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2 medical labs sued over Medicaid case

Editor's note (9-16-2013): This story originally posted Sept. 15, 2013, has been updated to a version that includes a response from Quest Diagnostics.

WASHINGTON — Quest Diagnostics Inc., the biggest U.S. operator of medical labs, and Laboratory Corp. of America Holdings defrauded Virginia's Medicaid program by billing it at higher rates than other customers, according to a 2007 state whistle-blower lawsuit unsealed last month and filed this month in federal court.

The companies "made false claims for payment of Medicaid- covered laboratory tests by falsely representing that the fees being charged were no greater than the maximum fees payable pursuant to Virginia regulations," according to the complaint filed by Hunter Laboratories, of Campbell, Calif., and its chief executive officer, Chris Riedel.

Under Virginia law, the companies were "required to provide their services to Medicaid patients at the same rates billed to others," Hunter said in the complaint in federal court in Alexandria. LabCorp's fees for Medicaid were "far in excess" of those charged to members of the Premier Inc. purchasing collective, Hunter said.

Quest, based in Madison, N.J., billed Medicaid as much as $10.42 for an automated hemogram, a common blood test that it charged others as little as $1.42, according to the suit.

"We believe these allegations lack merit and our testing services are priced appropriately," Wendy Bost, a spokeswoman for Quest, said in an emailed statement. "We comply with the laws and regulations governing our business, including Medicaid pricing requirements, not only as a legal obligation, but also because it is the right thing to do."

Phone and e-mail messages seeking comment from LabCorp weren't immediately returned.

Hunter and Riedel also are suing Quest and LabCorp for Medicaid fraud in Georgia, according to court records. Hunter is a competitor of the two companies.

The Virginia complaint seeks civil penalties of $11,000 for each false claim and does't specify the number of violations.

A similar case brought by Hunter and Riedel accusing Quest of overcharging Medi-Cal, the Medicaid program in the state of California, was settled in 2011 for $241 million.

At the time, the settlement was the largest recovery under the California False Claims Act, according to a news release by California Attorney General Kamala Harris.

The Virginia case was filed in December 2007 in state court under the Virginia Fraud Against Taxpayers Act. Hunter and Riedel also are acting on behalf of the state under the terms of the law.

It was unsealed in August, according to Mark Friedlander Jr., a McLean, Va.-based attorney for Hunter.

Friedlander referred further questions on the case to another attorney for Hunter, Niall McCarthy, of Burlingame, Calif. McCarthy didn't immediately respond to a phone message requesting comment.

The case was moved to federal court in Alexandria by Quest because the parties are from different states and the complaint raises questions of federal law, according to a Quest filing.