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Physicians should be on alert for demand letters from embattled lab

The Wisconsin Medical Society cautions members to be on the lookout for letters demanding repayment from a blood lab that has been the target of government investigations and multiple lawsuits. Physicians who receive such a letter are advised to discuss it with their attorney.

Health Diagnostic Laboratory, Inc, (HDL), a Virginia-based blood laboratory, along with several other labs, came under scrutiny from the U.S. Department of Justice (DOJ) for inducing physicians to refer patients to the lab for blood tests by paying them processing and handling fees per referral and by routinely waiving patient copays and deductibles. The practice triggered a June 2014 Department of Health and Human Services (HHS) Special Fraud Alert regarding laboratory payments to referring physicians, available here. HDL settled the DOJ claims of violation of federal Stark and antikickback laws for $47 million. Several private insurers also sued HDL, which was forced to enter bankruptcy in 2015.

A trustee appointed to manage the HDL bankruptcy has hired two law firms to pursue recovery of payments made by HDL to physician groups, specialty hospitals and other health care providers. Letters were sent to an estimated 3,000 physician groups nationwide in July and August demanding repayment of certain charges and threatening legal action. It is not known how many Wisconsin physicians received such letters. The letters claim that payments by HDL to referring physicians and facilities were excessive and constitute fraudulent conveyances, and that failure to immediately repay those amounts or enter into settlement discussions will result in legal action. The trustee also is pursuing repayment from patients whose copays and deductibles had previously been waived.

The Society recommends members be on the lookout for such letters, take them seriously and seek legal counsel if they receive one. To the Society’s knowledge, no legal action has been initiated to date against physicians receiving these letters, but such action is expected. Members seeking legal counsel can access a list of private attorneys here* (member login required). If you receive such a letter, please also notify John Rather, JD, the Society’s General Counsel. The Society will continue to monitor this issue and update members as necessary.

*(Member log-in is required to access the private attorney list. Click here to access the log-in page. Additional member log-in information is here.)

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