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Millennium Health said to confront damages claim from Humana

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(Bloomberg) — Millennium Health LLC, the largest U.S. drug-testing lab, is contending with more legal fallout after reaching a tentative deal to settle a government probe over alleged billing irregularities.

Humana Inc. (NYSE:HUM) has sought monetary damages tied to allegedly unlawful insurance claims made by the drug tester, according to two people with knowledge of a private disclosure Millennium made to its lenders in June. Humana sought the damages, along with injunctive relief, through a demand for arbitration dated May 29, the people said.

Millennium has come under fire in the debt market for not disclosing to prospective lenders that it knew federal authorities were investigating it while it was marketing a $1.78 billion loan last year. Millennium and the agent for the loan, JPMorgan Chase & Co., didn’t disclose the information after the lab company said it wasn’t material, a person with knowledge of the matter said in July.

The loan has since plunged to less than half of face value, prices compiled by Bloomberg show. Millennium has said the probe was disclosed to “pertinent parties” and was cited in media reports and legal filings.

Millennium said in a separate disclosure to lenders last week that it faced “potential commercial settlement payments” that were still to be determined, the people said. It didn’t name any specific company seeking damages.

“We cannot comment on any claims or counterclaims that are pending in any private arbitration with Humana,” Nicole Beckstrand, a spokeswoman for San Diego-based Millennium, said in response to a request for comment on the insurer’s arbitration demand.

‘Pending litigation’

Alex Kepnes, a spokesman for Louisville, Ky.-based Humana, said the company doesn’t “comment on pending litigation.” Megan Griffin, a spokeswoman at BackBay Communications for TA Associates, the private-equity firm that partly controls Millennium, also declined to comment, as did Tasha Pelio, a spokeswoman for JPMorgan.

Millennium’s credit agreement requires it to disclose any litigation or legal proceedings that threatens to create a liability of at least $15 million, the people said.

Justice claims

The company, which sells urine-testing services to monitor prescription drug use and potential abuse, has been in discussions with regulators and the U.S. Justice Department to settle allegations it over-billed federal health care programs. A draft settlement calls for it to pay a $250 million fine, Millennium has told lenders, people with knowledge of the matter have said.

The Centers for Medicare & Medicaid Services (CMS) had threatened to revoke the company’s ability to charge the two programs because of the alleged billing irregularities, which included urine tests the company never performed, even for dead people.

See also: What if CMS disagrees with a Medicare plan’s risk billing?

In the disclosure last week, Millennium included a presentation showing how it might pay the potential $250 million fine, the people said. The presentation showed Millennium would pay the amount over five years, with 4 percent interest annually, the people said.

Nicole Navas, a spokeswoman for the Justice Department, declined to comment.

The loan, sold less than 18 months ago, is quoted at 43 cents on the dollar, according to prices compiled by Bloomberg. It had been valued at par as recently as April, the data show.

—With assistance from Caroline Chen in San Francisco and Zachary Tracer in New York.