On April 25, 2016, UnitedHealthcare Insurance Company (“United”) filed a $50 million lawsuit against a number of drug urinalysis companies (“Labs”) and several investors, medical doctors, and other individuals who are presumably affiliated with these toxicology companies. The first defendant listed in United’s complaint is Sky Toxicology, Ltd. (“Sky”), which is also a defendant in a complaint filed by Cigna Health Insurance Company in July of 2015.
United alleges that Sky and the other Defendant-Labs are involved in a scheme to defraud United. This scheme allegedly involves unfair trade practices, kickbacks, waivers of copays, and unnecessary urinalysis tests.
The basic scheme alleged by United involves companies or individuals that offer substance abuse treatment services that purchased limited partnership shares in labs such as Sky. These limited partners would receive monthly distributions based on their limited partnership shares. But United alleges that if the limited partner stopped referring patients or referred less patients, then the lab would threaten to withhold the monthly distributions or buy back the limited partner’s shares. United further claims that the labs encouraged the limited partners to increase the number of urinalysis referrals by referring unnecessary or unauthorized urinalysis tests.
Federal law generally prohibits a quid pro quo payment for a referral when the federal government is the payor; the payment for referral is generally considered a “kickback” (see 42 USC 1320a-7b). The laws of several states extend this prohibition in order to protect private payors, such as health insurance companies. If United can show that a particular Lab was basing its monthly distributions to any particular limited partner on that partner’s volume of referrals, then it is very likely that the court would find that such payments were prohibited kickbacks under applicable state laws.
The case was settled out of court and the settlement was undisclosed, but it is clear that health insurance companies are looking for these types of arrangements between urinalysis companies and substance abuse treatment service providers and will challenge these arrangements. This probably will not be the last suit of its kind.