A South Carolina clinical laboratory company and its founder and chief executive have agreed to pay at least $6.8 million to the United States to resolve False Claims Act allegations involving illegal kickbacks to doctors. With this settlement, total civil recoveries relating to the company now exceed $11.5 million, including amounts recovered from nine doctors.
In addition to the civil settlement, the company has agreed to plead guilty to five counts of offering and paying healthcare kickbacks in violation of the Anti-Kickback Statute. Pursuant to the terms of the plea agreement in the criminal matter, the company will pay $103,551.90 in restitution, in addition to the civil recoveries above.
Under the settlement with the United States, the laboratory and its founder, who oversaw the company’s operations, have agreed to pay $6.8 million, plus up to an additional $3,271,536 if a financial contingency occurs. The settlement resolves allegations that they knowingly and willfully paid five types of kickbacks to induce laboratory testing referrals.
From August 2018 to November 2021, the defendants allegedly paid doctors illegal kickbacks disguised as office space rental, phlebotomy, and toxicology payments to induce laboratory test orders. To conceal the scheme, they allegedly hand-delivered money orders, entered into contracts that mischaracterized the payments as compensation for legitimate services, and falsified square footage and work hours on “fraud and abuse” certification forms.
In addition, the settlement resolves allegations that, from September to December 2016, they arranged to pay a physician practice in Charlotte, North Carolina, an inflated amount for used laboratory equipment to induce the healthcare provider to order their testing. Lastly, from March 2018 to November 2021, they allegedly provided a pain management practice in Landis, North Carolina, with free services and supplies related to drug screen testing in exchange for referrals of lucrative drug confirmation testing.
“When medical decisions are bought and sold, patients suffer and public trust erodes,” said Deputy Inspector General for Investigations Christian J. Schrank of the US Department of Health and Human Services, Office of Inspector General (HHS-OIG). “Kickback schemes like this violate the core of federal healthcare programs, and HHS-OIG will continue to relentlessly pursue anyone who exploits these programs and hold them fully accountable for their actions.”
Compliance Perspective
Issue
The federal Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration—directly or indirectly—to induce or reward referrals of items or services reimbursable by Medicare, Medicaid, or other federally funded healthcare programs. The statute is intended to ensure that clinical decision-making remains independent and based solely on patient need, rather than financial incentives. Arrangements that appear legitimate on their face—such as payments for office space, services, equipment, or supplies—may still violate the Anti-Kickback Statute if they are intended to influence referral decisions or are not commercially reasonable or fair market value. Claims submitted to federal healthcare programs that result from unlawful kickbacks may be deemed false or fraudulent and can expose providers and organizations to liability under the False Claims Act, as well as civil and criminal penalties.
Discussion Points
- Review and, where appropriate, update policies and procedures governing referral relationships, contractual arrangements, and compensation structures to ensure they clearly prohibit improper financial inducements and require compliance with Anti-Kickback Statute standards. Policies should address fair market value, commercial reasonableness, and documentation requirements for arrangements involving space, services, equipment, or supplies. Organizations may benefit from periodic, independent reviews of these policies and related operational practices to identify potential risk areas and confirm alignment with regulatory expectations.
- Provide regular education and training to appropriate staff on Anti-Kickback Statute requirements, including how improper remuneration may be disguised within otherwise common business arrangements. Training should emphasize recognizing red flags, understanding personal and organizational accountability, and knowing when and how to escalate compliance concerns. Med-Net Academy offers Fraud Series Module 9 – Independent Contracts and Referrals, which teaches staff how to follow company contracting policies, understand referral requirements, and recognize key elements of the Anti-Kickback Statute.
- Conduct routine audits and monitoring of referral patterns, contractual agreements, and payment arrangements to detect anomalies or trends that may indicate elevated compliance risk. Audits should assess whether agreements are supported by appropriate documentation, reflect fair market value, and align with actual services rendered. Organizations may consider engaging experienced external reviewers to perform mock audits or targeted assessments, helping to identify gaps early and support timely corrective action before issues escalate into enforcement matters.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*