From: ndallen@r-node.gts.org (Nigel Allen)
Subject: National Health Care Laboratories Inc. Will Pay $100 Million to Settle Largest Medicare Fraud Case Ever
Organization: Echo Beach, Toronto
Date: Tue, 22 Dec 1992 08:58:09 GMT

Here is a press release from the U.S. Department of Justice.

 National Health Laboratories Inc. Will Pay $100 Million to Settle
Largest Medicare Fraud Case Ever
 To: National and Business desks
 Contact: Joseph Krovisky of the U.S. Department of Justice,
          202-514-2007

   WASHINGTON, Dec. 18 /U.S. Newswire/ -- The Department of Justice
and the Department of Health and Human Services (HHS) announced today
that National Health Laboratories Inc. (NHL) will pay the United
States $100 million to settle a Medicare fraud case -- the largest
Medicare settlement ever reached between the government and a health
care provider.
   Assistant Attorney General Stuart M. Gerson, head of the Civil
Division, said NHL will pay the government $35 million by the end of
the year, $30 million by March 31, 1993, and the balance by the third
quarter of 1995.
   "The Department of Justice has made health care fraud a priority
investigative area and this case indicates the department's
commitment to investigate and prosecute aggressively abuses of the
federal health care system," Gerson said.
   Today's agreement settles claims that NHL, a major blood testing
laboratory headquartered in La Jolla, Calif., defrauded Medicare by
manipulating doctors into ordering medically unnecessary tests for
HDL (high density lipoprotein) cholesterol and ferritin (estimated
iron storage) whenever doctors ordered a basic blood test series.
   The allegations involved a series of laboratory tests conducted on
a "sequential multiple analysis computer" (SMAC) for which Medicare
and CHAMPUS, the Department of Defense's health care program for
dependents of military personnel, reimbursed laboratories on a flat
fee basis for any chemistry panel containing 19 or more tests, even
if the doctor only needed the results of a few tests.  The SMAC
series, because it is highly informative and relatively low in cost,
is the single most popular laboratory test ordered by physicians.  By
1989, NHL was performing about 7 million of the tests per year.
   In 1987, NHL devised a method to capitalize on the popularity of
the SMAC test and its ability to offer the same test to doctors and
Medicare at widely different prices.  NHL revised its order forms and
compendium of services so that the HDL test, which is not a part of
the SMAC test and is billed separately to Medicare and CHAMPUS, was
combined with the SMAC test, then NHL marketed the combination to
doctors as a package it called the "Health Survey Profile I" (HSP I).
   As a practical matter, a doctor who wanted to order only the SMAC
test could not because it was not listed on NHL's order form or in
its compendium of services.  To receive the results of a SMAC test,
the doctor effectively was forced to order it under HSP I. In doing
so, the doctor also ordered and received the HDL test as well, with
only a minimal rise in price to the doctors.
   The government alleged that physicians were led to believe that
the HDL test was like any other done on the SMAC and did not require
specific medical necessity.  However, NHL billed Medicare separately
for the SMAC and the HDL tests.  Under the Medicare fee schedule, the
cost for the HDL test was substantially higher than what the doctors
were charged.
   Similarly, NHL added the ferritin test as an "automatic" test in
the HSP I package in 1989.
   The government said NHL, in alleging that the HDL and ferritin
tests were part of -- or comparable in cost and technology to -- the
many tests performed by the automated SMAC test, made a
misrepresentation to its physician clients.
   Through this alleged scheme, NHL submitted a large number of
knowingly false claims to the government for payment from 1987 to the
present for HDL tests and from 1989 to the present for ferritin
tests.  The claims were knowingly false, the government said, because
NHL's automatic inclusion of these tests generated massive billings
for tests that it knew were not reasonable and necessary for the
treatment of an illness or injury.
   Gerson said, "The United States has investigated and continues to
investigate certain business practices by clinical blood testing
laboratory companies that submit claims for payment to the Medicare,
CHAMPUS and Medicaid programs."
   The office of inspector general of HHS participated in the
investigation of the case.
 -30-
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