Federal and state investigators are looking into allegations that Southern California medical diagnostic labs have billed insurance companies millions of dollars for unnecessary tests, often on healthy patients.
For more than a year, federal and state investigators have been targeting businessmen and doctors connected with about 80 diagnostic labs that are suspected of fraudulent testing. Involved in the investigation are the U.S. attorney's office in Los Angeles, the FBI, the inspector general's office of the U.S. Department of Health and Human Services, the state Department of Insurance fraud division and the state Board of Medical Quality Assurance.
In a separate inquiry, the Orange County district attorney's office has been investigating similar complaints against four diagnostic labs.
Insurance officials say that in the last three to four years, a disturbing pattern has developed, involving several hundred Southern California diagnostic labs that allegedly solicit patients for unnecessary testing through health clubs, at chiropractors' offices or by random phone calls. Some insurance officials have dubbed these firms "rolling labs" because some use portable equipment and operate out of vans.
While insurance policies generally do not cover medical screenings of healthy policyholders, company executives say, billings and computer-coded diagnoses from these labs have resulted in many payments that should not have been made. That means higher insurance costs for all consumers, said Jan Meisels, associate director for the Health Insurance Assn. of America, an insurance industry association based in Washington.
In the last 18 months, federal civil suits have been filed by Aetna Life Insurance Co., Metropolitan Life Insurance Co. and the Motion Picture Health and Welfare Fund against David and Michael Smuskevich. The suits accuse the Smuskevich brothers of fraud for operating as many as 42 labs in Los Angeles and Orange counties that allegedly billed insurance companies for unnecessary tests.
According to Metropolitan's lawsuit, the company received claims for thousands of dollars in tests that indicated their clients were suffering from illnesses, when "often the diagnoses stated on the claims were simple fabrications, obtained from historical information received from the insured . . . to facilitate the payment of the claim."
The Aetna suit claimed that the company was billed for expensive diagnostic tests that were never administered. It cited the case of a woman who was solicited at a health club, made an appointment for testing but never showed up. Nevertheless, the suit claimed, in May, 1985, Aetna was billed for $2,400 in tests by three diagnostic labs allegedly controlled by the Smuskevich brothers.
Michael J. Schroeder, an attorney for the Smuskevich brothers, said Aetna's claim that patients were billed for tests that were never administered is false. He described all three lawsuits as "without merit."
"The real problem is that they (insurance companies) just don't want to pay for these tests," Schroeder said. "They don't believe in preventive medicine."
Schroeder said each of the insurance companies sued his clients only after the Smuskevich brothers had sued them first in state court for failing to pay thousands of dollars in fees for lab tests.
In every case, Schroeder said, the tests were administered correctly--on the written order of a doctor who was not compensated by the Smuskevich labs.
"A diagnostic lab is kind of like a gas station," Schroeder explained. Just as a gas station fills a customer's request for gas, a diagnostic lab simply follows a doctor's order and runs a test. "You don't turn around and say, 'Do you need gasoline?' That's not the diagnostic labs' role."
However, Adam Radinsky, an attorney for the Motion Picture Health and Welfare Fund, said some doctors who prescribed the tests were involved in a "fraudulent relationship" with the labs. The doctors "were being paid by the Smuskevich entities" and were sometimes told what tests to prescribe, Radinsky said.
The Motion Picture Health and Welfare Fund lawsuit alleges a conspiracy between doctors and certain diagnostic labs.
Schroeder denied Radinsky's claims.
He also noted that the older Smuskevich brother, David, 36, is not now involved in any of the labs. Since May, he has been serving a three-year federal prison term at the Boron Federal Prison in Kern County on his conviction for soliciting kickbacks in connection with a Norwalk diagnostic lab. But insurance company executives from Metropolitan, the Prudential Insurance Co. of America and other major firms contend their problems with diagnostic labs extend far beyond the alleged fraud involving the Smuskevich brothers.
The insurance company executives, frustrated by the continuing diagnostic lab operations, were eager to talk about their problems. But most officials from the federal and state investigative agencies said they could not comment.