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U.S. Probes San Juan Capistrano-Based Lab as Part of Industry Crackdown : Inquiry: The focus is on billing practices at companies that receive Medicare and Medicaid funds for medical tests.


SAN JUAN CAPISTRANO — Nichols Institute said Thursday that U.S. Department of Health and Human Services investigators plan to subpoena company documents during an ongoing investigation into the clinical laboratory industry.

The federal agency is seeking access to Nichols' records as part of an investigation of selling, pricing and billing practices at companies that receive Medicare and Medicaid reimbursement for medical tests, according to the company.

Nichols Institute is cooperating with investigators, according to company Chairman Albert Nichols, who said that no charges have been filed against the San Juan Capistrano-based company. "I am not aware of any improprieties in connection with the company's Medicare or Medicaid programs," Nichols said in a prepared statement.

The agency probe evidently is part of an increased federal effort to crack down on suspected fraud in the health care industry.

The statement from Nichols, a medical diagnostics and testing company, said it was not being singled out during the investigation. The company "understands that other independent clinical laboratory companies have received similar notices as part of what appears to be a nationwide audit and investigation of certain clinical laboratory industry practices."

Federal investigators also served notice Thursday on one of Nichols' competitors, Allied Clinical Laboratories Inc., a Nashville-based company. Allied Clinical said it "believes that its policies comply with all laws applicable to the Medicare and Medicaid programs and intends to cooperate fully in the investigation."

In recent months, two of Nichols' competitors have pleaded guilty to submitting false claims.

La Jolla-based National Health Laboratories in December agreed to pay $110 million to federal agencies after pleading guilty to submitting false claims to Medicare and Medicaid. Earlier this month, a company in Pittsburgh agreed to pay $2.4 million for fraudulent Medicare billings.

In an unrelated case Thursday, federal authorities raided 22 offices of Santa Monica-based National Medical Enterprises seeking evidence of alleged billing fraud related to psychiatric services.

According to Securities and Exchange Commission filings, about 13% of Nichols' $284.2 million in 1992 net revenue was derived from direct billings under the Medicare and Medicaid programs. However, Medicare and Medicaid provide a much higher percentage of Nichols' total revenue because the company bills hospitals for tests, and the hospitals then seek direct Medicare and Medicaid reimbursement.

Nichols' Class A stock rose 25 cents to $6 on American Stock Exchange trading Thursday. Its Class C shares rose 37.5 cents to $5.75. Nichols made its announcement after Thursday's trading ended.

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