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COMMONWEALTH PENNSYLVANIA v. LUDLOW CLINICAL LABORATORIES (01/19/82)

decided: January 19, 1982.

COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF PUBLIC WELFARE, PETITIONER
v.
LUDLOW CLINICAL LABORATORIES, INC., RESPONDENT



Appeal from the Order of the Board of Claims in the case of Ludlow Clinical Laboratories, Inc. v. Commonwealth of Pennsylvania, Department of Public Welfare, Docket No. 426.

COUNSEL

Bruce G. Baron, Assistant Attorney General, with him David H. Allshouse, Assistant Attorney General, for petitioner.

Harold Gondelman, Gondelman, Baxter, Mansmann & McVerry, with him Ralph D. Tive, Tive, Hetrick & Pierce, P.C., for respondent.

Judges Williams, Jr., MacPhail and Palladino, sitting as a panel of three. Opinion by Judge Williams, Jr. This decision was reached prior to the expiration of the term of office of Judge Palladino.

Author: Williams

[ 64 Pa. Commw. Page 179]

This is an appeal by the Commonwealth of Pennsylvania, Department of Public Welfare (DPW), from a decision of the Board of Claims ordering DPW to pay Ludlow Clinical Laboratories, Inc. (Ludlow) $1,394,327.38 plus interest. The amount of the award constituted moneys remaining unpaid by DPW on invoices

[ 64 Pa. Commw. Page 180]

    submitted by Ludlow for laboratory services performed relative to the Medicare and Medical Assistance Programs.

The facts, as found by the Board of Claims (Board), indicate that Ludlow commenced its clinical laboratory business effective September, 1972, the month in which its licensing and approval from all the necessary governmental entities became operative.*fn1 In the summer of 1973, DPW temporarily suspended payment on invoices properly submitted by Ludlow, pending a Utilization Review by its investigators. After its operating procedures were examined, its billings checked, and its files and invoices cross-checked, Ludlow's invoice backlog was approved and paid without notice to the lab that there were any improprieties or inadequacies in its systems. Seven months later, the lab passed a similar inspection by the U.S. Department of Health, Education and Welfare (HEW).

Although the regional director of HEW sent Ludlow a letter dated August 31, 1974, affirming that agency's position that Ludlow continued to meet its standards of operation, DPW informed the lab in September, 1974, that invoices, as yet unpaid, for services rendered prior to August 15, 1974, were not being processed for payment pending the outcome of another Utilization Review.

Reimbursement for those invoices was received the following November; however, Ludlow was notified by letter of January 24, 1975, that invoices submitted for services performed after August 15, 1974, would not be honored by DPW. The letter demanding restitution of $1,344,842.94, charged Ludlow with overbilling, inability to produce records to adequately substantiate

[ 64 Pa. Commw. Page 181]

    requested services, and erroneously billing DPW for services that should have been directed to HEW. Ludlow had terminated its operations on January 10, 1975, though, because it had "exhausted all of (its) funds, and cannot extend any further credit to the Commonwealth of Pennsylvania without some guarantee of payment."*fn2 The administrative appeal from the decision and concomitant suspension from the Medical Assistance Program, both communicated by the aforesaid letter, was filed by ...


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