Nearly three years ago I wrote about rural hospital lab scams. That’s when a shady marketing consultant working with scammers convinces struggling rural hospitals that they have a solution for precarious hospital finances. Basically, every lab test ordered by affiliated physicians is billed through a rural hospital with a more lucrative lab contract. The hospital makes money for doing nothing, while the marketing guys get a big, fat cut of the proceeds. You and I pay higher prices as a result. The following is what I wrote three years ago:
With less competition from commercial labs, rural hospitals are often able to command higher fees for lab tests than the prices routinely available in larger cities. In addition, hospital labs always charge more for their services than laboratories outside hospitals. Unscrupulous lab marketing consultants have figured out a way to take advantage of the difference between rural and urban lab prices. They’ve done this by partnering with rural hospitals in order to charge urban patients the higher rural hospital lab testing fees. This occurs even though patients may live far away from the rural hospital billing for lab tests. Patients may even live out of state.
In some cases, the shady marketers buy or take over management of the rural hospital to reap the rewards of billing higher rates for lab work actually performed at less expensive commercial labs in big cities. A little, struggling hospital that barely grosses, say, $5 million a year off local inpatients may bill $10 million a year in lab tests performed hundreds of miles away for patients who have never set foot in the hospital. This scam is called “pass-through billing.”
As an example, I can get a complete blood count with a comprehensive metabolic panel for $44 to $46 at two major commercial labs, one of which has a location only 1 mile away from my house. Let’s assume I go to my local doctor, who tells me she ordered a blood test for me. I drive to the Walmart near my house and stop by Quest Diagnostics for a blood draw. A few days later the physician’s office calls to say my results were fine. A month later I received a statement in the mail informing me a $440 withdrawal was taken from my health savings account and paid to a hospital in far West Texas for lab work. I would not be happy knowing a test I could have purchased for $44 instead cost 10 times that amount through a shady price-gouging arrangement.
As implausible as this sounds, an insurance company in Texas is claiming in a lawsuit that something similar is happening. United Healthcare of Texas has filed a lawsuit against Radiology Partners, who stand accused of funneling radiology billings through a small Houston radiology practice it acquired in 2014. The following are excerpts from the lawsuit.
Since as early as 2014, Radiology Partners has engaged in a classic form of healthcare fraud called pass-through billing. Simply put, Radiology Partners, caused its affiliated medical groups to bill for services that they did not perform.
Acting in concert with its affiliated medical groups, Radiology Partners deliberately caused thousands of claims to be improperly billed to United under network contracts, even though the in-network provider did not perform the underlying services being billed.
For example, one of Radiology Partners’ affiliated radiology groups, Singleton Associates P.A. (“Singleton”), was a small radiology practice located in Houston, Texas that was contracted to practice at two local hospitals.
Singleton obtained particularly high reimbursement rates from United under a contract executed in 1998 (the “Agreement”). The Agreement made clear that Singleton was only entitled to reimbursement for services performed by its “Medical Group Physicians” who were “shareholders, partners or employees” of Singleton, prohibited Singleton from assigning its rights and responsibilities under the contract without written consent from United, and required Singleton to notify United of any changes in ownership or control.
The scheme grew over time. In 2013, before Radiology Partners took over Singleton, 70 unique providers performed services that were billed under the Agreement. That number increased to more than 150 unique providers in 2017; nearly 315 unique providers in 2018; more than 500 unique providers in 2019; and to more than 1,000 unique providers in 2022. Upon information and belief, most of the providers billing under Singleton’s contract since at least 2017 were practicing with medical groups other than Singleton.
Indeed, the acquisition of Singleton was probably worth a lot more money than normal market value due to its lucrative contract. The contract dating back to 1998 was an agreement for United Healthcare to pay Singleton 600% of what Medicare pays for the same service.
Radiology Partners was founded in 2012 and has been expanding rapidly. It is now the largest radiology practice in the nation, with more than 3,300 radiologists serving 3,250 hospitals. Its physicians serve 20 million patients annually, interpreting roughly 53 million scans.
A Texas Neuroradiologist blogged about the controversial lawsuit in United against Radiology Partners | Ben White. It’s a sordid tale of the insidious ways health care goes awry when third parties pay the bills, and bean counters try to game the system.