• U.S. alleged company billed for urine tests of dead people
  • Plan to shave $1.2 billion in debt has creditor support

Millennium Health LLC filed for bankruptcy after settling federal claims that it improperly billed the government for running urine tests on dead people and checking senior citizens for angel dust.

The prepackaged reorganization plan filed Tuesday in Delaware already has the support of key lenders. Under the proposal, Millennium, the largest U.S. drug-testing lab,  will pay $256 million to settle the government claims while eliminating $1.2 billion in debt from its balance sheet. 

The San Diego-based company said it could lose lender backing if it doesn’t meet certain milestones or pay the government by Dec. 30. It has said the reorganization should be complete by the end of the year. The approximate $1.75 billion in loans under its current credit agreement will be replaced by a new $600 million term loan, the company said in court papers Tuesday.

Millennium faced claims from the U.S. Justice Department, the Centers for Medicare & Medicaid Services, 29 states and the District of Columbia. A federal complaint filed in March alleged that the company, which looks for prescription drugs and illegal substances, encouraged excessive testing, including for things patients weren’t suspected of taking.

Federal Funding

The agencies threatened to revoke the company’s access to federal funds because of the alleged irregularities. According to a complaint filed in a Massachusetts court, Millennium received more than $630 million from Medicare for drug testing from 2007 to 2014. 

Alleged improper practices included billing Medicare more than $15 million to test for PCP, or angel dust, the U.S. said. Use of the hallucinogen is “virtually non-existent” among Medicare patients, according to the U.S. The company also billed $55 million to test for certain antidepressants that aren’t widely abused, the U.S. said.

Chief Executive Officer William Brock Hardaway said in bankruptcy papers that the company had challenged the government’s bid to revoke its billing privileges after it was accused of submitting claims for services provided after the dates of death for 59 Medicare beneficiaries.

Millennium also pushed its sales force to produce by putting a former employee’s face on a firing-range target, as well as displaying photos of the same person and competitors in body bags during a slide show on compliance, according to the Massachusetts complaint.

“Millennium Health is currently a very different organization than we were in the past,” Hardaway said last month in a statement announcing the settlement and restructuring plan. He said the company may have debated some of the U.S.’s allegations but respects the government’s role in health oversight.

The case is In re Millennium Lab Holdings II LLC, 15-12285, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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