Laboratory Kickbacks and Unnecessary Testing - Jeff Newman Law

Some of the earliest major healthcare fraud cases were against diagnostic testing laboratories, and whistleblowers continue to expose fraudulent practices by these labs. Fraud by unscrupulous laboratories includes:

  • Unnecessary confirmatory urine-drug tests;
  • Paying commissions to 1099 sales reps in violation of the anti-kickback statute;
  • Paying kickbacks to referring physicians;
  • Performing and billing for unnecessary extra panels of tests;
  • Bundling Covid-19 tests with unnecessary respiratory pathogen panel tests; and
  • Medically unnecessary genetic testing performed on a routine and preemptive basis, without an individualized assessment of need.

In many cases, lab companies enable their frauds by paying kickbacks to physicians who then agree to send samples to the labs for unnecessary or excessive testing.

In recent years, lab companies have paid hundreds of millions of dollars in settlements as a result of fraud cases that whistleblowers initiated under the False Claims Act. In 2015, for example, Millennium Health paid $256 million to resolve a whistleblower’s allegations that it systematically billed federal healthcare programs for excessive and unnecessary drug testing and paid kickbacks to physicians by providing them with free drug test cups on the express condition that the physicians return the specimens to Millennium for hundreds of dollars’ worth of additional testing. More recently, in 2019, pathology laboratory company Inform Diagnostics agreed to pay $63.5 million to settle allegations that it violated the anti-kickback statute and the Stark Law by giving referring physicians subsidies for electronic health records systems and free or discounted technology consulting services. Also in 2019, a a genetic testing company, UTC Laboratories, and its principals paid a total of $42.6 million to resolve allegations in six whistleblower False Claims Act cases that the lab paid kickbacks to physicians under the guise of participation in a clinical trial, and that the lab billed for tests that were not medically necessary.

The Department of Justice also has brought several recent cases against labs that paid performance-based commissions to independent (“1099”) sales reps. The anti-kickback statute allows performance-based compensation for employees, but not for third parties. Labs that pay commissions to 1099 sales reps may be violating the anti-kickback statute and the False Claims Act.

If you have information about a lab company that has paid kickbacks or engaged in unnecessary testing at the expense of a federal healthcare program, please contact us here or at 617-917-2875.