ameritox in a Massachusetts court for unfair trade practices, accusing the company of providing kickbacks to doctors in return for contracting with Ameritox for specimen testing.

Ameritox denied Millennium’s allegations in court documents, and a week after the verdict in the Florida lawsuit Millennium voluntarily dismissed its case against Ameritox.

Wang, the research analyst, said that in an industry as competitive as clinical laboratories, litigiousness is to be expected.

“That kind of intensity of competition reflects the fragmented nature of this business,” said Wang, noting that the U.S. has close to 7,000 independent clinical laboratories.

“There’s a lot of scrabbling going on.”

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