Edward S. Wardell, Esquire Christine S. Orlando, Esquire CONNELL FOLEY LLP Liberty View 437 Haddonfield Road, Suite 230 Cherry Hill, NJ 08002 (856) 317-7100 Attorneys for Plaintiff Horizon Blue Cross Blue Shield of New Jersey FIORIZON BLUE CROSS BLUE SHIELD | SUPERIOR COURT OF NEW JERSEY OF NEW JERSEY, | MERCER COUNTY/LAW DIVISION Plaintiff, t DOCKET NO.: [80713 : | AVEELABORATORIES; ALERE,INC3 | Civil Action ALERE TOXICOLOGY SERVICES, INC; LAURIE DEERFIELD, D:0.; LEADING EDGE RECOVERY CENTER, LLC; JOHN | COMPLAINT DOES 1-10; and ABC CORPORATIONS 1- | 10. | Defendants. | Plaintiff Horizon Blue Cross Blue Shield of New Jersey, by way of Complaint against Defendants Avee Laboratories; Alere Toxicology Services, Ine.; Alere, Inc; Laurie Deerfield, D.O; Lesding Edge Recovery Center, LLC; Jolin Does 1-10; and ABC Corporations 1-10 (collectively “Defendants”) states: 1, INTRODUCTION By this action, Horizon seeks to recover damages and treble damages in excess of Thirty-Six Million Dollars ($36,000,000.00) it paid as a result of false and fraudulent health fnsurance claims which Defendants submitted and caused others to submit for unnecessary drug 296403940tests in violation of the laws of the State of New Jersey, including the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30, and the laws of the State of Florida. 2. Physicians, substance abuse centers and other health care providers (collectively “Ffealth Care Providers”), when appropriately authorized, may perform Point of Care Testing (“POCT”) on urine samples at their offices and facilities to identify the presence of drugs and other substances in their patients’ systems. Health Care Providers perform POCT when it is medically necessary based on a patient’s history and the results of prior testing. 31 ical laboratories perform confirmatory tests on urine samples at the request of Health Care Providers. A Health Care Provider may order confirmation of negative POCT results by a clinical laboratory only when the Health Care Provider has documented clinical reasons to believe that the initial POCT is inaccurate or inconclusive, 4, To generate unnecessary POCT and confirmatory tests, Defendant Avee Laboratories (“Avee") published false and deceptive marketing materials and offered unlawful inducements that encouraged Health Care Providers to perform medically unnecessary POCT ‘and to refer their patients to Avee for unnecessary confirmatory testing. Among other things, Defendant Avee falsely advised Health Care Providers that they could generate supplemental income by rendering and submitting claims to insurers like Horizon for performing POCT only when the provider also ordered confirmatory testing of the POCT results from a clinical laboratory, like Aves, 5. As a result of this scheme, Health Care Providers, including Leading Edge Recovery Center and Laurie Deerfield, rendered unnecessary POCT. Despite repeated negative results and the absence of any clinical reason to believe that the negative results were inaccurate, Health Care Providers requested Avec to perform unnecessary confirmatory tests on the sameurine samples. Health Care Providers often used order forms known as Custom Test Panels provided by Avee to request confirmatory testing. These Custom Test Panels, many of which ‘were not signed by the ordering provider, allowed Health Care Providers simply to check a box directing Avee to provide numerous tests without regard to medical need or reason. 6. To get paid for unnecessary tests, Health Care Providers submitted false claims to Horizon for medically unnecessary POCT while Defendant Avee submitted false claims for the medically unnecessary confirmatory tests, As 2 result of this scheme, since 2009, Horizon faced ‘an explosion in claims for unnecessary POCT and confirmatory tests. In all, Horizon paid Health Care Providers approximately Twelve Million Dollars ($12,000,000.00) for unnecessary POCT and paid Avee in excess of Twenty-Four Million Dollars ($24,000,000.00) for unnecessary confirmatory tests, 7. Defendants Alere, Inc., and Alere Toxicology perpetuated and benefited from the unlawful scheme initiated by Avee, In October 2011, only three years after Avee was founded, Alere, Inc., acquired Avee for One Hundred Twenty Million Five Hundred Thousand Dollars ($120,500,000.00). At the time of acquisition, Alere knew or should have known of Avee’s unlawful activities but chose to continue the same scheme for its own benefit Il. PARTIES A. Plaintiff Horizon Blue Cross Blue Shield of New Jersey 8, Plaintiff Horizon Blue Cross Blue Shield of New Jersey (“Plaintiff” ot “Horizon”) is a not-for-profit health service corporation organized under the New Jersey Health Services Act, N.JS.A. 17:48E-1 et sea., with its principal place of business at Three Penn Plaza East, Newark, New Jersey. Horizon administers or insures health care benefits for 3.6 million subscribers pursuant to a variety of health care plans issued or administered in New Jersey, 29640n8-01vidual policies, employer-sponsored benefit plans and government-sponsored 9. Horizon is an insurance company within the meaning of the New Jersey Insurance Fraud Prevention Act, N.J.S.A. 17:33A-1 to -30 (“IFPA”), and paid health insurance claims as a result of and in reliance upon the health insurance claims submitted by or caused to be submitted by Defendants. B, The Defendant Drug and Alcohol Testing Laboratories 10, Defendant Avee Laboratories (“Ave”) is a Florida corporation which operated a clinical laboratory to which Health Care Providers referred specimens for laboratory testing and services. Avee was formed in 2008 and maintained its principal place of business at 14440 Myetlake Circle, Clearwater, Florida, 11, Defendant Alere, Inc., (“Alere”) is a Delaware corporation with its principal place ‘of business at 51 Sawyer Road, Ste. 200, Waltham, Massachusetts, 12, On February 2, 2010, Alere, Inc, acquired Defendant Alere Toxicology Services, Ine, (“Alere Toxicology”), formerly known as Kroll Lab Services, Inc., a corporation which provides toxicology testing services throughout the United States, and maintains its principal place of business at 1111 Newton Street, Gretna, Louisiana. 13, On October 3, 2011, Alere, Inc., purchased Avee Laboratories, Inc., and merged its operations with those of Defendant Alere Toxicology. 14, Defendants Avee, Alere and Alere Toxicology are persons or practitioners within the meaning of the IFPA and committed, participated in, solicited others to engage in, and Knowingly assisted, benefited from, conspired with and/or encouraged others to commit the wrongful, unlawful, and fraudulent acts set forth in this Complaint. 296400001,C. The Defendant Health Care Providers 15. Defendant Leading Edge Recovery Center, LLC (“Leading Edge”) is a limited liability company organized under the laws of the State of New Jersey with its principal place of business in Mercer County, New Jersey, Leading Edge operates a drug and aloohol rehabilitation facility located at 1777 Klockner Road, Trenton, New Jersey. 16. Defendant Leading Edge was formed and began operating in 2010. Defendant Leading Edge holds a Clinical Laboratory Improvements Amendments (“CLIA”) Certificate of Waiver, but is not licensed by the State of New Jersey linical Laboratory Improvement Services (“CLIS”) through the New Jersey Department of Public Health and Environmental Laboratories. 17. Defendant Laurie Deerfield, D.O., is an individual and citizen of the State of New Jersey licensed to practice medicine in the State of New Jersey. Dr, Deerfield serves as medical director of Leading Edge and personally authorized or ordered unnecessary urine tests by or for Leading Edge, 18. Defendants John Does 1-10 are other Health Care Providers, rehabilitation centers and individuals who accepted unlawful inducements from Defendants Avee, Alere and Alere Toxicology and participated in, and/or encouraged others to commit the fraudulent and wrongful acts set forth in this Complaint. 19, Defendants ABC Corporations 1-10 are other Health Care Providers, corporations and entities, including rehabilitation centers, which accepted unlawful inducements from Defendants Avee, Alere and Alere Toxicology and participated in, and/or encouraged others to ‘commit the fraudulent and wrongful acts set forth in this Complaint. 20. Defendants Leading Edge, Deerfield, John Does and ABC Corporations, are persons and/or practitioners within the meaning of the IFPA. 296008.01IIL VENUE AND JURISDICTION 21. Venue is placed properly before this Court because Horizon resides in and actually does business in Mercer County, each of the Defendants resides in, conducts and/or solicits business in Mercer County, and Defendant Leading Edge operates a drug rehabilitation center and maintains its principal place of business in Mercer County. 22. Defendants Avee, Alere and Alere Toxicology are subject to jurisdiction in New Jersey because they maintain continuous contacts with the Siate of New Jersey. Among other things, Defendants actively solicit clients and provide services to individuals and Health Care Providers who reside in New Jersey, including Defendant Leading Edge; solicit and accept referrals from New Jersey providers for patients who reside in and receive health benefits issued in New Jersey; distribute unlawful marketing materials in New Jersey; provide services to New Jersey residents and other patients whose health care benefits were issued or administered in New Jersey by Horizon; and submit health insurance claims, directly or indirectly, to Horizon in the State of New Jersey. 23. Defendants Avee, Alere and Alere Toxicology are subject to jurisdiction in New Jersey because they entered into a scheme to defraud Horizon in New Jersey and Horizon’s claims arise directly out of these Defendants’ contacts with New Jersey. IV. THE RELATIONSHIPS AMONG THE PARTIES A. The Health Care Benefits Provided by Plaintiff Horizon 24. Pursuant to the terms of health care plans issued to individuals and employers throughout New Jersey, Horizon administers and insures health care benefits for medically necessary services rendered by eligible providers to its 3.6 million subscribers. Among other things, Horizon provides benefits for medically necessary laboratory services provided by eligible providers. -2964000.0125, Horizon offers plans and policies of insurance that provide health care benefits for ‘“in-network” services rendered by “participating providers” who have contracted with Horizon to provide covered services to subscribers at rates established by the terms of the contract, The subscriber ordinarily has no further financial obligation to the participating provider beyond a small co-payment. 26. Horizon also offers plans and policies of insurance that provide health care benefits for “out-of-network” services rendered by “non-participating” providers who have not contracted with Horizon. Horizon pays eligible charges for out-of-network services in accordance with the terms of the plan or policy of insurance. The subseriber typically contributes to the costs of out-of-network services through the payment of deductibles, a portion of the eligible charge known as “coinsurance,” and any “balance bill” for the amount by which the provider's charge exceeds the benefit paid by Horizon. 27, Bach of the named Defendants is a non-participating provider that renders out-of network services to Horizon subscribers. B, The Medical Services Provided by Defendants 1, POCT Services Rendered by Health Care Providers 28, Health Care Providers, including drug rehabilitation centers like Defendant Leading Edge, may conduct an initial urine analysis or drug screen, known as Point of Care Testing (“POCT”), on their patients. POCT tests a urine sample and provides the Health Care Provider with an immediate report on the presence or absence of certain drugs in the patient's system, POCT is typically performed at the Health Care Provider's office or facility, using kits that contain a plastic cup with testing strips. 29, Drug rehabilitation centers and other point-of-care providers are not authorized to perform laboratory services under the federal Clinical Laboratory Improvement Amendments of 29640084011988 (“CLIA”). POCT can only be performed by rehabilitation centers or other providers that receive a CLIA Certificate of Waiver to perform these tests. Under CLIA, waived tests such as POCT are simple laboratory procedures that have an insignificant risk of producing an erroneous result, 30. In New Jersey, in addition to a CLIA Waiver, Health Care Providers need to obtain a license from the New Jersey Department of Public Health and Environmental Laboratories to perform POCT. 31. Based upon the results of the POCT and the documented clinical needs ofa particular patient, Health Care Providers may send the urine specimen to a clinical laboratory, like the Defendant Laboratories, for confirmation and a quantitative analysis of drugs detected by POCT. 2, The Confirmatory Testing Services Rendered by the Defendant Laboratories 32. Defendants Avee, Alere and Alere Toxicology (“the Defendant Laboratories”) are clinical laboratories that perform testing on specimens to assist in the detection, diagnosis and treatment of diseases in accordance with standards established by CLIA. 33, The Defendant Laboratories provide urine drug tests for physicians, rehabilitation centers and other consumers, including “quantitative” or “confirmatory” tests ordered by physicians and rehabilitation centers to confirm or quantify the results of POCT conducted at a rehabilitation center or provider’s office. While POCT performed by Health Care Providers can detect the presence of certain drugs over a threshold level, a confirmatory test may detect drugs at lower concentrations or identify substances not detectable by POCT. 23es00s.0134. Confirmatory testing of negative POCT results are necessary and reasonable only when the Health Care Provider has documented clinical reasons to believe that the negative POCT was inaccurate or inconclusive. 35. Clinical laboratories like the Defendant Laboratories in this case have a duty to maintain compliance programs to detect and to prevent Health Care Providers from performing unnecessary POCT and ordering unnecessary confirmatory testing. C. Defendants’ Submission of Health Insurance Claims for Payment 36. In paying health insurance claims and determining whether services are eligible for reimbursement, Horizon relies upon health insurance elaims submitted by medical service providers like the Defendants, 37. ~ Pursuant to the Health Insurance Portability and Accountability Act, (“HIPAA”) Health Care Providers and clinical laboratories, including Defendants, are required to use uniform claim forms and billing codes for all claims for reimbursement submitted to public programs and private insurers, 38, In. submitting health insurance claims to Horizon (and others), Health Care Providers and clinical laboratories use a standard billing form promulgated by the Center for Medicare and Medicaid Services (“CMS”) and commonly known as a form CMS1500, This form and any electronic submission requires the medical provider to set forth accurately the information necessary to process its claim for services, including the services provided; the date of serviee; the provider's charge; and the provider's eligibility. 39, HIPAA requires Health Care Providers and clinical laboratories to use CMS Common Procedure Coding System (“HCPCS”) codes or Current Procedural Terminology CPT”) codes to describe the services rendered, A CPT code is a five-digit numeric code which 2964c09.01,identifies or describes the services rendered by reference to descriptors contained in the CPT Manual published and updated annually by the American Medical Association, 40. Health Care Providers submit claims to Horizon for POCT based on the drug class tested. While POCT can detect multiple classes of drugs, Health Care Providers can submit claims only for tests and drug classes actually performed. 41, Laboratories submit claims for confirmatory tests based on the drug tested and Horizon pays for each drug tested. The number of drugs tested and the number of claims submitted for which the laboratory seeks payment depends, in part, on the order or requisition form completed by the Health Care Provider. 42, To assure the accuracy of claims submitted for POCT, confirmatory tests and other services, the form CMS 1500 requires the Health Care Provider or clinical laboratory to certify that they were eligible to provide the services described in the claims; that they had performed the services billed; the information and statements contained in the claims submitted ‘were “true, correct and complete”; the services rendered were medically indicated and necessary; and the amounts billed were actually incurred by the patient. 43, Health Care Providers and cal laboratories intend for health care payors, ike Horizon, to rely on the information provided by the medical provider to adjudicate claims, and Horizon reasonably relied on the claims submitted by Defendants in this case. (Attached hereto as Exhibit “A” is a summary of the CPT codes paid by Horizon to Defendant Avee.) Y. DEFENDANTS’ SCHEME TO OBTAIN REIMBURSEMENT FOR UNNECESSARY POCT AND CONFIRMATORY TESTS 44, Beginning at least as early as 2009, and continuing through the present, Defendants entered into an unlawful scheme to defraud Horizon by submitting, and by causing ‘others to submit, false and fraudulent claims for unnecessary and ineligible POCT and 10 2964000-01confirmatory tests, 45. As part of their scheme to defraud Horizon: a, Defendant Avee published false, deceptive, and misleading marketing materials to encourage Health Care Providers to render and to order unnecessary tests; b. Defendant Avee offered financial inducements, such as free or below market value POCT cups and consulting agreements, to Health Care Providers to induce them to refer tests to Avec; ¢. Defendant Avee waived patient financial responsibility to induce Health Care Providers to refer urine specimens to Avee for testing without objection from patients; d. Defendants Alere and Alere Toxicology acquired Avee with knowledge of its unlawful practices and knowingly continued and perpetuated those unlawful practices after the acquisition; e. Defendants Leading Edge and Deerfield performed and ordered medically unnecessary tests; and £. Defendants Leading Edge and Deerfield submitted claims to Horizon for urinalysis tests that Leading Edge is not licensed to render in the State of New Jersey. 46. Asa result of Defendants’ unlawful scheme to defraud, Horizon paid Defendants Avee, Alere and Alere Toxicology in excess of Twenty-Four Million Dollars ($24,000,000.00) on false and fraudulent insurance claims for unnecessary and unreasonable confirmatory tests. (Attached hereto as Exhibit “B” is a listing of the amount paid annually by Horizon to Defendants.) 47. Asa result of Defendants’ unlawful scheme to defraud, Horizon paid Health Care Providers approximately Twelve Million Dollars ($12,000,000.00) on false and fraudulent insurance claims for unnecessary and unreasonable POCT. (Attached hereto as Exhibit “C” is a summary of the total amount billed by and paid to Health Care Providers for POCT.) n 2364009.01,48, As a result of Defendants’ unlawdul scheme to defraud, Horizon paid Defendant Leading Edge alone nearly Six Million Dollars (86,000,000.00) on false and fraudulent insurance claims for POCT and for unlicensed services in violation of the statutes and regulations ‘governing laboratory services in New Jersey. (Attached hereto as Exhibit “D" is a complete listing of each claim paid by Horizon to Defendant Leading Edge.) A. Avee's Marketing Scheme and Inducements to Health Care Providers 1, Ave Improperly and Falsely Advised Health Care Providers that Confirmatory Testing was Required on ANLPOCT 49. In order to increase its revenues and to compel providers to render unnecessary POCT, Avee intentionally, improperly and unlawfully distributed marketing materials which advised Health Care Providers that confirmatory testing was mandatory and directed providers to order medically unnecessary confirmatory tests of urine samples for all patients subject to POCT. 50. As part of its unlawful scheme, Avee published and distributed marketing materials which emphasized the profitability of POCT and falsely stated that as a condition of payment for POCT, insurers required Heslth Care Providers to order subsequent confirmatory testing by a clinical laboratory, like Avee. 51. Avee’s marketing materials falsely state confirmatory testing was required by CLIA Waived Testing, such as POCT. Avee’s marketing materials specifically stated that “[cJonfirmations are a Program Requirement when using CLIA Waived tests and submitting for reimbursement.” The marketing materials further provide: “Bottom Line: Avee's confirmation benefits both the patient and clinician, It is required by CLIA when using waived tests for reimbursement.” 1252, Ave knew that the marketing materials it distributed were false, deceptive and misleading, that confirmatory testing was not required for all POCT and that CLIA regulations id not mandate confirmatory testing of all CLIA Waived Testing. 53. As a result of Avec’s false, misleading and deceptive marketing, Health Care Providers repeatedly ordered medically unnecessary confirmatory tests and Avee submitted false and fraudulent claims to Horizon for payment of these tests, 2, Ave Improperly Induced Health Care Providers to Perform and Order Unnecessary Tests 54, To induce Health Care Providers to perform repeated unnecessary POCT and to use Avee’s services, Avee advised Health Care Providers that they would substantially increase their revenues by performing and referring tests to Avee for multiple drug classes without regard to whether the tests were needed. 55, Ave distributed marketing materials advising providers that Avee’s services included POCT screening options with multiple billable units so that providers could submit multiple claims for tests performed on single urine samples and thereby obtain hundreds of dollars in reimbursement for each patient seen by the provider. 56. Ave distributed marketing materials encouraging Health Care Providers to purchase in-office chemical analyzers, which would allow the Health Care Providers to bill for the testing of multiple drug classes from a single sample, Avee emphasized that the cost basis of the equipment would decrease as the provider performed higher volume testing and stressed significant inereased profits for the Health Care Providers. 57. Upon information and belief, Ave supplied POCT collection cups to at least one provider in New Jersey for free and established a business entity or subsidiary corporation known as Screen Tox to offer goods and services to referring providers. B 2364009-013. Avee Improperly Encouraged Health Care Providers to Order Unnecessary Confirmatory Tests 58. Clinical laboratories have a duty to construct test requisition and order forms that encourage Health Care Providers to order only those tests that are necessary for the patient and to document the need for each test by use of a diagnosis code for each test ordered. 59, The requisition and order forms should ensure that a physician or other authorized individual makes an independent determination that each test billed by the Inboratory is medically necessary. 60. _Avee utilized Custom Test Panels and order forms to encourage Health Care Providers to order confirmatory:and other testing routinely on all urine samples without regard to the POCT results, the drugs tested in the POCT, or the patient's documented clinical need or medical history. 61. _Avce supplied Health Care Providers with Custom Test Panels and order forms which enabled the Health Care Providers to check off routine confirmatory tests to be performed by Avee on all POCT tests without regard for the POCT results or reasonableness or medical history. 62, In addition to its use of improper Custom Test Panels and order forms, Avec routinely accepted orders from Health Care Providers for confirmatory tests without any signature or acknowledgment from a physician or other individual authorized to order the tes. 63, As a result of Avee’s use and supply of Custom Test Panels and order forms, Health Care Providers routinely ordered unnecessary and unreasonable confirmatory tests. 4, Avee Improperly Advertised the Waiver of Patient Financial Responsibility 64. Avee's marketing materials advised Health Care Providers that Avee would accept insurance reimbursement as payment in full and waive any remaining patient 14 296400001,responsibility, including co-insurance and deductibles, leaving “no out of pocket expense” to patients, 65. Ave waived all patient financial responsibility for its services to induce unnecessary referrals from Health Care Providers and to mute any objections to the referral by patients. 66. At the time it advised Health Care Providers of its waiver, Avee knew that health benefit plans issued by Horizon require members to share in the costs of services rendered at an out-ofrnetwork facility, like Avee, and waived these costs to interfere with the terms of the benefit plans. 67. As a result of Avee's waiver, Health Care Providers ordered medically ‘unnecessary confirmatory testing without objection from patients. B. The Explosion in Claims for Unnecessary POCT and Confirmatory Testing 68. _Avee intended and designed its unlawful practices to incite Health Care Providers to perform unnecessary POCT and to order unnecessary confirmatory tests from Ave, 69, Asa direct and intended result of Avee’s unlawful practices, Horizon suffered an explosion in claims for unnecessary POCT and confirmatory tests. 70, Asa direct and intended result of Avee’s unlawful conduct, Health Care Providers routinely performed POCT several times a week for the same patient even though prior tests ‘were negative and repeatedly ordered unnecessary confirmatory tests of negative POCT even though they had no documented clinical reason to believe that the negative results were inaccurate or inconclusive. In some instances, Health Care Providers rendered POCT so frequently that they ordered additional confirmatory tests on POCT before they received the results of their prior requests for confirmatory testing. 15 296400901,