Blue Cross of Minnesota lawsuit alleges 'profiteering' by lab in COVID-19 testing

Blue Cross and Blue Shield of Minnesota filed a lawsuit Tuesday alleging that a Nebraska-based lab with COVID-19 testing centers in the Twin Cities engaged in fraudulent billing practices that overcharged the Eagan-based health insurer millions of dollars for thousands of tests.

Blue Cross alleges that GS Labs posted inflated cash prices on its public website in order to charge the health insurer much higher rates for testing than the prices applied to cash-paying customers — an assertion GS Lab denies.

The lawsuit seeks to recover more than $10 million in overpayments, the health insurer said in a news release.

"This case concerns a COVID testing laboratory profiteering off the pandemic and at Blue Cross's expense," the insurer said in a lawsuit filed in U.S. District Court in Minnesota. "Determined not to let such a monumental public health crisis go to waste, GS Labs pocketed millions of dollars in wasteful and duplicative testing fees."

GS Labs spokesman David Leibowitz called the lawsuit "an abrupt deviation from active negotiations" in a statement to the Star Tribune.

Leibowitz said the lab company has followed federal law and posted prices for COVID-19 tests that are in line with markets across the U.S. Other insurers have paid the posted price, he said, or negotiated rates.

Leibowitz alleged that Blue Cross of Minnesota has failed to pay millions of dollars for COVID tests that provided enrollees with "critical medical information and peace of mind." He also suggested that Blue Cross, despite being a wealthy company, was seeking the same "hardship price" offered to patients in financial distress.

The lawsuit "represents more strong-arm gamesmanship by 'big insurance,' designed to hide their egregious failure to obey [federal law] by paying for tens of thousands of COVID-19 tests provided to their members," Leibowitz said. "We look forward to litigating this absurd claim by BCBS of Minnesota in court."

The lawsuit is the latest in a series of legal skirmishes between health insurers and GS Labs.

Last year, Washington state-based Premera Blue Cross claimed in a lawsuit that the posted rates of $380 to $979 per test at GS Labs were "extraordinarily high." Blue Cross and Blue Shield of Kansas City alleged in litigation last year that the lab company's claims for payment "amount to unlawful price gouging and disaster profiteering."

GS Labs filed a counter-claim against BCBS of Kansas City, saying the health insurer had paid only about $108,496 of the $9.6 million owed for more than 12,000 tests. The testing company filed a legal complaint in November claiming that Minnetonka-based Medica had failed to provide full reimbursement for thousands of tests.

In an interview last year, an executive with the testing company said GS Labs had been "bullied and pushed around" by health insurers and was "the furthest thing from a profiteer or a price gouger."

All four of the 2021 lawsuits are ongoing. In the complaint filed Tuesday, Blue Cross of Minnesota says that GS Labs provides COVID-19 tests in Minnesota and four other states.

Under federal law, health insurers must provide approved forms of coronavirus testing to patients at no cost. If carriers haven't negotiated rates with labs for providing the service, insurers must pay the cash price listed on the lab's website, Blue Cross says.

At GS Labs, the website prices are up to 10 times higher than those charged by other testing providers, Blue Cross alleges. Plus, the cash prices are "a sham," the lawsuit asserts, given that individual patients paying out-of-pocket have received price cuts of 50% or more.

"[GS labs] utilizes a 'discount' specifically to obscure the fact that no cash customers are actually required to pay the 'cash prices' it is charging insurers like Blue Cross," the lawsuit states. "GS Labs has thus misrepresented its 'cash prices' in an effort to deceive Blue Cross into paying rates that far exceed the reasonable value of its services."

There have been problems with the timeliness of test results provided by GS Labs, Blue Cross alleges, adding in the lawsuit that the lab has submitted false information on its claims for payment. GS Labs has administered extra tests to patients that aren't necessary, the insurer says, but allow the company to boost its charges to Blue Cross.

"After months of attempts at good-faith negotiations, we were unable to reach an agreement with GS Labs that would put in place appropriate COVID-19 testing practices at a fair price," Scott Lynch, senior vice president of pharmacy and the chief legal officer at Blue Cross and Blue Shield of Minnesota, said in a statement. "It's egregious price-gouging like this that ultimately drives up the cost of health care for everyone."