Millennium Health seeks bankruptcy after overbilling settlement

WILMINGTON, Del (Reuters) - Millennium Health, one of the largest urine drug testing laboratories in the United States, filed for Chapter 11 bankruptcy on Tuesday, a month after agreeing a $256 million settlement to resolve federal allegations of health care fraud.

The company, formerly Millennium Laboratories, allegedly billed Medicare, Medicaid and other federal healthcare programs for medically unnecessary testing.

In court documents filed in Wilmington, Delaware, Millennium said it had already agreed a prepackaged deal that will hand ownership over to its creditors and reduce company debt by more than $1.15 billion.

Prepackaged bankruptcies are often approved by a judge in a matter of weeks because creditors have already voted to accept the proposed plan before the case is filed.

The U.S. government is its largest unsecured creditor with a $206 million claim. The government will be paid in full, according to court documents.

Millennium, founded in 2007 by James Slattery, also faced allegations by the U.S. Justice Department of providing free items to physicians who agreed to refer expensive lab testing business to the San Diego-based company.

It asked for court approval of the plan by the end of the year.

The case is Millennium Lab Holdings II, LLC, U.S. Bankruptcy Court, District of Delaware, No. 15-12284.