UnitedHealth names labs, treatment centers in federal fraud case

Last week, insurer UnitedHealth and its Florida affiliate filed a federal lawsuit against several testing labs, treatment centers and individuals, alleging financial kickbacks, fraud and other complaints. It’s uncertain how the insurer came to discover the details outlined in the claim.

Jeffrey C. Lynne, partner with Beighley, Myrick, Udell & Lynne, P.A., who works with addiction treatment organizations tells Behavioral Healthcare it’s yet to be determined whether any of allegations have merit, but it’s unlikely an insurance company would file a frivolous lawsuit in federal court because the sanctions could be “massive.” At least 20 defendants are named in the $50 million suit. UnitedHealth warns that others could be added as more information comes to light through the legal process.

Allegations of kickbacks

In the suit, UnitedHealth says certain investment partners in Sky Toxicology—individual investors and addiction treatment center investors—received financial distributions based on the quantity of urine drug tests they each referred to Sky Toxicology’s labs. The tests were then paid for by the insurer under the patients’ health plans.

UnitedHealth characterizes the actions as a scheme to defraud whereby kickbacks are disguised as investment dividends.

Elements Behavioral Health is claimed to have the largest stake of the investments among those named, holding 20 limited partnership shares, resulting in $600,000 in payments per month, according to the language in the lawsuit. Solid Landings and Above It All owner Kory Avarell—who has seen at least two licenses revoked in California in the past—are also alleged investors.

Further, UnitedHealth claims that investors that failed to refer drug tests to the lab would be cut out of the partnership and the cash. There is clearly a trend in commercial payers auditing lab-testing claims and searching for excessive utilization, but some wonder if UnitedHealth’s fraud allegations will stick in this case.

“It’s complicated,” Lynne says. “It is not in and of itself illegal—treatment centers can own labs all day long and can invest all day long. But it’s not the investment itself that’s in question, it’s the kickback disguised as a dividend.”

Meanwhile, where’s my reimbursement?

Lynne says treatment centers are at odds with insurers as reimbursements decline and scrutiny increases. There’s certainly a place for urine drug testing in comprehensive addiction treatment, and payment for the service is warranted. However, insurers are wary of potential profiteering from drug testing.

“The complaint is that labs were never intended to be a source of revenue for drug and alcohol treatment,” he says. “But the insurance industry continues to thumb its nose at the parity act and to bully treatment centers that now find themselves squeezed financially.”

As far as providers are concerned, insurers have historically short-changed addiction treatment and now seem to be finding new ways to balk at the coverage rules under the Affordable Care Act that are undoubtedly driving up claim costs. At the same time, some testing labs deploy sales teams that aggressively pursue treatment centers, aiming to appeal to their financial situations in the new era of healthcare, Lynne says.

“I don’t know how much of this is greed, and how much is necessity, and how much is creative lawyering by people creating something that wasn’t lawful but wasn’t unlawful either,” he says.

Fraud and forgery

UnitedHealth also claims in the suit that physician orders for tests were forged and utilization of testing services was inflated. Additionally, Florida law requires that providers collect patient copays and deductibles, and the suit alleges that providers failed to do that for drug tests.

It’s possible that a separate $20 million lawsuit insurer Cigna had filed against Sky Toxicology in federal court last year might eventually reach a settlement.

Elements Behavioral Health was contacted by Behavioral Healthcare for comment but did not respond.