Clinical Science Laboratory: The Clinic Price Medicaid Did Not Get

In the Clinical Science Laboratory Medicaid settlement, the Massachusetts laboratory and its two owners paid $1,508,106 to resolve allegations that they overcharged Connecticut Medicaid for urine drug screens. The government alleged that the laboratory regularly accepted $38 per test from Medicaid while charging substance abuse treatment clinics approximately $2. For someone who handles laboratory billing or clinic accounts, the price on a clinic invoice can be the detail that changes how a Medicaid claim looks.

Clinical Science Laboratory, based in Mansfield, Massachusetts, provided urine drug testing for substance abuse patients enrolled in Connecticut Medicaid. Federal and state officials announced the settlement on June 27, 2019. The state attorney general described the alleged gap as 19 times the price charged to other customers. Taxpayers were paying for substance abuse treatment, but the government alleged that the laboratory sold comparable testing to clinics for far less.

The Urine Test Behind the Bill

Urine drug testing gives clinicians information about substance use and prescribed medication. A 2021 clinical review in The Journal of Family Practice, Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, describes its use in treating patients with substance use disorders and patients receiving ongoing opioid or benzodiazepine treatment. The review recommends choosing tests and testing frequency according to the patient’s risk, and revisiting unexpected results through the patient’s history or confirmatory testing.

A urine screen and a confirmatory test can answer different questions. The review explains that immunoassay testing provides rapid, relatively inexpensive screening results. Testing with chromatography and mass spectrometry provides more specific, confirmatory results at greater cost and with a longer wait.

The review also describes the money behind excessive testing. It reports that insurers have been billed as much as $4000 for definitive chromatography testing. Its discussion of insurance fraud identifies practices with a financial interest routinely using large, expensive panels, testing too frequently or sending all positive tests for unnecessary confirmatory or quantitative analysis. Those decisions put the laboratory’s financial interest into the testing process, where the patient’s treatment needs should come first.

That is a different mechanism from the price allegation against Clinical Science Laboratory. The review examines the choice and frequency of tests. The Connecticut case concerns what a laboratory charged different customers for the same or similar services. Both bring the business behind the test into view. For a laboratory insider, the clinical purpose and the commercial decisions belong in the same conversation.

The treatment relationship also explains why different people can see different parts of the problem. The clinician makes the testing decision, the laboratory performs the work, and a payer pays the claim. In the alleged arrangement here, clinics also bought testing directly from the laboratory. Someone familiar with those clinic accounts could recognize a pricing practice that a Medicaid payment entry alone would not explain.

Are Excessive Laboratory Charges Insurance Fraud?

Excessive laboratory charges can support a false-claims case when they exceed what a government program’s payment rule allows. In this case, the government alleged that Clinical Science Laboratory violated Connecticut’s Most Favored Nation regulation by accepting Medicaid payments above the price it charged treatment clinics.

The Justice Department’s explanation of the Connecticut rule says that clinical laboratories should not seek payment from the state’s Medicaid program at a price higher than the lowest price they charge other third parties for the same or similar services.

The Claims Covered by the Settlement

The settlement covered claims submitted to Connecticut Medicaid from October 1, 2016, through May 23, 2017. The settlement resolved allegations under both the federal and Connecticut False Claims Acts.

The company was in Massachusetts, but the claims at issue went to Connecticut Medicaid. The relevant price rule followed the program being billed.

The Office of Inspector General for the Department of Health and Human Services investigated the matter. The U.S. Attorney’s Office and the Connecticut attorney general’s office handled the case. The state attorney general also credited the state’s Office of Quality Assurance for its work with the federal investigators.

Redwood Toxicology and the Same Price Comparison

Redwood Toxicology Laboratory resolved a separate Connecticut Medicaid pricing case for $4,797,578. In its March 7, 2022 announcement, the Justice Department alleged that Redwood regularly accepted $38 per test from Medicaid while charging other third parties as little as $2 for the same or substantially similar urine drug tests. The government again cited Connecticut’s Most Favored Nation regulation.

Redwood’s settlement covered claims from January 1, 2015, through February 24, 2018. The comparison again came from prices inside the laboratory’s own business, rather than a price charged by a competing laboratory.

Redwood was headquartered in Santa Rosa, California. Like Clinical Science Laboratory, it supplied urine drug testing for substance abuse patients enrolled in Connecticut Medicaid. These were separate laboratories and separate settlements, with the same state program and the same comparison at the center of the allegations.

What Laboratory and Clinic Insiders Can Show

A clinic invoice, the laboratory’s description of the test it covered and the corresponding Medicaid billing can explain a differential-pricing concern. Our work with an insider is to connect those pieces and understand the decisions behind the prices. The person who knows the clinic account may hold a different part of that explanation from the person who handles Medicaid reimbursement.

We would want to understand how the clinic price was set, when it applied and how the laboratory billed the government for comparable work during the same period. Those are questions about the laboratory’s business that billing, account-management and clinic staff may already understand through their everyday work.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know the Price the Clinic Paid

If your work puts you between a laboratory’s clinic prices and its Medicaid billing, speak to one of our whistleblower experts about the price gap you see. We build your strongest Medicaid pricing case with you, bring in laboratory fraud whistleblower lawyers who understand Medicaid pricing, and stay beside you through the pursuit of a recovery.