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Friday, June 14, 2024 | Back issues
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Blue Cross Accused|of Monopoly Conspiracy

SAN JOSE (CN) - Blue Cross and Blue Shield conspired with Aetna and Quest Diagnostics to monopolize the diagnostic lab test market in California, four laboratories claim in a federal antitrust complaint.

Lead plaintiff Rheumatology Diagnostics Laboratory is joined as plaintiff by Pacific Breast Pathology Medical Corp., Hunter Laboratories, and Surgical Pathology Associates.

They claim Blue Shield of California, the Blue Cross and Blue Shield Association, Aetna and Quest Diagnostics conspired to corner the market by offering cut-rate deals to physician groups.

"Diagnostic testing represents less than 2 percent of spending by health plans, but nonetheless influences seventy (70) percent of all medical decisions," the complaint states.

Aetna is a leading health insurance company but its business model differs from Blue Cross's, according to www.healthinsuranceproviders.com .

Blue Cross is comprised of dozens of smaller, independent health insurance companies, which pay a licensing fee to use the "Blue Cross" logo. Insurance plans vary from state to state.

Aetna has a national network of doctors and hospitals, and historically has competed with Blue Cross, according to the health insurance providers website.

But now, the plaintiffs claim, the two giant companies are working together to monopolize and "restrain" competition for routine molecular and specialty testing services in California.

The anticompetitive plan includes dangling the lure of "loss-leader, below-cost" contracts to physician groups on a "capitated basis," the complaint states.

The plaintiffs say that violates California anti-kickback laws.

"Quest provides the capitated prices as an inducement to its customers to refer all of their lab testing business to Quest, including Medi-Cal and Medicare business, which Quest charges on a lucrative, fee-for-service basis," the complaint states. "Because Quest's competitors, including plaintiffs, are unwilling to violate the law by offering such loss-leader capitated rates, Quest's capitated discounts have the effect of eliminating competition from the markets at issue in this complaint."

The plaintiff labs claims that plans licensed by Blue Shield are subject to restrictions that preclude physicians from sending their lab tests to some of the most innovative labs in the country. Some of those labs offer new tests that, "have major impacts on patient health care and long-term health," according to the complaint.

"The Blue Card Association has conspired with Quest to promote a new, exclusionary licensing agreement that requires labs to submit Blue Card members' claims to the Blue Plan provider in whose region the patient is insured," the complaint states. "The Blue Plans must be billed by the lab which performs the test; if the patient is not insured in the region where the lab services are performed, then the plan in the patient's region will not adjudicate the claim."

The labs claim that Quest "persuaded" Aetna and Blue Shield to discontinue the in-network status of Quest's smaller competitors, in return for financial and other incentives. This induces doctors to steer clear of independent labs to save "out-of-network" fees, which hurts major portions of the market, according to the complaint.

For example, "Quest has successfully offered Blue Shield of California a 10 percent discount on lab testing as an incentive for it to take Westcliff (then, before its acquisition by LabCorp, the largest privately owned lab in California) and plaintiff Hunter Labs out-of-network," the complaint states. "This has had the effect of substantially lessening Hunter Labs' competitive position while leaving practitioners and consumers with fewer choices for quality lab testing."

That's not all, the labs say: Aetna, with Quest, agreed to "terminate 400 regional contacts across the United States," according to the complaint.

The laboratories say these anticompetitive practices are illegal.

"These practices, in addition to others described herein, have resulted in an unreasonable restraint on competition in violation of federal and California law, and constitute unlawful, unfair and/or fraudulent business practices under California law," the complaint states.

"This is an action for violation of the Sherman Act, California's Cartwright act, violation of California's unfair competition law, violation of California's Unfair Practices Act, Intentional Interference with Prospective Economic Advantage, and Negligent Interference with Prospective Economic Advantage."

The plaintiffs seek an injunction enjoining the monopoly, and treble damages for the causes listed above, and intentional and negligent interference with prospective economic advantage.

They are represented by Niall McCarthy, with Cotchett Pitre & McCarthy, of Burlingame.

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