GS Labs Hits Blue KC With Counterclaims: New Motion Alleges Antitrust Violations, Conspiracy Among Blue Insurers, Defamation, Tortious Interference

KANSAS CITY, Mo., Jan. 20, 2022 /PRNewswire/ -- GS Labs, a leading provider of COVID-19 rapid tests in Missouri and the U.S., has filed its latest pleading in the company's ongoing legal battle against insurance giant Blue Cross Blue Shield of Kansas City.

The amended counterclaims, filed in U.S. District Court for the Western District of Missouri, allege that Blue KC violated federal antitrust laws to prevent entry and expansion of GS Labs in Missouri, conspired with other Blue insurance companies to illegally deny payment to GS Labs, defamed GS Labs to state and federal enforcement authorities and tortiously interfered with GS Labs' business relationships.

"Across Kansas City, Missouri and America, communities and families have struggled to overcome the COVID-19 pandemic, including limited access to testing. This national shortcoming has been exacerbated by numerous insurance company's attempts to strangle providers in an effort to continue setting record profits," said Kirk Thompson, a partner with GS Labs. "The conduct of Blue KC in trying to destroy a business that provides critical COVID-19 testing is disturbing, especially at a time when the Omicron variant has made testing more difficult to find and more important than ever. Given Blue KC's refusal to negotiate in good faith, we forge ahead with the counterclaims to protect patients and our business."

The CARES Act makes clear that insurance carriers must pay for COVID-19 testing for insured members. Section 3202(a) states: "If the health plan or issuer does not have a negotiated rate with such provider, such plan or issuer shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website, or such plan or issuer may negotiate a rate with such provider for less than such cash price."

"Blue KC's entire Complaint rests on one fundamental flaw," the filing details. "With no legal authority, the insurer suggests it can refuse to pay GS Labs for COVID-19 testing at the required rates simply because Blue KC deems the published prices too high. Never mind that thousands of Blue KC's insureds benefitted from those services, or that Congress intended to incentivize providers to pivot their businesses to supply this crucial testing in an attempt to curb the virus' spread."

The filing alleges that Blue KC has unlawfully harmed competition in the provision of COVID tests by leveraging its monopoly power in the health insurance market in certain areas in Missouri including in and around Kansas City. Blue KC has 46% of all commercially insured lives in the Kansas City area, and well over 50% of all lives enrolled in PPO or HMO plans. This dominant market share provides Blue KC the power and influence to foreclose entry and expansion of innovative new COVID-testing providers like GS Labs, through refusing to pay GS Labs for tests provided to KC Blue's members, and steering insureds using false and misleading information away from GS Labs to other providers, including the Blue KC-owned and operated Spira. Blue KC went so far as to send "deceptive and misleading Explanation of Benefits notices," according to the filing, in an effort to deter patients using from GS Labs.

The amended counterclaims also allege that Blue KC has conspired with other Blues to withhold payments due to GS Labs, for the purposes of price fixing and/or depressing the supply of high-quality testing services (for the reasons described above). This alleged collusion includes the use of listservs to coordinate with other Blue insurers and conference calls between Blue executives to collude against the testing company.

Specifically, the suit illustrates how Blue KC and certain affiliates exchanged competitively sensitive pricing and other information with one another and aligned their strategies and approach in negotiating rates with GS Labs. Blue KC (and other BCBS affiliates) are alleged to have improperly shared competitively sensitive information, their future pricing approach to GS Labs, and their plan to either deny or pay less for GS Labs' claims. The motion details email and other communication that explicitly demonstrates collusion and collaboration among Blue KC and other Blues. Per the filing, "Many of these communications between Blue insurers were filtered through the companies' respective legal departments in an (ultimately unsuccessful) attempt to hide the conspiracy under the cloak of privilege."

The pleading also alleges that investigators working on behalf of Blue KC provided false information to state and federal regulators in an effort to deceive government officials and the public. Per the filing, this communication contained "a host of outright falsehoods and misleading statements, many of them reminiscent of Blue KC's pleadings in this litigation."

In addition to its role as a direct insurance provider, Blue KC provides third-party administration services to insurance plans sponsored by self-insuring employers and labor unions ("ASO plans"). The filing alleges that Blue KC had a legal obligation to the ASO plans to properly pay reimbursement claims; instead, Blue KC breached this obligation to its customers by unlawfully causing the ASO plans not to pay GS Labs, as required by the CARES Act. By causing the ASO plans not to pay reimbursements as required by federal law, Blue KC tortiously interfered with GS Labs' business relationship with the ASO plans, indicating that GS Labs would need to pursue the companies whose plans Blue KC was supposed to represent, rather than working with Blue KC, their plan administrator.

GS Labs is seeking full payment for charges that will likely exceed $13.5 million by the end of the week, a total which grows daily as it continues testing without reimbursement. The company also seeks compensatory damages, interest and legal fees.

GS Labs began offering COVID-19 rapid tests in October 2020. Many communities directly requested assistance from GS Labs, due to a lack of testing resources. By keeping testing centers open 12 hours a day during the height of the pandemic – and paying above-market salaries to hire experienced registered nurses and other medical professionals – GS Labs to date has safely and effectively tested approximately one million Americans, including more than 12,000 Blue KC customers.

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