Nolan v. Lab. Corp. of Am. Holdings

• Decision Date: 13 February 2023
• Docket Number: 1:21cv979
• Parties: NATHANIEL J. NOLAN and HELENA WITTENBERG, individually and on behalf of all others similarly situated, Plaintiffs, v. LABORATORY CORPORATION OF AMERICA HOLDINGS, Defendant.
• Court: U.S. District Court — Middle District of North Carolina

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NATHANIEL J. NOLAN and HELENA WITTENBERG, individually and on behalf of all others similarly situated, Plaintiffs, v. LABORATORY CORPORATION OF AMERICA HOLDINGS, Defendant.

No. 1:21cv979

United States District Court, M.D. North Carolina

February 13, 2023

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, CHIEF DISTRICT JUDGE.

This is a putative class action involving claims of unfair and deceptive conduct under Nevada and Florida law related to the billing practices of Defendant Laboratory Corporation of America Holdings (“Labcorp,” sometimes referred to the parties as “LabCorp”).^[1] Before the court is Labcorp's motion to dismiss all claims pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docs. 10, 11.) Plaintiffs filed a response in opposition (Doc. 13), and Defendant replied (Doc. 15). On November 8, 2022, the court heard oral argument. For the reasons set forth below, the motion to dismiss for failure to state a claim will be granted and the complaint will be dismissed.

I. BACKGROUND

The allegations of the complaint, viewed in the light most favorable to Plaintiffs as the non-moving parties, show the following:

LabCorp provides laboratory testing services to millions of healthcare recipients internationally. (Doc. 1 ¶ 27.) It has more than 100 million patient encounters annually and “typically processes clinical lab tests on more than 3 million patient specimens per week.” (Id. ¶ 12.) “Labcorp Diagnostics,” one of Labcorp's two major business segments, is an independent clinical laboratory business that provides the services that are the subject of Plaintiffs' complaint. (Id. ¶ 28-29.) Labcorp Diagnostics offers an array of frequently requested and specialty testing through a network of primary and specialty laboratories. (Id.) Its customers are managed care organizations, biopharmaceutical companies, governmental agencies, physicians and other healthcare providers, hospitals, employers, patients, and consumers. (Id. ¶ 31.)

Labcorp routinely performs lab testing services prior to processing billing information and determining the ultimate amount due. (Id. ¶¶ 21, 48.) It later determines the price and the paying party's information upon receiving (i) a medical diagnosis code and test code for each lab test prescribed by a physician and (ii) the patient's insurance information (for insured patients). (Id.) If the service is covered by a patient's health insurance plan, Labcorp bills the third-party payer the “health plan allowed” rate.^[2] (Id. ¶¶ 21-22, 48, 55.) If the service is not covered by the patient's health insurance plan, Labcorp bills the patient directly at the “patient list price” (hereinafter “list price”). (Id. ¶¶ 21-22.) These rates vary greatly, but the list price tends to be much higher than the health plan allowed rate. (Id.) Accordingly, if a patient's insurer denies coverage for certain lab testing services, the patient will generally owe Labcorp the much higher list price. (Id. ¶¶ 4-5 9-10.)

Typically, a patient will authorize his or her physician to order lab testing without inquiring as to what lab will perform the work. In this situation, the patient's healthcare provider will generally collect the specimen necessary for testing, e.g., perform a blood-draw, and then send that specimen to a Labcorp location for testing. (Id. ¶ 21.) In some instances, however, a patient will go directly to a Labcorp “patient service center” or other Labcorp facility to have the lab-testing services performed.

(Id. ¶¶ 29, 66, 100-101.) Before it will perform any lab testing services, however, Labcorp asks its patients to review and sign a document - the Patient Acknowledgement of Estimated Financial Responsibility form (the “Patient Acknowledgement”) (Id. ¶¶ 1, 34, 7; Doc. 1-1; Doc. 1-2; Doc. 1-3.)

The Patient Acknowledgment - which forms the basis of Plaintiffs' complaint - is a “common form used throughout Labcorp's operations and is signed by thousands, if not millions” of patients a year. (Id. ¶ 12.) It provides insured patients with an estimate of the total amount due for the lab-testing services, assuming those services are covered by their health insurance plan. Put differently, the Patient Acknowledgment gives patients an estimate of what they will owe out-of-pocket, reflecting the estimated deductible, coinsurance, and copay amounts if the lab-testing services provided are covered by their health insurance plan. (Id. ¶¶ 1, 3, 73, 112; Doc. 1-1, Doc. 1-2, Doc. 1-3.) The Patient Acknowledgment refers to this cost estimate as the “health plan allowed rate.” (Id.) It also sets out the “Estimated Amount Paid by Health Plan.” (Id.) The form has a block on page two entitled, “YOUR ESTIMATED RESPONSIBILITY” with a dollar amount provided. (Id.) What the Patient Acknowledgement does not provide is the (generally more expensive) list price - the amount a patient would owe in the event the services are not covered by her health insurance. (Id. ¶ 74; Doc 1-1, Doc. 1-2, Doc. 1-3.)

The second page of the Patient Acknowledgment includes further information about the estimate's conditional nature. In full, it reads:

You are being provided with this Acknowledgment of Estimated Financial Responsibility. This estimate assumes all services will be covered. Your physician has requested the above service(s) and some services may be considered investigational, require prior authorization, are excluded or otherwise not covered by your health plan. Additionally, your physician may have requested laboratory services that will automatically trigger additional testing procedures based on certain clinical indications or your physcian may determine it necessary to order additional testing procedures based on the sample collected today. LabCorp will bill you for any additional testing. Your health plan may not pay for these services and you will be personally responsible for payment for these services. This acknowledgment is based on the health plan information provided at the time of service. In the event that your information changes, your acknowledgment of financial responsibility still applies.

By signing below, you acknowledge: I want the laboratory test(s) listed above to be performed. My health plan will be billed for the applicable charges. As outlined above, I understand that my health plan may not pay for this test(s) at 100%. The amount I may have to pay may be different than the estimated amount. I agree to be personally and fully responsible for charges from today's services that are not covered by my health plan.

(Doc. 1-1 at 2 (bold added); Doc. 1-2 at 2 (bold added); Doc. 1-3 at 2 (bold added).) Thus, by signing the Patient Acknowledgment, the patient agrees that her “health plan may not pay for this test(s) at 100%” and that the amount the patient “may have to pay may be different than the estimated amount.”

Plaintiffs Nathaniel Nolan and Helena Wittenberg complain that that the Patient Acknowledgement is materially misleading and deceptive under their respective state's law because it discloses the health plan allowed rate without also disclosing the patient's list price - the amount due in the event the test is not covered by insurance.

A. Plaintiff Nolan

On September 11, 2018, Plaintiff Nolan visited a Labcorp facility in Reno, Nevada, to have several lab tests performed. (Doc. 1 ¶¶ 64-66.) Before Labcorp would administer the tests, however, a Labcorp representative required Nolan to sign the Patient Acknowledgment, which included an estimate of the health plan allowed rate that Nolan would owe assuming each test was covered by his insurance. (Id. ¶ 67; Doc. 1-1 at 1.) Nolan signed and dated the Patient Acknowledgment, thereby agreeing “to be personally and fully responsible for charges” for those labtesting services not covered by his health plan. (Doc. 1 ¶ 73, Doc. 1-1 at 2.) One of the tests was a Vitamin D, 25-hydroxy test, which the health plan allowed rate estimated would cost him $18.93. (Doc. 1 ¶ 4, 68; Doc. 1-1 at 1.) The Patient Acknowledgement did not include the list price of the Vitamin D (or any other) test, “or that the list price is many multiples of the disclosed negotiated rate.” (Doc. 1 ¶ 74.)

Two weeks later, Labcorp sent Nolan a bill, which charged him $292 for the Vitamin D test. (Id. ¶¶ 5, 75-79.) Unable to understand the discrepancy between the bill ($292) and the Patient Acknowledgement ($18.93), Nolan requested and received an Explanation of Benefits (“EOB”) from Highmark Blue Shield, his insurer. (Id. ¶ 77.) Highmark explained that although Nolan's insurance plan covered each of the other tests, it did not cover the Vitamin D test. (Id. ¶ 78.) Accordingly, the EOB stated that Nolan would be responsible for paying Labcorp the Vitamin D list price of $292 (in addition to the health plan allowed rate for each of the other tests Nolan was administered, because Nolan had not met his copay or deductible). (Id.) Nolan was “shocked” because he assumed, based on the Patient Acknowledgment, that Labcorp was willing to perform the test for the “Health Plan Allowed Rate” of $18.93. (Id. ¶ 79.) Nolan has since refused to pay the list price for the test “absent an appropriate settlement of his claim.” (Id. ¶ 5.)

B. Plaintiff Wittenberg

Plaintiff Wittenberg's experience is similar. On April 16, 2018 Wittenberg went to a Labcorp patient service center in Lake Mary, Florida, where she was administered two different sets of clinical laboratory tests. (Id. ¶¶ 7-8, 100.) Wittenberg signed a Patient Acknowledgement for each set of tests. (Doc. 1 ¶¶ 7, 101, 106, 109; Doc. 1-2 at 2; Doc. 1-3 at 2.) The total estimated responsibility, based on the “Health Plan Allowed Rate” for the first set of tests provided a cost estimate of $44.60 (Doc. 1 ¶¶ 7, 101, 106; Doc. 1-2 at 1) and...