Summary
This report was published by Hindenburg Research, a well-known activist short research firm. It focuses on Natera Inc., a genetic testing company specializing in non-invasive prenatal testing (NIPT), highlighting alleged deceptive medical billing and sales practices behind its rapid revenue growth.
Who is Natera Inc.
Natera Inc. is an Austin, Texas-based genetics company founded in 2004 offering DNA screening services primarily in women’s health, with a focus on non-invasive prenatal testing (NIPT). Its flagship product, Panorama, is a widely used prenatal screen that leverages cell-free DNA analysis to assess fetal chromosomal abnormalities. The company went public in 2015 and has grown rapidly, becoming a market leader in NIPT by volume in the U.S., though it remains unprofitable.
Key Points from Report
Rapid Rise Fueled by Deceptive Practices
- Natera generates approximately 91% of its 2021 revenue from its prenatal testing business, which includes NIPT.
- Despite late entry, Natera quickly became the leading NIPT provider by volume in the U.S.
- The company has never reported a profit and recorded a $468.2 million operating loss in 2021, with a total accumulated deficit of $1.4 billion.
- Its growth has been driven by questionable sales and billing practices, including deceptive insurance billing and patient overcharging.
- Natera settled a $11 million DOJ fraud allegation in 2018 regarding improper billing from 2013 to 2016.
Mystery Non-Profit Entity "My Genome My Life" (MGML)
- MGML, formed in 2018 shortly after insurers required prior authorization for Natera’s tests, claims to have processed over 1.8 million prior authorizations.
- MGML operates with minimal staff and uses a virtual office, presenting itself as a non-profit which helps doctors with prior authorizations at no cost.
- "Vickie Seth," the president of MGML, is allegedly a pseudonym for Deepti Gupta, who has close personal and financial ties to a former Natera VP of Sales.
- MGML submits insurance prior authorization requests under doctors' login credentials, concealing its third-party role, potentially violating HHS anti-kickback statutes.
- Some doctors refuse to work with MGML due to unethical access to their insurance portal credentials.
Microdeletion Screening and Billing Controversies
- Natera pushes microdeletion screening, which has high false positive rates and leads to medical risks, including wrongful pregnancy terminations.
- This screening is included by default unless providers opt out, defying industry recommendations for opt-in only due to risks involved.
- Microdeletion tests are rarely covered by insurers but are billed separately from NIPT, often leading to patients being double billed without clear disclosure.
- Natera more than doubles patient bills by adding microdeletion screens, causing surprise and outrage among patients and medical practitioners.
Patient Billing and Insurance Issues
- Natera markets tests with promises that patients will pay no more than about $249 out-of-pocket, but many patients receive bills for thousands of dollars later.
- The company allegedly discounts patient deductibles without notifying insurance companies, potentially constituting insurance fraud.
- After outsourcing billing, sales reps handle billing disputes by converting insurance payments to lower cash-pay amounts, a practice raising ethical concerns.
- Online reviews and complaints vastly outnumber those of competitors, citing deceptive billing, failure to provide itemized invoices, and aggressive collection tactics.
Regulatory and Legal Actions
- Natera is under a Michigan Attorney General investigation for its billing practices, undisclosed in company filings.
- A class action lawsuit filed in November 2021 alleges deceptive billing practices and misleading marketing promises about cost to patients.
- A Washington D.C.-based ethics watchdog called for an SEC investigation over alleged investor misleadings regarding test accuracy and billing issues.
Activ8 Finance Analysis
Hindenburg Research’s report on Natera highlights significant operational and ethical risks associated with the company’s growth strategy, largely driven by aggressive and potentially deceptive sales and billing methods. These practices, including the use of a shadowy third-party non-profit to manage prior authorizations and the controversial addition of costly microdeletion screenings often not covered by payors, have resulted in mounting regulatory scrutiny and class-action litigation.
From an analytical perspective, the issues raised suggest systemic vulnerabilities in Natera’s business model that could impact long-term sustainability. The company’s ongoing losses despite revenue growth and increasing patient backlash underscore potential future challenges, signaling caution for stakeholders evaluating Natera’s market position and governance practices.