A gastroenterology practice located in Atlanta, Georgia, has agreed to pay $4.75 million to resolve allegations that it violated the False Claims Act by receiving kickbacks in exchange for referrals of gastrointestinal pathology services and by performing certain gastrointestinal pathology services that were not medically reasonable or necessary. The Department of Justice announced the resolution on February 27, 2026.
The United States alleged that beginning in approximately May 2017, the practice contracted with a pathology laboratory located in Little Rock, Arkansas, to construct and operate a limited-capacity pathology laboratory within the gastroenterology practice’s office. Under this arrangement, histology technicians prepared and stained specimen slides in the in-house lab, and the practice billed Medicare and other insurers for the technical component of those services. The laboratory interpreted the slides and billed for the professional component.
According to the allegations, the practice received financial and operational benefits from the laboratory in connection with the setup and ongoing operation of the in-office lab. In exchange, the practice agreed to exclusively refer patients to that laboratory for pathology interpretation services. The United States alleges that these benefits constituted unlawful remuneration in exchange for patient referrals.
Additionally, the United States alleges that the practice performed and billed for medically unnecessary special stains through a blanket or reflex ordering process. Under this process, special stains were ordered automatically, without a pathologist first reviewing a routine stain to determine whether additional testing was clinically necessary for the individual patient. The government further alleged that there was insufficient justification documented in the medical record to support the additional stains.
The practice and the laboratory terminated their relationship in approximately May 2020.
The resolution was achieved through a coordinated effort by the Justice Department, the US Attorney’s Office for the Eastern District of Arkansas, and the Offices of Inspector General for Health and Human Services, Defense, and Veterans Affairs.
Compliance Perspective
Issue
Healthcare providers must ensure that all laboratory tests, diagnostic services, and other billable medical procedures are medically necessary and supported by appropriate documentation. Services that lack medical necessity or are performed in exchange for referrals may expose providers to civil or criminal liability under the False Claims Act and federal or state Anti-Kickback Statutes. Kickbacks can take many forms, including cash, rebates, or other in-kind benefits, and both the party offering and the party receiving remuneration can be held responsible. Failure to promptly identify and report potential violations can increase regulatory and legal risk for the organization.
Discussion Points
- Review and update policies and procedures to clearly define medical necessity requirements, appropriate documentation, and acceptable referral or vendor arrangements. Policies should also outline how to evaluate services or relationships that may pose compliance risks. Facilities may benefit from working with their consultant to assess current policies, identify gaps, and implement best practices to mitigate potential risk.
- Provide ongoing training for staff who order or review services, emphasizing medical necessity, proper documentation, recognition of potential kickbacks, and internal reporting procedures. Training should reinforce staff responsibilities under federal and state regulations, including prompt reporting of suspected violations. 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 periodic audits to assess compliance with medical necessity standards and billing practices. Audits should include reviews of orders, documentation, referral patterns, and staff awareness of reporting protocols. Facilities may consider engaging their consultant to perform focused or mock audits, which can help identify compliance gaps early and provide actionable recommendations for improvement.
*This news alert has been prepared by Med-Net Concepts, Inc. for informational purposes only and is not intended to provide legal advice.*