Fraud Claims Against Laboratory Testing Company Can Proceed.


The U.S. District Court for the Northern District of Texas grants in part and denies in part the defendants' motion to dismiss the plaintiff's fraud claims.

The plaintiff is a provider of health care insurance, administration and/or benefits pursuant to a variety of health care benefit plans and insurance policies. The defendants are a medical laboratory testing company and its subsidiaries. The defendants provide services to the plaintiff's members as an out-of-network provider.

Many of the plaintiff's private employer-sponsored plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA). Those plans are generally classified as self-funded or fully insured plans. The plaintiff is obligated to approve claims for health benefits that satisfy the terms of either type of plan.

The plaintiff uses a two-tier provider system for its plans, which allows members to obtain health care services from network or out-of-network providers. Network providers enter into agreements under which the plaintiff agrees to reimburse them at specified rates. In return for those specified rates, network providers agree not to use balance billing for the plaintiff's members. In contrast, out-of-network providers do not have similar agreements with the plaintiff, and they generally bill members at the rates they determine and set. Members are usually required to pay the amount by which an out-of-network provider's charges exceed the approved payment under the applicable plan.

The defendants offer laboratory testing that is ancillary to a patient's encounter with a medical provider. The plaintiff alleges that the defendants committed fraud in connection with their provision of out-of-network testing services to the plaintiff's members. The plaintiff further alleges that the defendants paid bribes and kickbacks to referral sources in exchange for requesting out-of-network lab services from the defendants, performed and billed for lab services that were not ordered by medical providers or in some cases even performed, inflated claims, and billed charges that the defendants never intended to collect from patient members. As a result of such fraud, the plaintiff argues that it paid the defendants more than $100 million over a five-year period. The defendants filed a motion to dismiss the plaintiff's state law misrepresentation-based claims, arguing that they were preempted by ERISA.

ERISA preempts any and all state laws insofar as they may now or...

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