Cigna Health and Life Insurance Co. vs. BioHealth Laboratories, Inc., et al

Case Background

On December 13, 2021, Plaintiff  Cigna Health and Life Insurance Company filed a Healthcare fraud lawsuit in the District Court of Connecticut(Case number: 3:19-CV-1324 ). This case was presided over by Janet C. Hall.

Cause

BioHealth Laboratories, PB Laboratories, EPIC Reference Labs, and Epinex Diagnostics (collectively, “the Labs”) engaged in fraudulent laboratory billing practices targeting Cigna health insurance. The Labs conducted unnecessary urine drug tests and used a fee-forgiving scheme to waive patients’ cost-sharing obligations while charging Cigna inflated rates. They performed expensive confirmatory quantitative drug tests even after negative screening results, which were medically unnecessary. Additionally, the Labs unbundled services by billing each component separately instead of using a comprehensive code. All four labs, owned by Medytox, followed similar billing and collection practices.

Injuries

Cigna and its health plans suffered financial losses due to the Labs’ deceptive practices. The fee-forgiving scheme undermined Cigna’s cost-containment strategies, which aimed to keep healthcare costs manageable for plan members. By waiving patient costs and inflating charges to insurance, the Labs reduced incentives to use in-network providers, driving up overall medical costs. Unnecessary confirmatory testing and unbundled billing further inflated costs that Cigna would not have paid if it had known the true nature of the services.

Damages

The Labs’ fraudulent billing caused Cigna and its health plans to overpay by at least $20 million. For instance, BioHealth billed Cigna $319,212.60 for drug testing a single patient over five months, of which Cigna reimbursed $163,602.30. The Labs retained these overpayments even though the services were either unnecessary or improperly billed through unbundling.

Key Arguments and Proceedings

Legal representation

  • Plaintiff(s): Cigna Health and Life Insurance Company
    • Counsel for Plaintiff: Edward T. Kang | Emily Costin |  Kelsey L. Kingsbery | Michelle Jackson | Alexander Akerman
  • Defendant(s): Epic Reference Labs Inc. | BioHealth Laboratories Inc. | PB Laboratories LLC
    • Counsel for Defendants: Fred Alan Cunningham | Matthew Thomas Christ | Scott M. Hare | Anthony T. Gestrich | John J. Radshaw III

 Claims

Unjust Enrichment:

The Labs submitted false and misleading claims, leading Cigna to pay millions in reimbursements they were not entitled to receive.

ERISA Violations (29 U.S.C. § 1132(a)(3)):

As a fiduciary, Cigna sought equitable relief to recover plan assets misused through fraudulent claims.

Declaratory Relief:

Cigna requested a court declaration that the Labs’ claims were not covered under its health plans and demanded the return of improperly received payments.

Defense

The Labs argued their billing practices followed standard industry protocols and provided medically necessary services. They claimed the fee-forgiving scheme ensured access to care for patients unable to afford high out-of-pocket costs. The Labs emphasized that no laws explicitly prohibited fee-forgiving at the time.

To address unbundling accusations, the Labs argued they correctly billed for distinct services requiring separate resources and expertise. They supported their claims with evidence that confirmatory testing was essential after negative screenings due to the risk of false negatives. Additionally, they pointed to proper authorizations and documentation proving medical necessity.

The Labs also disputed Cigna’s authority under ERISA to seek equitable relief, claiming Cigna exaggerated its $20 million overpayment by ignoring the actual value of services and market rates. They maintained that any discrepancies arose from honest misunderstandings of complex billing codes, not intentional fraud.

Jury Verdict

On November 4, 2024, the jury unanimously found that Cigna had proven its unjust enrichment claims against BioHealth Laboratories, PB Laboratories, and Epic Reference Labs. The jury ruled it was unfair for the Labs to retain payments from Cigna obtained through healthcare fraud. In the damages phase, the jury found that BioHealth Laboratories wrongfully retained $2,418,700.20. PB Laboratories and Epic Reference Labs each retained the same amount. In total, the jury awarded Cigna $7,256,100.60.

Court Documents:

Available Upon Request