Independent specialty labs almost all start as business “question mark,” with a test or tests that are unique to the status quo. Startup specialty labs have to get their tests into physician offices to generate lab volume. With their initial low volume, specialty labs often do not submit enough claims to insurance companies to draw much attention. Their tests are often expensive, which allows for significant insurance reimbursement even with the majority of the charge being written off. In HDL’s case, for instance, they were receiving 29.5% of charges billed to insurance companies. On a $3,000 bill, they would receive about $1,000 (Click Here for a detailed article on HDL).

Once specialty labs achieve some scale in provider offices and become “rising stars” and “cash cows,” insurance companies begin to take notice and make more of an effort to scrutinize charges. In HDL’s case, their reimbursement from insurance companies fell almost 33%. At the same time, HDL had invested in developing provider relationships by paying fees for specimen collection, physician speakers and marketing.  These pressures and insurance company lawsuits, (along with generous compensation to management and top sales people), forced HDL into bankruptcy. Other specialty labs have also filed bankruptcy.

Settlement Offers

The bankruptcy of specialty labs has has created a cottage industry for law firms serving as trustees of bankrupt specialty labs. 

Even after accepting the settlement offer and paying funds to the trustee, the provider may be contacted again with another settlement offer by the same trustee for transactions not included in the first settlement at a later date. In addition, the acceptance of the settlement offer may be construed by other parties, (regulatory boards, government regulators, other specialty labs, etc.), as an acknowledgement by the provider that the payments were in violation of the Stark Law, Anti-Kickback Statutes and OIG alerts.


  • Review records to determine the amount of payments received by the specialty lab as well as the basis of the payments.
  • Ask the malpractice carrier to review the settlement offer. Malpractice coverage may include administrative coverage for such issues.
  • Even if the malpractice carrier does not provide administrative coverage for settlement offers, the provider should consult an attorney knowledgeable in healthcare law.
  • Before considering any settlement offer, obtain the specific transactions included in the settlement offer and make sure these transactions match the provider’s records.

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