Walgreens to Pay $44 Million to Theranos Customers

by Jondavid Klipp | Sep 20, 2023 | Theranos

Walgreens to Pay $44 Million to Theranos Customers

Walgreens Boots Alliance (Deerfield, IL) has agreed to a $44 million settlement to resolve class-action claims related to its partnership with Theranos.

The proposed settlement, which needs court approval, will provide consumers who participated in the lawsuit with “approximately double their out-of-pocket damages,” lawyers for plaintiffs said in a court filing in federal court in Phoenix on September 6.

The class-action lawsuit accusing Walgreens of being “willfully blind” to the fraudulent company, which claimed to offer hundreds of lab tests with only a few drops versus vials of blood thanks to its proprietary technology, called Edison. Walgreens partnered with Theranos in 2013 and installed sample collection kiosks in 40 stores in Arizona and one store in Palo Alto, California,
without validating its technology.

Theranos formally dissolved nearly three years after The Wall Street Journal uncovered discrepancies about the once-valued $9 billion company in 2015. Walgreens ended its partnership with Theranos in 2016 and shut down all testing locations.

Although Walgreens agreed to settle the class-action lawsuit against it rather than go to trial, the pharmacy chain maintains it too was duped by Theranos.

Elizabeth Holmes, age 39, founder and CEO of Theranos, was convicted of fraud in 2022 and sentenced to 11.25 years in prison. Ramesh “Sunny” Balwani, 58, former Theranos President, was also found guilty and is serving a 13-year sentence.

Labcorp to Buy Tufts Outreach Lab Assets

by Jondavid Klipp | Aug 18, 2023 | Hospital Outreach Laboratory, Lab Acquisition, Labcorp

Labcorp to Buy Tufts Outreach Lab Assets

Tufts Medicine (Boston, MA) is selling its clinical lab outreach business to Labcorp for an undisclosed amount. The transaction, which
does not involve anatomic pathology services, is expected to formally
close in October. Tufts says the sale is the first step towards a broader
partnership with Labcorp. The announcement comes as Tufts endures
prolonged financial difficulties that led Fitch Ratings to downgrade its
debt rating from BBB+ to BBB earlier this year.

Tufts Medicine (TM) includes three hospitals in the Boston area, including Tufts Medical Center (405 beds), Lowell General Hospital (390 beds) and Lawrence Memorial Hospital of Medford (216 beds). It also includes Tufts Medicine Integrated Network, which has more than 1,800 affiliated community and academic physicians.

The annual lab department budget at TM’s three hospitals is a combined $122 million, according to Medicare Hospital Cost Reports. Laboratory Economics estimates that TM’s clinical lab outreach business has annual revenue of roughly $30 million. Labcorp is expected to make job offers
to nearly all 574 TM lab employees affected by the sale.

TM lost $399 million on operations in the fiscal year ended Sept. 30, 2022. TM management estimates that approximately $129 million of the losses were related to one-time items, including the stoppage of elective surgeries due to the pandemic (a $58 million loss of revenue) and installation of the electronic medical records system Epic ($71 million). The largest component of the rest of the operating loss was $217 million for increased staffing costs. The amount TM paid for contract labor increased an incredible 1,423%, to $155 million in the 12 months that ended Sept.
30, 2022, compared to pre-pandemic in 2019.

In addition, TM is facing stiff competition for hospital patients from Massachusetts General Hospital (Boston), which is aggressively competing for managed care contracts.

Sizing Up the Boston Lab Market
The Boston-Cambridge-Newton metropolitan area has a population of 4.9 million with an estimated physician lab services market of $650 million per year.

Quest Diagnostics has by far the largest market share in the Boston area. Quest purchased the Worcester-based clinical lab outreach business of UMass Memorial Medical Center in 2013. Quest then consolidated testing at a new 200,000-square-foot lab in Marlborough (30 miles west of Boston). Quest has a total of more than 100 patient service centers in the Boston area. It generates an estimated $350 million in revenue from physician office clients in the Boston area.

Labcorp has 15 PSCs in the Boston area and estimated physician client revenue of $50 million… per year (excluding Tufts Medicine deal). Labcorp’s nearest major regional lab is located in Raritan, New Jersey (~5-hour drive)

Mass General Brigham provides lab outreach testing at several hospitals in the Boston area, including Massachusetts General Hospital (1,019 beds), Brigham and Women’s Hospital (812 beds) and Newton-Wellesley Hospital
(273 beds). Total estimated annual lab outreach revenue from the physician office market is $75 million.

Beth Israel Lahey Health operates its biggest hospital-based outreach
labs at Lahey Hospital and Medical Center Burlington (345 beds), Beth
Israel Deaconess Medical Center (743 beds) and Winchester Hospital (194 beds). Total estimated annual lab outreach revenue from the physician office market is $60 million.

CAP Has “Serious Concerns” with UnitedHealthcare’s Z-Code Rollout

by Jondavid Klipp | Jul 19, 2023 | College of American Pathologists, Z-Codes

CAP Has “Serious Concerns” with UnitedHealthcare’s Z-Code Rollout

The College of American Pathologists (CAP) has sent a letter to Optum requesting a meeting to discuss its partnership with Palmetto GBA and UnitedHealthcare’s new Z-code requirement. CAP and Optum are in the process of scheduling the meeting, says Jonathan Myles, MD,
Chair of CAP’s Council on Government and Professional Affairs.

Myles notes that HIPAA designated AMA CPT as the official code set for use in claims, and CAP made the argument back when the Z-codes first started that it violated HIPAA to require the use of an alternative code set. Only CMS (HCPCS level II codes) or the AMA (CPT codes) may develop code sets for laboratory services under HIPAA. If a provider desires to file an electronic
health care claim, a health plan must accept such a transaction that is filed in HIPAA standard format. Furthermore, only HIPAA-approved code sets may be required by a plan in connection with electronic health care claims, adds Myles.

Myles maintains that the existing CPT Editorial Panel has the infrastructure and capacity to process code requests on a quarterly basis, provide transparency and offer a public forum at regular intervals several times a year. This process would be the appropriate method for insurers to address any issues with information on specific tests without adding further requirements and reporting complexity.

CAP has requested that Optum and UHC remove Z-code requirements.

Hospital Labs Expanding PCR-Based Test Menus

by Jondavid Klipp | Jun 23, 2023 | Covid Testing, COVID-19, PCR Testing

Hospital Labs Expanding PCR-Based Test Menus

PCR-based testing for gastrointestinal profiles, gonorrhea/ chlamydia, bacterial vaginosis panels, and herpes simplex virus (HSV) are the tests that most hospital labs plan to add to their test menus within the next 12 months, according to LE’s Hospital Laboratory Survey. These choices are obviously related to the need to find work for excess PCR testing capacity due to the wind down of the pandemic.

Twelve surveyed hospitals labs (or 8%) said they plan to add gastrointestinal panel testing by PCR. The majority of these labs specifically mentioned the BioFire GI Panel for 22 of the most common pathogens associated with gastroenteritis.

Another nine surveyed hospital labs (or 6%) cited plans to add PCR testing for gonorrhea/chlamydia (CPT 87591 & 87491).

Seven hospital labs (or 5%) indicated they will add PCR testing for vaginitis panels (CPT 87798). Most indicated their panel will include three tests: bacterial vaginosis, vulvovaginal candidiasis and trichomoniasis.

Among the non-PCR tests that hospital labs plan to insource were procalcitonin (CPT 84145), free testosterone (CPT 84402), tuberculosis (CPT 86480) and Lyme disease antibody (CPT86618).

MACs Back Off Proposed Toxicology Cuts

by Jondavid Klipp | May 17, 2023 | Aegis Sciences Corp., Toxicology

MACs Back Off Proposed Toxicology Cuts

Six Medicare Administrative Contractors (MACs) have retired
proposed Local Coverage Determinations (LCDs) that would have
limited reimbursement for definitive drug testing to no more than 14
drug classes.

The proposed LCDs would have resulted in effective Medicare reimbursement cuts of 21% for procedure code G0482 (definitive drug testing for 15-21 drug classes) and 37% for G0483 (22+ drug classes). This would have resulted in an estimated $100+ million per year of lost Medicare revenue for toxicology labs (see LE, March 2023). Additionally, due to the draft LCDs proposed reduction to the number of recognized drug classes, most testing falling under procedure code G0481 (8-14 drug classes) would have been reclassified to procedure code G0480 (1-7 drug classes), which reimburses at $114.43 vs $156.59 for G0481.

The five MACs that had proposed limiting reimbursement for definitive drug testing to no more than 14 drug classes were CGS administrators, First Coast Service Options, Noridian, Novitas Solutions, Palmetto GBA and Wisconsin Physicians Service. Another MAC, National Government Services (NGS), had actually introduced the proposed changes by issuing a billing article late last year. NGS then issued a proposed LCD for capping definitive drug testing in February 2023.

However, all of the MACs, including NGS, retired the proposed changes in early April.

The American Clinical Laboratory Assn., the big commercial labs and numerous independent toxicology labs, with bipartisan and bicameral support from Congressional representatives, had all argued to the MACs against the proposed changes. Their reasoning included:
1) The proposed LCDs directly violated CMS’s national coding and payment policies for definitive drug testing.
2) CMS had published clear guidance in 2016 that the definitive drug test codes (G0480-G0483) and payment rates—that providers must use— were set based on AMA CPT Manual listings of drugs and drug classes.
3) The proposed policies could cause significant disruptions to access for drug testing services during the ongoing opioid public health emergency.

“This outcome reflects the highly constructive dialog that occurred between all key stakeholders and a recognition of the importance of definitive drug testing services as a vital tool in combating
the worsening opioid epidemic,” noted Joel Galanter, Chief Legal Officer of Aegis Sciences (Nashville, TN).

Newly proposed LCDs issued by the MACs are now focused on tweaking the language that describes patient risk assessments and documentation that doctors should use before ordering drug testing. There are no drug class caps on the definitive drug test codes (G0480-G0483) contained in the newly proposed LCDs.