Court Dismisses Lawsuit Against LabCorp . . . Again

The U.S. District Court for the Eastern District of Virginia has once again dismissed a lawsuit filed against Laboratory Corporation of America (LabCorp) by Chris Riedel, former chief executive officer of Hunter Laboratories. The case, originally filed in 2007, was unsealed last year and dismissed by the court in November 2013. The lawsuit alleged that LabCorp violated the Virginia Fraud Against Taxpayers Act by overcharging the state Medicaid program and providing kickbacks to health care providers to induce the referral of Medicaid business. The lawsuit was originally filed against LabCorp, Quest Diagnostics, and Specialty Laboratories. In between filing the motion to amend and filing the amended complaint, the relators reached a provisional settlement with Quest and Specialty, which has since been stayed. In dismissing the case against LabCorp for the second time, the court ruled that Hunter Laboratories and the former owner Riedel failed to identify a single false claim. The court dismissed the case with prejudice, meaning it cannot be amended and refiled. In filing the lawsuit, Hunter and Riedel alleged that LabCorp violated the law by charging the state Medicaid program higher rates than non-Medicaid customers and offering discounts to providers to induce referrals. While the plaintiffs provided specific examples of LabCorp’s “usual and customary” prices and “specific, particular examples of below-cost discounts,” they did not identify specific false claims, said the court. “The falsity of LabCorp’s conduct lies not in the prices it charged or discounts it provided but in the claims it submitted to [Medicaid],” the court wrote. “Thus, it is the claims which must be alleged with particularity. Additionally, Rule 9(b) does not require identification of all false claims. It requires only the identification of some representative claims.” Usual, Customary, and Reasonable The court also ruled that LabCorp was not required to charge the Virginia Medicaid program its lowest price. Rather, under the participation agreement, “[t]he provider agrees that charges submitted . . . will be based on the usual, customary, and reasonable concept and agrees that all requests for payment will comply in all respects with the policies of the [Virginia Medicaid Independent Laboratory Participation Agreement].” Essentially, the court disagreed with the plaintiff’s argument that labs are required to charge Virginia Medicaid the lowest rate they charge nongovernment payers. Rather, Virginia Medicaid is simply required to pay the lowest rate. Riedel has pursued Quest, LabCorp, and other labs for years, alleging that they are overbilling state Medicaid programs. In 2005, Riedel won a settlement against the two big labs in California. Quest and LabCorp eventually settled the lawsuit for a combined $290.5 million. Riedel reportedly has additional whistleblower lawsuits pending in Georgia, Massachusetts, Michigan, and Nevada. Takeaway: LabCorp has won at least one fight in its battle with Chris Riedel, former CEO of Hunter Laboratories, as a court in Virginia dismisses a lawsuit filed by Riedel alleging that LabCorp overcharged the state Medicaid program.