Pomona Lab Wants to Lock Up Prison Business

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Pomona Lab Wants to Lock Up Prison Business
Scott Weingarten

Foundation Laboratory is trying to block Health Net Inc. from taking away its contract with its biggest client – the state prison system – warning that the loss may force it out of business.

The Pomona diagnostic laboratory learned Nov. 19 that the Woodland Hills insurer planned to award its contract servicing 20 of the state’s prisons to another lab, according to a lawsuit filed Dec. 6 in Los Angeles Superior Court.

Latara Enterprises Inc., which does business as Foundation Laboratory, alleged that Health Net not only doesn’t have the power to terminate Foundation’s contract, but also didn’t give it sufficient opportunity to compete against other bidders.

It also alleged that Health Net failed to provide sufficient reason for giving the contract to another laboratory, which has yet to be identified but is believed to be either Burlington, N.C.-based Laboratory Corp. of America or Madison, N.J.-based Quest Diagnostics Inc.– the two largest lab companies in the nation.

Foundation, which was founded in 1966 and has 255 employees, is seeking a restraining order to halt the change. The lab alleged that news it had lost the prison business has already caused it to lose other clients, threatening its viability. Processing the prison laboratory samples comprises nearly 60 percent of Foundation’s business, bringing in roughly $28 million a year.

The change in laboratory provider, which is set to take effect Jan. 1, follows a decision by the state Department of Corrections and Rehabilitation to award a three-year contract to Health Net to provide preferred-provider-style coverage to adult inmates at California’s 33 prisons. This is the first PPO-type contract for the prison system and is part of an overhaul of the overcrowded system, which has been the focus of several federal lawsuits over substandard care.

A hearing was held Dec. 9 on Foundation’s request for a temporary restraining order. Judge Robert O’Brien took the matter under submission.

Foundation attorney Patric Hooper referred any questions to the lawsuit. Health Net also declined comment, citing the litigation.

Improving Accountability

Cedars-Sinai Medical Center spinoff Zynx Health hopes to add to its hospital customer base significantly with a new software program that should enable hospitals and affiliated doctors to control costs and boost care quality.

Zynx Health, a subsidiary of Hearst Corp., sells databases that doctors can use with their electronic records to help determine the best care for patients. The databases give quicker access to the latest scientific literature and best practice guidelines. Zynx has 1,800 of the nation’s roughly 5,000 hospitals using its clinical decisions software.

“We’d be disappointed if in five years we don’t have 3,000 hospitals using this,” said Chief Executive Scott Weingarten.

The Westwood-based health care information technology company will work with Cedars and four other hospitals nationwide to test the system. It will help so-called accountable care organizations of doctors and hospitals, which is one of several new ways health care providers are banding together to meet the requirements of health care reform.

Hopes are that technology like Zynx’s ACO program will help these groups achieve the same level of risk management that large HMOs like Kaiser Permanente – which provide everything from physician to hospital care – are able to achieve. Medicare and other insurers will be encouraged to favor such providers under federal health care reform.

“You want doctors to do the right thing at the right time in the right setting for the right patient,” said Dr. Glenn Braustein, chairman of the department of medicine at Cedars.

New Pet

Sofie Biosciences, an alumni of Culver City biotech incubator Momentum Biosciences, has received a $2 million investment from investors, including first-time investor Cycad Group, a Carpinteria venture capital firm.

The Culver City company, which is working on molecular imaging of diseases, said it will use the money to create imaging agents and systems for PET scanners, an advanced technology that is increasingly popular for diagnosing and determining treatments for cancer and immune system diseases.

“This investment represents an important step towards achieving our goal of rapidly commercializing new PET technologies,” said Chief Executive Patrick Phelps, who presented his company’s plans to potential investors last month at the annual SoCalBio Investor and Partnership Conference.

Staff reporter Deborah Crowe can be reached [email protected] or at (323) 549-5225, ext. 232.

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