National Laboratory Pays Nearly $4.8 Million to Settle Allegations it Overcharged Connecticut Medicaid

U.S. Attorney Leonard C Boyle, Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of Inspector General, and Connecticut Attorney General William Tong today announced that REDWOOD TOXICOLOGY LABORATORY, INC. has entered into a civil settlement agreement with the federal and state governments and has paid nearly $4.8 million to resolve allegations it overcharged the Connecticut Medicaid program for certain laboratory services.

Redwood Toxicology Laboratory (“RTL”), with a headquarters located in Santa Rosa, California, provides laboratory-testing services, specifically urine drug testing services, for substance abuse patients enrolled in the Connecticut Medicaid program.  The government alleges that RTL violated Connecticut’s so-called “Most Favored Nation” regulation (Conn. Agencies Regs. § 17b-262-649), which provides, in essence, that clinical laboratories should not seek payment from Connecticut Medicaid for services at a price that is higher than the lowest price the laboratory charges for the same or similar services from other third parties.  Specifically, the government alleges that RTL regularly accepted payments from Connecticut Medicaid for certain urine drug tests at the rate of $38 per test, while at the same time charging other third parties from $2 to $10.50 for the same or substantially similar urine drug tests.

To resolve the governments’ allegations, RTL agreed to pay $4,797,578, which covers claims submitted to the Connecticut Medicaid program from January 1, 2015, through and including February 24, 2018.

“We are committed to ensuring that public funds used for substance abuse treatment are properly spent, and clinical laboratories that charge government health care programs a higher price than they charge to other providers for the same or similar services will be held accountable,” said U.S. Attorney Boyle. 

This matter was investigated by the Office of Inspector General for the Department of Health and Human Services.  The case is being prosecuted by Assistant U.S. Attorney Richard M. Molot, and Assistant Attorney General Gregory O’Connell of the Connecticut Office of the Attorney General.

People who suspect health care fraud are encouraged to report it by calling 1-800-HHS-TIPS.