By Kirell Lakhman

LabCorp over the past few weeks has been embroiled in two lawsuits: one in which it has accused Cardinal Health Systems and others of breaching a non-compete agreement, and the other in which it has been sued by Aetna for allegedly issuing misleading reimbursement information.

In the first case, LabCorp claims CHS and its affiliates have breached a promise not to engage in clinical lab activity after the reference lab paid $74 million in 2007 to acquire Indiana-based PA Labs from them.

According to the suit, filed two weeks ago in the US District Court for the Eastern District of North Carolina, CHS, Ball Memorial Hospital, Clarian Health Partners, and Clarian Pathology Laboratories have “destroyed, injured and impaired [LabCorp's] right to receive the fruits of both the noncompetition agreement and the asset purchase agreement.”

LabCorp claims that because of the breach it is has “suffered and continues to suffer damages and irreparable harm, including but not limited to, the loss of business, loss of goodwill and other damage, for which there is no adequate remedy at law [emphasis added]."

Despite its claim that these troubles are beyond the reach of the legal system, LabCorp has nevertheless asked the court to prohibit the defendants from continuing to "directly and indirectly engage in the clinical or anatomic laboratory business." It is also asking for compensatory damages, interest, costs, expenses, and attorneys' fees.

The case traces its roots to 2007 when LabCorp was negotiating buying PA Labs, which was partially owned by Cardinal at the time. During the negotiations, the lab said a condition of any acquisition would require the sellers — Cardinal and its affiliates — to sign non-compete agreements. In other words, 'Don't do any clinical lab stuff.'

But according to LabCorp, a year after it bought PA Labs, and after Cardinal merged with its wholly owned subsidiary Ball Memorial and Clarian, the companies "began violating the noncompetition agreement by assisting hospitals, clinics and other health care facilities in the prohibited area with various laboratory services," according to Law360.com.

For instance, the suit claims Clarian runs "at least" 14 patient-service centers in or around Marion County, Ind., ... [and] defendants are actively soliciting business in the territory, including contacting LabCorp clients to utilize defendants' services as opposed to LabCorp's, in violation of the non-competition agreement.”

'Malicious Scheme'

The CHS case was made public one week after LabCorp was sued by health-insurer Aetna, which accused it of "misleading" its members by saying in-network rates for its lab services would continue to apply after its in-network provider contract with the payor had expired.

LabCorp covered in-network laboratory services to Aetna members from the late 1990s until July 2007.

Calling LabCorp's alleged actions a “malicious scheme,” Aetna said the lab "used proprietary information gained during its time as Aetna's in-network provider so that Aetna members would continue to refer their patient's laboratory tests to the company to the detriment of both the insurer and its current in-network provider," according to a separate Law360.com report.

Filed last month in the US District Court for the Eastern District of Pennsylvania, the suit claims that because of LabCorp's actions Aetna was "forced to pay more money for services than they would have done so if such tests had been sent to plaintiffs' in-network provider, and LabCorp received payments it would not have received had such tests been properly sent to plaintiffs' in-network provider of laboratory services.”

In the suit, which can be read here, Aetna has asked the court to force LabCorp to pay it $100,000 along with reasonable attorneys' fees and other costs.

The case dates to March 2007, when Aetna pulled LabCorp from its preferred-provider network, a position that had enabled the lab to collect around $100 million during the previous year.

But three months later LabCorp started sending letters to participating providers in Aetna's network saying that “your Aetna patients will not pay more for services performed at LabCorp after July 1, 2007" — after Aetna essentially fired LabCorp — "than they would pay if the services were performed by an in-network laboratory provider,” according to the suit.

Aetna claims that letter and others like it caused “considerable provider and member confusion” about whether LabCorp was an in-network provider, and that it was forced “to expend valuable human resources and expend additional monies processing and reprocessing claims that have been diverted out of Aetna's network as a result of LabCorp's misconduct,” according to the suit.

In an Aug. 26 SEC filing, LabCorp said it "believes that the allegations are wholly without merit and will vigorously defend the lawsuit."

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