A Lab Industry Veteran Deciphers The Zombie Lab Enigma

True Health Diagnostics (THD) is the new, rapidly growing lab that bought the assets of the disgraced and bankrupt Health Diagnostic Lab (HDL). (See the bottom of this story for links to my previous coverage of this story.) I asked one industry veteran for his thoughts on THD’s business practices and the relationship between THD and Iggbo, a new company that offers on-demand phlebotomy services. My attention was drawn to Iggbo because of Paul Spicer. Spicer contacted me recently as a representative of True Health. But, according to LinkedIn, Spicer is also the “chief brand officer” at Iggbo and was, for nearly five years, the vice president of marketing and public relations for HDL. Here are the lightly edited remarks of the industry veteran:

Iggbo charges $50 per blood draw, so they are only used in rare instances by most established labs. Most just can’t afford this. Quest and LabCorp make about $30-$40 in revenue per blood draw, so obviously they don’t use Iggbo, at least not regularly.

It all goes back to the business model, which hasn’t changed since HDL changed its name to THD. They’re collecting $2,000-$4,000 per sample, so paying out $50 to Iggbo is a small investment for a great return.

But there still has to be some incentive to the doctor. Does Iggbo pay this now? No one seems to know for sure. There’s a lot of chatter about Iggbo playing the role of BlueWave [the outside sales force for HDL]. I don’t know if that’s true, but something just doesn’t add up. They absolutely must give $$ incentives to doctors for this to work.

The business is built on a few thousand doctors who go out of their way to order 10-20 HDL/THD test panels per day. And the only way to motivate this is with cash.

They do business with many more doctors, but outside of this core group, most doctors only order the test panels when they feel it is necessary—maybe once a week or once a month. There’s no way the business could exist—at its current size—if they just depended upon these occasional orders. HDL had to have a core group of 1000+ doctors who set weekly goals for 50-100 orders. Otherwise, it just doesn’t work. Same is true now for THD. They need this core group to keep the spigot of blood open wide and flowing 24/7. If it’s just trickling in, which it would without a very proactive sales force, THD would be another mom & pop specialty lab with a half dozen employees.

In a statement Grottenthaler said: “In recent days, True Health has been flooded with questions and complaints from physician offices and patients concerning the fact that the HDL bankruptcy estate has recently hired collection agencies to aggressively pursue bills against former patients for services performed many months if not years ago.”

THD said that when they took over HDL, they made it clear with all of HDL’s clients that there was a new sheriff in town. They said they laid down the law with these doctors—especially the list of all-star doctors, or the “whales,” who ordered hundreds of tests per week. Everyone was told, supposedly, that there would be no more kickbacks, no more waiving of copays, no target-setting for weekly and monthly test orders, etc.

So why are doctors calling THD to complain and telling their patients to call THD instead of the creditors of HDL who are issuing these bills?

Let’s say that it’s completely true—no one from HDL management/ownership is involved with THD. It really doesn’t matter because the face of the company is the sales rep, not the owner. Doctors work with reps and I would bet that 85% of these docs have only a vague understanding why HDL became THD. Most just think it was a name change. They see the same reps who are making the same promises and payoffs—with a few modifications. (I also think most don’t realize, or want to realize, they are breaking the law. Their peers do it and the HDL-THD reps tell them it’s all “standard practice.” They like the cash and they don’t have the time or motivation to really look into it).

I’m sure doctors are calling THD like crazy. They hate when patients call them to complain about 3rd party bills. But these docs are much more concerned about current patients and tests than old tests and copays. I bet they’re asking themselves: “If patients who we promised  would never be billed 12-36 months ago when the company was called HDL are now getting billed, what’s going to happen with the hundreds of patients I promised would never see a bill in the last few months with THD?”

And this is the real problem for THD and why they want to shut down “these controversial collection actions taken by the HDL bankruptcy estate.” The bills aren’t the problem, it’s the loss of confidence and credibility among the doctors that is killing business. The same reps who had HDL or BlueWave on their business cards a year ago, and who now have THD on their business cards today, are telling the very same doctors the same thing they have been saying for 5 years: “Patients never get billed and if they do, we’ll pay it.”

Suddenly, this isn’t true and docs are panicking not about tests from 2 years ago but about the tests they ordered last week.

The two pillars of this scam are the kickbacks and the waived co-pays. HDL/THD needs to deliver on both of these promises to keep that spigot of blood flowing at full capacity. If they can’t do both, the blood flow becomes a trickle and they go out of business.

Below is an image of a letter that THD sent to all HDL doctors after they bought the company. In it, they promise “business as usual” to all their doctors: same sales people and practices. I’m sure that THD will say the letter doesn’t state that they will continue to pay kickbacks or wave copays. But if they insist that they’ve made it crystal clear to their doctors that these practices are over, when did they do it? This letter doesn’t even imply that major  changes in how HDL did business are about to happen.

 

True Health Letter

Click to enlarge

CardioBrief Stories About HDL and True Health Diagnostics:

 

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