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Ameritox lab case shows why health system bleeds money

Why does American health care cost so much and deliver so little? We have another, partial answer courtesy of a Baltimore company called Ameritox, the U.S. Justice Department and a courageous whistleblower named Debra Maul.

A few weeks ago Ameritox agreed to pay $16.3 million to settle allegations that it bribed doctors to prescribe drug tests that were paid for by Medicare, the taxpayer-financed program for the elderly and disabled.

Federal authorities alleged that Ameritox gave cash to doctors at pain-management practices in return for drug-test business. Ameritox employees also lodged themselves in physicians' offices and sent patient urine samples to be tested by the company without regard for whether the physician thought it was medically necessary, according to a lawsuit filed against the company by Maul, a former Ameritox sales rep.

"Financial kickbacks can subvert the medical decision-making process, resulting in abuse of government health programs and harm to the beneficiaries of those programs," Daniel R. Levinson, inspector general for the Department of Health and Human Services, said in announcing the Ameritox settlement.

What's worse, kickbacks prompt the prescription of unneeded procedures at enormous cost to Medicare and health insurers — "unnecessary testing and attendant overtesting and overbilling," according to Maul's lawsuit.

Ameritox, based here but with a lab in Texas, is owned by a private-equity fund run by Baltimore-based Sterling Partners, whose co-founder is Douglas L. Becker, chief executive of Laureate Education. Sterling didn't respond to my inquiry, and Ameritox officials declined to be interviewed.

But Ameritox said in a prepared statement that it agreed to settle the bribery allegations "so it could focus on serving the pain medication monitoring needs of its customers." As is usual in these cases, Ameritox did not admit wrongdoing in the settlement.

The company's business is testing patients to make sure they're taking the right medication and not abusing painkillers. Ameritox claims its analysis of results is better than those of its competitors. But another key business strategy, according to the federal allegations, was cutting doctors in on the action.

Not only did Ameritox pay doctors cash for ordering its tests, the government alleged, but it dispatched Ameritox employees who handled urine collection at doctors' offices and "automatically" sent samples to be tested "without physician request," according to Maul's lawsuit.

Physicians are free to order tests and bill insurance companies if they deem them medically necessary.

"But nobody ever thought of what would happen if docs were billing and letting the lab specimen collector do all the work," says Jennifer Bolen, a former federal prosecutor and now a legal consultant to doctors, pharmacists and laboratories. "The reimbursement that the doctor was getting at the time was very significant" — more than $200 per test in some cases, she said.

Maul, 56, who declined to be interviewed on the advice of her lawyer, was hired in Florida by Ameritox in 2005. She became troubled by what was going on and alerted company management, her lawsuit says — apparently to no effect. She left the company in mid-2006 and contacted federal authorities.

Maul collected $3.4 million of Ameritox's settlement, which was announced in November by Robert E. O'Neill, U.S. attorney for Florida's middle district. But after taxes and lawyers' fees, the reward is hardly likely to be worth the grief, headache and stress that are the typical lot of the whistleblower.

Too few insiders have the guts or principles to expose problems. And the kinds of things alleged to have gone on at Ameritox are hardly isolated.

Sales reps invading the clinical setting? How about the marketers of coronary-artery stents who were allowed in the catheterization lab at Towson's St. Joseph Medical Center despite that hospital's rules against it, as reported last year by The Baltimore Sun?

Plying doctors with goodies? How about The Sun's account of the pig roast that stent-maker Abbott Laboratories threw at the home of St. Joseph cardiologist Dr. Mark Midei? (Pharmaceutical and medical-device companies buying meals for docs is legal and routine, but the practice shows how firms seek to curry favor.)

Bribing doctors in return for referrals? See St. Joseph's $22 million payment last year to settle federal claims that it engaged in a decade-long kickback scheme to get cardiovascular business.

Possible gaming of the reimbursement system to increase payments? See The Sun's November report on Baltimore Behavioral Health, which was diagnosing nearly all of its patients with mental illness, and billing Medicaid, even though their primary problem was drug abuse.

Problems are reported across the country. Last year another testing company, Calloway Laboratories, was indicted by a Massachusetts grand jury for an alleged "extensive" kickback scheme to gain drug-screening prescriptions. (Calloway told the Associated Press that it would mount a "vigorous defense.")

To a large degree the U.S. health industry isn't about what's medically needed. It's about the hustle, about getting extremely lax reimbursement systems to pay up at the expense of taxpayers, employers and consumers. Whoever suggests cracking down risks being accused of favoring "death panels" or "interfering in the doctor-patient relationship."

No wonder we pay nearly twice as much for health care as people in other rich countries. And they live years longer.

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