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Talk about a company that knows how to test the limits of credibility. By now, Bio-Reference Laboratories (Nasdaq: BRLI) has contradicted itself so many times that its own statements establish the company as blatantly deceitful at worst and dangerously unreliable at the absolute best. As illustrated by the string of conflicting viewpoints and glaring reversals that follow, most of them directly attributable to the company itself, Bio-Reference might face more than a few challenges if it dared an attempt at passing a lie-detector test.

* Bio-Reference claim: "The company has no knowledge of any government subpoenas about its billing practices." (Source: email from Bio-Reference to TheStreetSweeper on Feb. 25, 2013)

* Contradictory evidence: "The company has, from time to time, received subpoenas from state agencies and from the Office of the Inspector General of the U.S. Department of Health and Human Services seeking documents relating to the company's billing-related activities." (Source: brand-new disclosure in Bio-Reference 10-K report for the 2012 fiscal year filed by the company - and certified by its CEO and CFO as reliable - on Jan. 14, 2013)

* Bio-Reference claim: "Let me just go emphasize. In women's health, we make these tests available. The doctors order these tests. They order the Pap smears. They will order whatever molecular test that they want. We don't do that … We may monitor what they do and make sure, if we can, they don't over-test … But these doctors choose it." (Source: Bio-Reference CEO Marc Grodman downplaying the potential for excessive use of high-end specialty tests sold by its GenPath subsidiary during a quarterly conference call on May 26, 2011)

* Contradictory evidence: "$300 visit + $845 lab bill for an annual checkup. Lab is called GenPath, and they conducted fraud on my insurance and me by charging for some kind of tests that were never ordered. Seaside staff member said: 'I think the lab is regularly overcharging patients like this and, when they charge the insurance, they don't return anything.' ??? After several aggravated calls to Seaside, they finally persuaded the lab to waive the out-of-pocket fees, but are still keeping what they've stolen from my insurance. This is wrong on many levels and could happen to you." (Source: an online review posted in December of 2012 by Diana Konrad, a San Diego photographer who underwent a routine Pap smear only to later discover that GenPath had billed her Blue Cross/Blue Shield plan for a far more elaborate test - without prior authorization from her physician - and allegedly pulled the same trick with others on a regular basis)

* Bio-Reference claim: "The change in the BlueCard … is a complex issue which, for the most part, only became effective as of January 1, 2013. At this time, the company believes it is too early to ascertain potential impacts on its business." (Source: email from Bio-Reference to TheStreetSweeper on Feb. 25, 2013)

* Bio-Reference claim: "Based on our current experience with billing, we believe the change in the BlueCard program will not have a material effect on our business this year … I think it's creating a lot of confusion, (but) we're comfortable in being able to say that, overall, the impact is not going to be significant for us." (Source: conference call hosted by the company to review its first-quarter results and full-year outlook on Feb. 28, 2013)

* Contradictory evidence: "Something else is occurring now that could be very difficult for some of us in independent laboratories. (Soon), the easier access that BlueCard afforded the patient will be gone … If we're shut out of the game before that change evolves, then we won't be able to compete … Think of it this way: The Blues will be able to do what the FDA could not do to stop innovation and new testing, because you simply will have no ability - no way, no mechanism - to bill, except to have the patient pay for it out of his or her own pocket." (Source: speech given by Bio-Reference CEO Marc Grodman to fellow lab executives in May of 2012 ahead of the nationwide BlueCard change)

* Contradictory evidence: "Some labs are seeing as much as an 85% drop in Blue Cross payments. This is going to cause regional laboratories a big financial hardship … It's something that we're struggling with tremendously." (Source: fallout from the BlueCard change witnessed by Alice Carroll, president of Revenue Cycle Consultant, a firm specifically hired by labs to help enhance their billing systems and bolster their collection rates)

* Bio-Reference claim: "We are one of the largest laboratories in the country with contracts with numerous Blues plans, including new contracts recently negotiated, as well as current negotiations with others at this time. For competitive reasons, we cannot discuss ongoing negotiations. However, based on our current experience with billing, we believe the change in the BlueCard program will not have a material effect on our business this year." (Source: conference call hosted by the company to review its first-quarter results and discuss its future outlook on Feb. 28, 2013)

* Contradictory evidence: "The Blues are one of the hardest groups with which to contract. There are probably only two laboratories in the U.S. that are in all the Blues. It's not cost-effective, because the laboratory is forced to submit paper claims (instead of billing electronically) to an out-of-network Blue, which may - or may not - pay the laboratory based on that network's benefits." (Source: speech given by Bio-Reference CEO Marc Grodman to fellow lab executives in May of 2012 ahead of the nationwide BlueCard change)

* Contradictory evidence: "None of the labs performing proprietary assays have contracts with each of the 39 independent Blue plans. (SO) each independent clinical lab and each Blue plan will bear the cost of negotiating and maintaining separate agreements with each other, with labs either not being reimbursed at all or being reimbursed at a lower non-participating rate, if they are unable to contract with a certain plan. Complicating matters is the fact that many of the Blue plans are not contracting with new, out-of-state providers, making it impossible for labs to get reimbursed for tests where specimens were collected in those jurisdictions." (Source: report issued by Xifin, a widely respected revenue cycle management firm, in June of 2012)

* Contradictory evidence: "Contracting with these out-of-state BCBS carriers may pose a potential problem, as PSA has confirmed that in certain states, including Georgia and Florida, BCBS has exclusive contracts with national labs such as Quest Diagnostics and LabCorp. (Moreover), BCBS has explained that there are a number of in-state contracted laboratories that could provide the services and they do not believe that it is necessary to contract with additional providers." (Source: a special bulletin issued by PSA, a subsidiary of giant McKesson that caters to the laboratory industry, in August of 2012)

* Contradictory evidence: "Speaking (FOR) one of those Blues plans that's hearing from dozens of you labs, I can say that I'm turning away all of you, as I have yet to see any lab offering necessary testing that can't be offered by LabCorp, Quest, Myriad and Genomic Health combined. Why do you think we started enforcing that BlueCard rule in the first place? We were sick of labs doing unnecessary, expensive testing and never having to justify their behavior to us, as the plan (and members) that ultimately had to pay your bills." (Source: a self-proclaimed BCBS insider responding to an online discussion between laboratory sales representatives worried about the new BlueCard restrictions earlier this year)

* Bio-Reference claim: "We don't buy companies for the sake of having customer lists because we figure that, if they wanted to use us, they would use us originally. (That's) really separate from what our business plan is." (Source: statement made by Bio-Reference CEO Marc Grodman in a conference call hosted by the company to review its fourth-quarter results and future outlook on Dec. 6, 2012)

* Contradictory evidence: "On December 31, 2012, Bio-Reference Laboratories, Inc. (the "Company") entered into an agreement with Florida Clinical Laboratory, Inc., a Florida corporation having its place of business in Melbourne, Florida ("FCL"), pursuant to which the Company purchased all issued and outstanding shares of capital stock of FCL for approximately $7,000,000 … Shareholders acknowledge that the Blue Shield provider agreement with FCL is a substantial factor in inducing buyer to enter into this agreement." (Source: special 8-K report filed by Bio-Reference on Dec. 31, 2012, detailing the second of two rare acquisitions executed by the company within weeks of issuing its bullish forecast)

* Contradictory evidence: "So we buy a lab in the armpit of the states. Fantastic. Where does our management team get field surveys from? Been asked to be part of the integration team. I'll pass … Florida Clinical Lab in Melbourne and Meridian Lab Corp., both in Florida. Who are these guys?!?!?!?" (Source: an online discussion between apparent members of the Bio-Reference sales team taken by surprise this January after the company abruptly purchased a pair of obscure labs well outside of its traditional region)

* Bio-Reference claim: "There has been much reported about the new molecular coding initiatives. While these codes may impact the number of tests with regards to Medicare, their effect is mostly on oncology or cancer molecular tests. And we have consistently said that the amount of business we do for these tests - specifically for Medicare reimbursement - is not significant, in that a decrease in reimbursement of these tests will not have a material impact on us … We've also stated that we're being reimbursed for this oncology business by managed care (at rates that) have not terribly changed" ahead of the proposed cutbacks. (Source: conference call hosted by the company to review its first-quarter results and full-year outlook on Feb. 28, 2013)

* Contradictory evidence: "CMS released a clinical lab fee schedule with zeros in the pricing column. That spills over into the private payer sector, because private payers often purchase these fee schedules from CMS to use as a basis for their pricing. This likely means uncertainty as to pricing with the commercial payers as well. We have called the private payers, but none had any guidance for us … All this uncertainty in how CMS and commercial payers will process claims for molecular tests represents a big downside for laboratories. That's because many labs have no way of modeling their expected payments for 2013 … Any lab that has a contract with a commercial payer that specifies how the lab will be paid for these tests will likely be fine. But most labs do not have such contracts. When it comes to getting paid for molecular tests, labs are likely to experience a logistical headache and endure long delays in getting paid … Also, be prepared for payment denials." (Source: The Dark Report, a trade publication widely read by laboratory executives, citing views expressed by a respected expert in the field on Dec. 31, 2012)

* Bio-Reference claim: "We have made it very abundantly clear that the molecular testing issues refer to oncology and that, as a percent of our business, it is very small … We remain consistently enthusiastic about GeneDx, and it's not only because it is the fastest growing part of our business." (Source: conference call hosted by the company to review its first-quarter results and full-year outlook on Feb. 28, 2013)

* Contradictory evidence: "Molecular diagnostic labs already impacted by unwarranted claims adjudication delays and coverage uncertainty have now been confronted with a severe and unexpected rate reduction that threatens their future viability. Initial claim feedback from Tricare South shows that the new Tier 1 molecular pathology codes are being denied as 'experimental and/or investigational' (E&I) for multiple labs. This is an interesting development when considering that the Tier 1 codes were developed to identify gene/analyte-specific tests that have been used by the medical community at a high frequency for many years and even established as a standard of care in making therapy decisions in many cases. Labs will need to be prepared to defend the use of these now-common procedures to insurance carriers in order to demonstrate the clinical validity and utility of the test based on certain patient indications. In some cases, it appears that insurance carriers will use this newfound transparency to deny certain gene tests indiscriminately." (Source: online bulletin published by Xifin, a well-respected revenue cycle management firm, on Feb. 4, 2013)

* Bio-Reference claim: "The company has no knowledge about any whistleblower lawsuits against the company." (Source: email from Bio-Reference to TheStreetSweeper on Feb. 25, 2013)

* Contradictory evidence: "This action arises out of an ongoing scheme to defraud the United States of America, as perpetrated by the defendant since at least 2003 … The false statements and claims involve fraudulently billing federally funded programs (and possibly Medicare) and receiving payments for clinical lab services which were either unnecessary or unrequested, or for which payment was received at a rate known by the defendant to be reimbursable at a much lower rate. The damages and civil penalties that may be assessed against defendant under the facts as alleged in this complaint are substantial." (Source: whistleblower lawsuit filed against Bio-Reference in April of 2005 and officially unsealed for public view in October of 2012 after the plaintiff voluntarily dismissed the case due to a problematic technicality)

* Contradictory evidence: "The company may also be named from time to time in suits brought under the qui tam provisions of the False Claims Act and comparable state laws in which allegations may be made that the company has submitted or caused to be submitted false claims in connection with claims for payment from federal or state health care programs." (Source: brand-new disclosure in Bio-Reference 10-K report for the 2012 fiscal year - totally absent from past annual reports - filed by the company on Jan. 14, 2013)

* Bio-Reference claim: "We embraced the adoption of the Accounting Standards Update Topic 954, which requires certain healthcare entities such as Bio-Reference to present that portion of the provision of a doubtful account relating to patient service revenue which was previously classified as a portion of bad debt and is deducted now from patient service revenue rather than an operating expense … We welcome the reclassification of doubtful accounts pursuant to this update, because it enables the investing public to more evenly compare results of operations with similar companies." (Source: conference call hosted by the company to review its first-quarter results and full-year outlook on Feb. 28, 2013)

* Contradictory evidence: "In July 2011, the FASB issued ASU No. 2011-07: Health Care Entities (Topic 954 - Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts and the Allowance for Doubtful Accounts for Certain Health Care Entities) … We do not expect that we will be required to change our presentation of the statement of operations, because the company does not recognize revenues that it does not expect to collect and this update specifically exempts companies who follow that methodology from its application." (Source: special disclaimer included by Bio-Reference in its 10-K report for the 2011 fiscal year but absent from its 10-K for the 2012 fiscal year - once again blessed by its auditors without the change - on Jan. 14, 2013)

* Bio-Reference claim: "I once went through a change in auditing firms back in the '80s; it was a difficult time having two accountants. But I will tell you, given all the things that have happened, we are open to every consideration we can to deal with or preserve credibility in the marketplace … We have to look at every alternative facing the company, and we will. Right now, we're in the middle of our year-end audit, which is important to be able to do … But over the next months, we'll look at all our alternatives." (Source: Bio-Reference CEO Marc Grodman responding to suggestions that the company upgrade its auditor during an emergency conference call hosted by management after a damaging report by TheStreetSweeper in November of 2011)

* Contradictory evidence: "The firm of MSPC, Certified Public Accountants and Advisors, a professional corporation ("MSPC") audited our accounts and the accounts of our subsidiaries for the fiscal years ended October 31, 2012 and 2011. MSPC and its predecessor firm have been our auditors since 1988 … The engagement of MSPC to render the above audit and tax services was approved by our audit committee prior to the engagement." (Source: new 10-K report filed by Bio-Reference on Jan. 14, 2013)

* Bio-Reference claim: "On our 1 million share repurchase plan, we have, I think, 700,000 shares left of what we can purchase, and there is nothing in the world that would prohibit us from increasing what our purchase options are." (Source: response offered by CEO Marc Grodman when asked about the potential for a massive 10 million share buyback during a conference call hosted by the company on Feb. 28, 2013)

* Contradictory evidence: Total cash and cash equivalents of $26.3 million; revolving loan balance of $6.68 million; and long-term debt of $17.5 million at the end of January 2013. (Source: balance sheet summary contained in the press release that Bio-Reference issued to announce its latest financial results on Feb. 28, 2013)

Contradictory evidence: Estimated cost of repurchasing the 700,000 shares of Bio-Reference stock remaining under the current buyback program approaching $20 million based on current market prices; total cost of purchasing 10 million shares of stock under an expanded buyback program surpassing $275 million - a sum far beyond the company's rather limited means - based on that same formula. (Source: basic arithmetic performed on a standard calculator)

* Important Disclosure: Prior to the publication of this investigative report, TheStreetSweeper established a short position in Bio-Reference (BRLI) and stands to profit on any future declines in the share price. Please click on the link for "Current Positions" and review the specific disclosures for BRLI to secure timely details about that investment.

As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in any of the companies that they cover. To contact Melissa Davis, the primary author of this story, please send an email to editor@thestreetsweeper.org.

Source: Bio-Reference: Claims Don't Match The Evidence

Additional disclosure: TheStreetSweeper holds a short position in BRLI; the author of this report does not. TheStreetSweeper does pay the author a regular salary, however, as a full-time investigative reporter for the site.