I was amused after reading the California Court of Appeal opinion in the case of Unilab Corporation v. Angeles-IPA. The legal issues in the case are fairly straight forward and unremarkable. However, the court’s description of the facts of this case are of interest, as they  reveal some of the complexity in the delivery of, and payment for, health care services. In this situation, testing by a commercial laboratory of specimens drawn at a physician’s office.

The court’s opinion goes into detail as to the underlying problem of “misdirected” specimens. The story  underscores why so many perceive that the health system  is inefficient, confusing, and prone to errors. I am the first to acknowledge that the health care industry has taken steps to improve the process. However, the Unilab Corporation v. Angeles-IPA case serves as a reminder that certain segments of the industry have a way to go.

Not to spoil your read of the opinion, the synopsis of the case is as follows: Angeles-IPA had contracted with Quest (i.e. Unilab) to be the in-network laboratory services provider for the IPA’s managed care lives. The IPA terminated the contract with Quest and selected a different lab to contract for services. Even though the IPA informed its physician members of the change of labs, some physicians who contract with the IPA to provide services to IPA-covered patients continued to leave specimens in the Quest pick-up box, rather than the pick-up box for the newly designated in-network lab. Quest picked up these specimens, conducted the test ordered on the paper Quest-requisition form, and sent the results to the ordering physician. When Quest billed for these tests, it discovered that they were not authorized by the IPA.  Accordingly, the IPA refused to pay the $174,000 plus in charges for the tests and took the position that Quest can recover the test costs from the ordering physicians (not the patients, as under Prospect Medical Group v. Northridge Emergency Medical Group  (2009) 45 Cal.4th 497, out-of-network providers are precluded from balance billing patients).

Reading through the opinion, I came up with these observations as they relate to the problems facing health care:

  • We seem to encourage the complexity of health care delivery processes and systems with different payors and providers having different networks with different network affiliations that are ever changing.   How can anyone keep it all straight?
  • Finger pointing is a sport among health care payors and providers when it comes to reimbursement issues – in this case, the lab blames the IPA, the IPA blames the physician, and, presumably, the physician blames both the lab and the IPA.
  • A lab is not likely to take physicians to court for misdirected specimens or for the cost of tests not authorized by the IPA – suing a referral source is not a good business plan.
  • If “misdirection” of specimens has been an ongoing issue with labs (referred to as ”leakage” in the opinion), why haven’t the labs developed solutions to avoid the problem?
  • Technology and the use of electronic ordering of lab tests, verification and pre-test authorization before the specimen is even picked-up seems smarter than paper requisitions and after-the-fact determinations of whether a test was misdirected.

Although this case is a reminder for me of what is often perceived as  “wrong” with health care, I am encouraged that more industry leaders are beginning to pay attention with an eye toward making smart changes. 

For the record, Unilab lost its appeal to overturn the trial court’s dismissal of their complaint against Angeles-IPA. Sometimes the courts don’t provide the change we seek, but the light shed by its analysis of the facts reveal the opportunities for improvement.