MONTPELIER >> A Burlington-based chain of drug-testing labs that has been a key player in Vermont's battle against opiate addiction is being investigated for alleged Medicaid fraud, a state official said Tuesday, but Burlington Labs denied any wrongdoing and blamed coding errors for any overbilling.
Jason Turner, head of the state attorney general's Medicaid fraud unit, confirmed the investigation of Burlington Labs to The Associated Press, and said a settlement has not been finalized. He confirmed it is a fraud investigation involving alleged violations of the Vermont False Claims Act.
A letter to the Green Mountain Care Board, the state panel that regulates health care, from a lawyer for a group trying to acquire Burlington Labs said the company had recently negotiated a settlement of the Medicaid case, calling for it to pay the state about $6.5 million. Turner said if that's the final amount, it would be the largest such settlement ever in Vermont.
Turner said he could not provide details on what the investigation into Burlington Labs has found until the probe has been concluded. The letter by Elizabeth Wohl, a lawyer for the group trying to acquire Burlington Labs, referred to "overstatement of Medicaid claim amounts."
The letter was posted to the Green Mountain Care Board's website. The board's director of health policy, Noel Hudson, said the panel would take up the matter on Wednesday.
Burlington Labs issued a statement late Tuesday saying it was in the "final stages of negotiations" for a purchase by the investor group.
As for the alleged Medicaid fraud, the statement said, "Burlington Labs will reimburse the State and Vermont Medicaid for all incorrect coding that resulted in over-reimbursement by the State. Burlington Labs denies that any knowing or intentional overbilling occurred."
Wohl did not immediately respond to repeated messages left at her office.
Wohl's letter, dated Aug. 19, asks the board for emergency approval for Burlington Labs to be taken over by the group she represents. She described dire financial straits for Burlington Labs: Default on a nearly $4.9 million bank loan and $3.7 million in debt to other creditors, much of it also in default, aside from the pending $6.5 million settlement with the attorney general.
Vermont Medicaid has cut its payments to Burlington Labs by about half since January, worsening its cash-flow problems, Wohl wrote. The company's current expenses exceed revenues by about $400,000 per month, she wrote.
There's a "near certainty that Burlington Labs will cease doing business if the proposed transaction is not completed in the next 30 days," she wrote, adding later that the firm provides "desperately needed services to residents of the State of Vermont."
Burlington Labs has 180 employees — about 150 of them in Vermont, branches in Worcester, Massachusetts, and Lexington, Kentucky, and has contracts in 20 states, Wohl's letter said. The company said about 130 of the workers were in Vermont. According to an October 2015 feature story on the business in the Burlington weekly Seven Days, it had 11 collection centers around the state where people submit regular urine samples, as required by probation officers or drug-treatment counselors.
Wohl wrote that Burlington Labs has Vermont sample collection sites in Barre, Bennington, Burlington, Middlebury, Morrisville, Rutland, St. Albans and Springfield and had planned to open one in White River Junction late this year.
A decision on the proposed takeover is needed within 30 days or the investors, one of whom already has made $1.4 million in loans to try to keep Burlington Labs afloat, would be forced to back out, Wohl wrote.
The proposed buyers of Burlington Labs include an executive team headed by James Crook Jr., former CEO of Vermont-based health software firm IDX Systems Corp. Michael Casarico, who with his wife founded Burlington Labs in 2006, would serve on the newly constituted company's board.
Investors would include Vermont's dominant health care player, the University of Vermont Health Network. It includes the University of Vermont Medical Center and a range of affiliated hospitals, physicians' offices and other health care providers.
"The University of Vermont Health Network is involved because it believes that Burlington Labs' opiate testing services are vital to the communities that (it) serves," Wohl wrote.