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LabCorp Pays $187 Million to Settle Health Fraud Case

November 22, 1996 GMT

GREENSBORO, N.C. (AP) _ One of the world’s largest medical laboratory companies agreed Thursday to pay $187 million in penalties for fraudulently billing the government for unnecessary tests on elderly patients.

Laboratory Corp. of America, based in Burlington, will repay $182 million in improper billings as part of a civil settlement. It will also pay a $5 million fine to resolve a guilty plea by its former subsidiary, San Diego Regional Laboratory, to a charge of filing a false claim.

Officials said the deal is the largest to date in the government’s four-year investigation of lab billings to the Medicare health insurance program and other federal health programs.

That investigation had already resulted in more than $300 million in penalties and reimbursements from some of the country’s largest labs.

Laboratory Corp., its subsidiaries and predecessor companies had been under investigation for about two years.

The case was similar to ones previously settled, in which the labs told doctors they were doing a package of tests on patients for a single price, then billed the government separately for each test, at a higher price.

One AIDS patient’s account was billed for 22 cholesterol tests in a year, although the tests weren’t needed in his treatment, said U.S. Attorney Walter Holton Jr. of North Carolina.

The company cooperated in the investigation, said James Powell, LabCorp’s president and chief executive.

``Going forward, we believe that this settlement reflects a new emphasis on cooperation with the government that will help forestall any reoccurrence of these billing issues,″ Powell said.

According to the allegations, doctors were convinced to use a package of blood tests that included a cholesterol or blood iron test, neither of which were needed. The doctors were told the extra tests were included in a single bill to Medicare.

But the labs then billed the government separately, said investigator Ed Lefaivre of the U.S. Department of Health and Human Services. Typical bills totaled $45 instead of an agreed-on rate of about $15.

A North Carolina physician noticed the unnecessary tests, and when the company refused his request to stop them, he contacted a New York law firm to help resolve the matter. The doctor wasn’t identified at his request, said his attorney, Neal Getnick.


``At one point, he was told not to worry about it since Medicare was paying for it,″ Getnick said.

Under a federal whistleblower law, the doctor will get a share of the settlement, to be determined by a federal judge.

The investigation has left LabCorp in financial straits.

The company reported losing $154.7 million on $1.22 billion in revenues during the first three quarters of the year, largely due to money that had to be set aside to pay government claims.

LabCorp was formed in 1995 through mergers of Allied Clinical Laboratories, Roche Biomedical Laboratories and National Health Laboratories.