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June 2024 Labs in Court

by , | May 27, 2024 | Essential, Lab Industry Advisor, Labs in Court

Examining DOJ and OIG investigations of labs and their owners: Recent cases show continued focus on the usual enforcement targets.

Settlements and indictments announced in late March and through to the end of April 2024 demonstrate that the U.S. Department of Justice (DOJ) and the Office of Inspector General at the U.S. Department of Health and Human Services (HHS-OIG) continue to pursue cases against laboratories and their owners for improper relationships with ordering providers, payment of kickbacks, payment of commissions to independent contractors, and medically unnecessary testing.

Laboratory and Its Owners Settle Allegations of Unnecessary PCR Tests for More than $13.6 Million

On March 27, 2024, the DOJ announced that a laboratory in Missouri and three of its owners agreed to pay more than $13.6 million to resolve allegations that they violated the False Claims Act (FCA) by submitting claims to Medicare for unnecessary PCR urinalysis tests that were not ordered by patients’ treating providers. For a 10-month period in 2020, when a provider ordered a urinalysis with culture and sensitivity (C&S), or only a C&S, the lab routinely performed a PCR test for a urinary tract infection (UTI). As in other FCA cases, the DOJ criticized the lab’s requisition form design for not offering providers the ability to opt out of UTI PCR tests.1 In addition to paying the settlement amount over five years, the lab owners agreed to be excluded from participation in federal healthcare programs for 15 years.1,2

Five Physicians and Two Laboratory Marketers Settle Kickback Allegations

On April 1, 2024, the DOJ announced several settlements related to marketers and physicians in five states. One sales and marketing representative and his marketing companies agreed to pay $400,000 to resolve allegations that they paid consulting and medical director fees to a doctor in exchange for referring testing to several different laboratories. The laboratories paid commissions to the marketers based on them securing referrals. In addition, the sales and marketing representatives paid commission-based consulting fees to a doctor in exchange for the doctor’s referral of laboratory tests and preparation of false invoices. The other sales and marketing representative and his company agreed to pay a total of $320,000 for kickbacks paid to a physician in return for referring tests to a clinical laboratory that previously settled with the DOJ.3

Additionally, five physicians from different practices each settled alleged violations of the Anti-Kickback Statute (AKS) based on their participation in purported management service organizations in return for making referrals to several different laboratories.3

Oncology Practice, Physicians, and Reference Lab Settle Kickback Allegations for More than $4 million

On April 2, 2024, the DOJ announced that a hematology and oncology practice in Texas, its affiliated physicians, and a reference laboratory agreed to pay a total of more than $4 million to settle kickback allegations brought by a qui tam relator. The DOJ claimed that the reference lab provided in-office bone marrow biopsy services and subsequent diagnostic testing on the biopsies. The laboratory agreed to pay $115 for each biopsy referred by the practice and its physicians. Unlike in a traditional reference lab arrangement, the payments for each referred biopsy were made to the private practice entities of the three physicians at the practice. The DOJ claimed that these payments constituted kickbacks within the meaning of the AKS and that the agreement between the practice and laboratory did not meet any safe harbor.4

Doctor Indicted for Healthcare Fraud Related to Ordering Unnecessary Toxicology Testing

On April 23, 2024, the DOJ announced the indictment of a New Hampshire doctor related to the prescription of controlled substances, knowing that at least some of his patients were abusing and diverting drugs. He was affiliated with a network of clinics throughout several northeastern states. In addition, the doctor allegedly solicited kickbacks from laboratories in exchange for ordering medically unnecessary urine testing.5

Individuals Indicted for Alleged COVID-19 Testing Fraud Scheme

On April 24, 2024, the DOJ unsealed an indictment charging three men for their roles related to a $36 million COVID-19 testing scheme and money laundering. The government alleges that the owners of an independent laboratory submitted medically unnecessary and non-reimbursable COVID-19 testing to healthcare benefit programs, including the Health Resources and Services Administration and Medicare. The indictment also alleges that the laboratory paid illegal kickbacks and bribes to patient recruiters. Among other things, the laboratory billed for tests that did not have emergency-use authorization under the FDA.6

Physician and Sales and Marketing Representative Settle Kickback Allegations 

On April 29, 2024, three physicians and a laboratory marketer settled allegations of kickbacks in violation of the FCA and agreed to cooperate with the DOJ’s investigation of other participants. The marketer resolved allegations that he paid physicians and their medical practices for the rental of office space, equipment rental, and phlebotomy services on behalf of a laboratory in exchange for laboratory referrals. In addition, the marketer was paid commissions by the laboratory based on the volume or value of tests referred as an independent contractor, in violation of the AKS.7

Takeaways for lab leaders

The DOJ continues to pursue individuals and laboratories engaged in illegal kickbacks and violations of the AKS and the FCA. As we have seen throughout 2024, the DOJ and HHS-OIG can be expected to prioritize enforcement activities related to commission payments to independent contractors based on the volume or value of tests performed; improper relationships between laboratories, providers, and marketers; and performing testing that is not medically necessary.


    1. https://www.justice.gov/opa/pr/gamma-healthcare-and-three-its-owners-agree-pay-136-million-allegedly-billing-medicare-lab

    1. https://www.justice.gov/opa/media/1345561/dl?inline

    1. https://www.justice.gov/opa/pr/marketers-and-physicians-five-states-agree-pay-over-15-million-settle-laboratory-kickback

    1. https://www.justice.gov/usao-wdtx/pr/oncology-practice-physicians-and-reference-laboratory-pay-over-4-million-settle-false

    1. https://www.justice.gov/opa/pr/doctor-charged-unlawfully-distributing-controlled-substances-and-health-care-fraud

    1. https://www.justice.gov/opa/pr/laboratory-owners-charged-36m-covid-19-testing-fraud-scheme

    1. https://www.justice.gov/opa/pr/laboratory-marketer-and-north-carolina-physicians-agree-pay-over-13m-settle-kickback

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