GS Labs sues Minnetonka-based Medica alleging lack of payment for COVID-19 tests

A private lab that opened several locations in the Twin Cities to meet the surging demand for COVID-19 testing claims Medica has failed to provide full reimbursement for thousands of tests.

Omaha-based GS Labs says in a lawsuit filed late last month that more than 16,000 Medica enrollees have obtained tests from the company, which decided in early 2020 to invest in and open about 50 testing sites across the U.S.

At that time, a shortage of COVID-19 testing capacity was hindering a national effort to minimize the spread of the pandemic virus.

GS Labs tries to make testing easy for patients through convenient hours, a drive-in format and fast results, said Kirk Thompson, one of the partners at the privately-held business.

"It's a really quick turnaround time," Thompson said. "Our testing process has given a substantial amount of accessibility, where each one of our sites has the capability of accommodating up to 1,000 patients a day."

A spokesman for Minnetonka-based Medica said the company would not comment on pending litigation. GS Labs has been sued twice this year by health insurers that allege the company charges unreasonably high prices.

Last month, a health insurer in Washington state, called Premera Blue Cross, filed a lawsuit claiming the posted charges of $380 to $979 per test at GS Labs are "extraordinarily high." In July, Blue Cross and Blue Shield of Kansas City filed a lawsuit alleging the lab's claims for payment "amount to unlawful price gouging and disaster profiteering."

"The Medicare program typically reimburses providers $41.38 to administer this type of test," the insurer said in its lawsuit. "Other providers charge as little as $35. However, GS Labs's posted cash price for the same test is $380 — approximately ten times higher than reasonable rates and twenty times higher than the wholesale cost."

In August, GS Labs filed a counter-claim for damages against Blue Cross and Blue Shield 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 supplies for a COVID-19 test come to about $20, the lab said in its counter-claim, but such references to wholesale prices show the insurer's "underlying contempt for the valuable services that GS Labs provided."

GS Labs says it invested substantial resources in a "custom technology platform" that lets a high volume of patients securely schedule tests and then promptly receive results. And, Thompson said, the lab has successfully negotiated with some insurers to provide discounts off the prices listed on the company's website.

"We're very reasonable people," he said.

One fact that was "conspicuously absent" from the insurer's lawsuit, the lab said, is that GS Labs "has not and will not" try to collect the unpaid sums for COVID-19 tests directly from patients.

In the background of all the lawsuits is the CARES Act, the federal stimulus legislation passed in the spring of 2020.

Congress included in the law a requirement for health insurers to provide access to medically necessary testing without cost-sharing for patients. The law required health insurance providers to pay the listed cash price for tests when they didn't have contracts for discounts from labs, a provision that eliminated the ability of insurers to negotiate more affordable test prices, according to America's Health Insurance Plans, a trade group for insurers.

This summer, the trade group published a report showing that in-network labs were charging an average of $130 for COVID-19 tests, compared with out-of-network lab charges of more than $185 per test.

The trade group said the proportion of tests billed at the "most egregious" rate of more than $390 per test decreased from 12% to 7% during the first year of the pandemic. Yet the share of tests charged at 50% to 100% above the average doubled during the time period, the trade group said.

"Taking steps to eliminate any potential for COVID-19 price gouging is key to ensure testing continues to be widespread and affordable for Americans," America's Health Insurance Plans said in its report.

This summer, U.S. Sen. Tina Smith, D-Minn., introduced legislation to make sure that testing costs aren't passed along to patients. Among other things, the bill would set a cap on cash prices for COVID-19 tests at twice the reimbursement rate under the federal Medicare program.

Meanwhile, the litigation between labs and health insurers continues.

This summer, a New Jersey-based lab sued Minnetonka-based UnitedHealthcare over unpaid bills for COVID-19 tests. United, which is the nation's largest health insurer, shot back with a court filing that alleged Genesis Laboratory Management LLC was trying to capitalize on the public health crisis "by doubling the price of COVID-19 diagnostic tests at its height — unilaterally setting its charge for COVID-19 tests to more than five times what Medicare paid for the same test."

In its lawsuit against Medica, GS Labs cites language in the CARES Act that says if a health plan has a negotiated rate with a lab provider, the discounted rate should be applied throughout the public health emergency. If the health plan doesn't have a negotiated rate, the insurer "shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website."

"Medica and GS Labs have not agreed upon a different negotiated cash price, and their discussions have broken down and are at an impasse," the lab says in its lawsuit. "GS Labs has now been forced to bring this complaint to obtain reimbursement and other damages resulting from Medica's brazen refusals to reimburse GS Labs in violation of the federal CARES Act."

In Premera's lawsuit, the insurer says the plain language of the CARES Act was supplemented by federal regulations explainingthe "cash price" that health insurers should pay is analogous to the "discounted cash price" — a lower price that's generally similar to, or lower than, rates negotiated with in-network health care providers.

"Premera has attempted to negotiate with GS Labs," the health insurer said in a court filing, "but GS Labs will not accept payment at reasonable rates."

Without commenting on the Premera lawsuit, Thompson of GS Labs said his company regularly has negotiated in good faith with insurers.

"We're the furthest thing from a profiteer or a price gouger," Thompson said. He added: "We've been bullied and pushed around. And this is an industry that — they've been doing this a long time."