In several short years Health Diagnostic Laboratory (HDL) achieved spectacular growth partially on the promise to customers that they would never be responsible for the high costs of the company’s tests. Now, after bankruptcy and a forced sale of the company following multi-million dollar lawsuits by the Federal government and large private insurance companies, those same patients are receiving threatening notices from a debt collection agency.
Health Diagnostic Laboratory (HDL) was started in 2009 and by 2012 had reached revenue of $417 million, $138 million of which was profit. The rapid growth, according to charges by the US DOJ and others, was achieved by giving kickbacks to physicians ordering a battery of unproven cardiovascular diagnostic tests. Patients were never billed for the tests. The company billed Medicare and insurance companies several thousand dollars for each battery of tests, and recommended that physicians repeat the tests every three months. (It is also important to recognize that there is no current medical justification for the routine use of the vast majority of these tests, though it turns out that this is largely immaterial to the business and legal issues at play in the story.)
In 2014 the government filed suit against HDL, eventually settling with the company in 2015 for at least $47 million. The company might have survived at that point, but then it was dealt a second blow when it was sued by two large insurance companies, Aetna and Cigna. A third insurance company, UnitedHealthcare, withheld millions of dollars in payments to HDL. As a result of the lawsuits, the bad publicity, and a precipitous drop in revenue, HDL filed for bankruptcy in 2015.
In September 2015 a federal bankruptcy judge approved the sale of HDL to a new lab company, True Health Diagnostics, for $37.1 million. By many accounts, True Health has a business model that closely copies HDL’s and is owned by some of the same players who helped create and run HDL.
But now, months after the sale, some HDL patients– who agreed to get HDL tests because they were told by their doctor, and assured by the company, that they would never be billed for the tests– are receiving threatening letters from a collection agency. The letters, from Accelerated Receivables Management, a debt collection company in Jacksonville, Florida, urge payment of the debt in order to “possibly prevent this from affecting your credit” and warns the recipients that if they don’t respond to the letter within 30 days “this office will assume this debt is valid.”
The letter, signed by Natonya Suitzer, “Collection Supervisor,” offers advice to the recipient to “please govern yourself accordingly.”
The language of the letter is in striking contrast to HDL’s promotional literature distributed by physicians to their patients. “Lab costs and bills are worry-free with HDL, Inc.” the brochure promises. “If it turns out your insurance company does not cover a specific test, HDL, Inc. assumes all the risk… For patients with Medicare/Medicaid, the entire cost of services performed by HDL, Inc is covered under current Medicare/Medicaid requirements.”
Jason Shumake is a patient who received two batteries of HDL tests in June of 2014 and December 2014. He was told by his doctor that there would be no charge for the tests and he never received a bill. But then he was shocked to receive a letter in December from from Accelerated Receivables Management. Here is what he wrote me:
I am hoping that once the debt collector receives my written notice disputing the validity of the debt, this will simply go away. But I worry about what I will do if they persist and how this may affect my credit, and I am angry that I have to waste any time and energy at all dealing with this. And I worry about the exploitation of other patients with less knowledge and fewer resources. This whole thing is just despicable.
I have asked Fran Landau, the president of Accelerated Receivables Management, for an explanation of the situation. No response has been forthcoming, despite repeated efforts to contact her company, True Health Diagnostics, and Douglas Sbertoli, who was an executive vice president and general counsel at HDL, and who is now a consultant on the HDL bankruptcy.
“The discovery that a collection agency is billing patients tested more than a year ago by HDL—and who were promised by HDL that they would not see a bill—is just the latest twist in the saga of HDL,” stated Robert L. Michel, Editor-in-Chief of The Dark Report, an intelligence service covering the clinical laboratory industry. “This new development also comes just a few months after many of HDL’s assets were sold in a bankruptcy court auction.”
“Thus, who decided to engage a collection agency to contact HDL patients and demand payment for a sizeable bill they may have never seen before?” asked Michel. “Who owns this debt? Are HDL’s patient accounts receivables still owned by HDL? Or did they remain in the bankruptcy, as an asset for eventual recovery by the court on behalf of HDL’s creditors, for example?”
“There are estimates that HDL generated between $1 billion and $1.5 billion of revenue during the years 2010 and 2014, preceding its settlement of a federal whistleblower lawsuit in April 2014,” he continued. “Given details about the case that are in federal court documents, it may be that the current owner of HDL’s patient accounts receivables believes that it can collect tens of millions of dollars by turning those accounts over to collection agencies.”
“There are three ways this may backfire on the owner of HDL’s patient debt,” noted Michel. “First, if it is determined the debt holder is violating federal and state laws with the collection methods, regulators may step into this case, particularly if alerted by irate patients who have been dunned by collection agencies. Second, in today’s litigious society, it would be no surprise if one or more of the patients getting collection notices decided to file a class action suit.”
“The third way this may backfire is if a substantial number of patients go to their physicians with these collection notices and complain,” concluded Michel. “This happens frequently when patients believe they have been overcharged or improperly charged by the clinical laboratory. When physicians get these complaints, they are quick to contact the laboratory and complain. Often, too many patient complaints will cause the physician to drop that laboratory and begin using another clinical lab provider.”
CardioBrief Stories About HDL and True Health Diagnostics:
- Beyond Kickbacks: More Questions About Unnecessary Cardiovascular Biomarker Tests
- Way Beyond Kickbacks: More Serious Misconduct Alleged Against Medical Testing Company HDL
- Embattled HDL Laboratory CEO Resigns Amid Federal Investigation
- Doctor: You’re Going To Have A Heart Attack! Patient: Your Tests Results Are Giving Me A Heart Attack!
- Cigna Sues Embattled HDL Laboratory For $84 Million
- Embattled Lab Nears Settlement With Government Over Kickbacks
- DOJ Settles With Embattled Lab, Criminal Charges For Executives Still Possible
- Inside The Scandal: Profit And Greed At An Embattled Laboratory Company
- Embattled Laboratory Files For Bankruptcy
- Bankruptcy Judge Approves Sale Of Embattled Diagnostic Lab Company
- Zombie Laboratory Company Sics Bill Collectors On Patients Promised Free Tests
- New Lab Company Seeks To Bury Links To Zombie Lab And Rogue Sales Team
- A Lab Industry Veteran Deciphers The Zombie Lab Enigma
- The Real Losers In The Zombie Versus Vampire Lab Company Court Battle
- Vampire Lab Turns To Old Trick To Grow Business: Physician Owned Labs
- US Freezes Millions Of Dollars In Assets Of Rogue Lab Sales Force