State sues medical labs over billing

By Ann M. Simmons

California is seeking to recover hundreds of millions of dollars -- possibly approaching $1billion -- from private medical laboratories accused of bilking the state Medi-Cal program by drastically overcharging for various tests, Atty. Gen. Jerry Brown said Friday.

Under a scheme involving what Brown called "massive Medi-Cal fraud and kickbacks," seven companies, including five based in Los Angeles County, charged the state up six times more than they charged some other customers for such services as urine analysis and blood count tests.

The Medi-Cal program provides healthcare services to the poor and is entitled to the deepest possible discounts whenever available.

"In the face of declining state revenues, these medical laboratories have been ripping off our medical program for our most vulnerable people," Brown said at a Los Angeles news conference announcing a civil lawsuit filed in San Mateo County.

The defendants include Health Line Clinical Laboratories, now known as Taurus West, and Physicians Immunodiagnostic Laboratory, both based in Burbank; Westcliff Medical Laboratories of Santa Ana; Pomona-based Whitefield Medical Laboratory; Seacliff Diagnostics Medical Group, based in Monterey Park; Quest Diagnostics, based in Madison, N.J., and five of its affiliates, including Specialty Laboratories, based in Valencia; and Laboratory Corp. of America, based in Burlington, N.C.

Nancy Ogan, chief executive officer of Seacliff Diagnostics Medical Group, said her company was "a small local business that has rigorously followed Medi-Cal guidelines in providing quality service" to their clients.

"We take the attorney general's charges seriously and, though we believe our inclusion in this suit is not justified, we plan to conduct an investigation into the allegations, cooperate fully with the authorities and vigorously defend Seacliff against these charges as we believe we will be vindicated in a court of law," Ogan added.

Appropriate representatives from other companies named in the suit could not be reached, or did not respond to requests for comment.

A state investigation showed that for the last 15 years, the companies' laboratories provided deep discounts when they were being paid directly by doctors, patients or hospitals, Brown said.

Prices were often lower than the labs' cost, and some tests were free. In exchange for the discount, the companies expected customers to refer all of their other patients, including those with private insurance, Medicare and Medi-Cal, Brown said. Under California law, this constitutes an illegal kickback," he said.

Medi-Cal was financially burdened by the scheme. For example, according to the attorney general's charges, Quest Diagnostics charged Medi-Cal $8.59 to perform a complete blood count, while it charged some of its other customers $1.43 for the same test.

ann.simmons@latimes.com

Times staff writer Ruben Vives contributed to this report.