Medical labs pay $11 million to settle Medicare fraud case

Sept. 19, 1996 -- Two of the country's largest medical testing laboratories -- MetPath Inc., a wholly owned subsidiary of Corning Inc., and Unilab Corp. -- have agreed to pay a total of $11 million to the federal government and the states of Georgia and California to settle a lawsuit charging they had bilked Medicare and other state and federal health insurance programs by obtaining excessive reimbursements when billing for laboratory tests.

The lawsuit, filed by two whistleblowers, said the labs had billed the insurance programs for blood tests that were never ordered, were medically unnecessary and provided doctors with generally worthless information.

"This is an example of why the Medicare fund is going broke," said Mary Louise Cohen, an attorney representing the two whistleblowers. "It was a widespread practice in the medical industry, yet doctors and patients were completely unaware of it because the bills were sent directly to Medicare."

Kevin Spear and C. Jack Dowden, both former sales representatives in California for MetPath and Unilab, filed the lawsuit in January 1995 under the federal and California False Claims Acts in U.S. district court in San Francisco. The case was later transferred to Newark, New Jersey, and has been under seal during the government's investigation.

The False Claims Act grants whistleblowers 15 percent to 30 percent of whatever money the government recovers. Spear and Dowden were awarded 15 percent of the recovery for their efforts.

In their lawsuit, the two men said that each time a doctor ordered a standard blood test, known as a "complete blood count" (or CBC), MetPath and Unilab routinely billed Medicare, Medicaid and other government insurance programs for additional unordered and unnecessary procedures. There was virtually no medical value in providing those additional results along with the CBC. Those additional tests -- called "hemogram indices" -- are mere calculations based on the already-provided CBC results. Doctors never ordered them, never used them and, with the exception of hematologists, had never heard of them.

Moreover, the indices were generated by automated testing equipment as a byproduct of the CBC, meaning that the labs did no additional work to justify their separate and excessive charges.

The labs did not bill doctors who ordered the CBC tests for Medicare patients and others, so the doctors were not aware that the labs imposed extra charges. Because Medicare pays all lab charges, patients had no interest in challenging the bill or the need for the tests.

"Medical labs deceived doctors, patients and the government for years, unfairly reaping millions of dollars at taxpayers' expense," Cohen said. "This is an example of how the False Claims Act can be used as a powerful tool to stop fraud."

Under the terms of the settlement agreement, MetPath will pay $6.9 million. Unilab will pay $4.1 million in seven installments over the next three years. MetPath is based in Teterboro, N.J. Unilab has its headquarters in Tarzana, Calif.

As part of the settlement, California and Georgia will receive $190,643 and $34,989, respectively, as reimbursement for false Medicaid billings. The rest of the settlement will be paid to the U.S. Treasury.

For more information about Phillips & Cohen's record, see P&C's Successful Whistleblower Cases.

For more information, please see following news stories:

  • "Two labs will pay $11 million to settle overcharging case," The San Francisco Daily Journal, 9/30/96.
  • "Unilab, Corning settle with feds for $11 mil," The Dark Report, 9/23/96.
  • "Corning labs deal halts suit," Jerry DeMarco, The Record, 9/20/96.