5 top medical labs' records subpoenaed in U.S. billing probe Medicare, Medicaid focus of investigation

August 28, 1993|By New York Times News Service

In a rapidly widening effort to root out health care fraud, federal officials have subpoenaed Medicare and Medicaid billing records of at least five of the country's largest medical laboratory companies.

Although no charges have been brought against the companies, the investigation of the $32 billion-a-year blood-testing industry is the latest of several inquiries by law enforcement agencies. Federal officials have said that medical fraud may account for $80 billion to $100 billion of the more than $900 billion that Americans will spend on health care this year.

Corning Inc. and SmithKline Beecham, the nation's largest laboratory companies, confirmed yesterday that Corning's Metpath and Damon subsidiaries and SmithKline's Clinical Laboratories unit had received subpoenas from the Office of the Inspector General of the Department of Health and Human Services.

Two other laboratory companies, Nichols Institute and Allied Clinical Laboratories, had said Thursday that their records were subpoenaed.

Judith Holtz, a spokeswoman for the inspector general's office, declined to specify what the investigators were seeking. She said previous investigations of other laboratory companies had uncovered billing for unauthorized or excessive testing, double billing to federal and private insurers, billing for services that were not rendered and kickbacks to doctors.

All four of the companies said they were cooperating.

Several federal agencies, including Health and Human Services, the Justice Department, the FBI, the Defense Department and the Department of Veterans Affairs, have intensified their investigations of possible health care fraud since early last year.

The inquiries accelerated this month. On Thursday, federal agents raided offices and hospitals across the country operated by National Medical Enterprises, one of the nation's largest hospital companies.

That effort, coordinated by the Justice Department, appears to be an attempt to show the company had participated in a nationwide conspiracy to defraud patients and insurance companies.

In another case earlier this month, the Department of Veterans Affairs accused Baxter International, the nation's largest hospital-supply company, of "systematically cheating" and overcharging in federal supply contracts.

A Baxter spokeswoman said the company had been suspended from bidding on new federal contracts for up to one year.

A Justice Department spokesman, Carl Stern, said: "The current activity is a reflection of the administration's concern that the public get a dollar's worth of medical care for every dollar the system is billed."

Justice officials declined to say whether there was suspicion of fraud in the hospital and hospital-supply industries.

The investigation of laboratory companies followed the repayment to federal and state agencies of $111.4 million by National Health Laboratories Inc., a large blood-testing company based in San Diego. The company repaid the money as part of a consent agreement in December.

It pleaded guilty to submitting false claims to Medicare, the federal program for the elderly and disabled, and Medicaid, the federal-state program for low-income patients.

Carol C. Lam, an assistant U.S. attorney in San Diego, said National Health Laboratories had routinely charged the government for blood tests that doctors had not ordered. She said Medicare payments to the company increased more than $30 million in 1990, the year after the extra charges began.

In defending themselves, employees of National Health Laboratories contended that overcharging was common in the industry, investigators said.

Indeed, Med-Chek Laboratories Inc., based in Pittsburgh, agreed a $2.4 million government settlement this month in a case involving charges of Medicare fraud from 1987 to 1989. Med-Chek was acquired by Damon last year; Corning purchased Damon last month.

Joseph E. Millsap, a health care analyst at Morgan Keegan & Co. in Memphis, said total spending on medical laboratory services was $32 billion last year. He said the Medicare and Medicaid share of the lab business was 30 to 35 percent, or at least $9.6 billion. The government programs pay for testing by 12,000 laboratories, of which 6,600 are hospital labs.

Mr. Millsap said that overcharging by the laboratories was more likely to be accidental than fraudulent. But he added that if the government looked long and hard at the lab companies, it "could probably find some instances of questionable billing practices."

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