Diagnostic Lab to Pay More Than $9 Million After Alleged Medicare Kickback Scheme

Key Takeaways

• $9.62 Million Settlement: Patients Choice Laboratories agreed to pay $9.62 million to resolve allegations that it billed Medicare for medically unnecessary respiratory pathogen panels and engaged in kickback arrangements.
• Marketing Services Agreement Scheme: Federal investigators allege PCL paid a purported infection-prevention company $1.86 million under a 2020 agreement that served as a pretext for buying referrals from long-term care facilities.
• Improper Use of COVID-19 Swabs: The government says COVID-19 specimens collected in long-term care facilities were used to bill Medicare for unnecessary RPPs, generating more than $6 million in reimbursement.
• Independent Rep Commissions: PCL allegedly paid at least $372,000 in commission-based compensation to 1099 sales representatives, violating the Anti-Kickback Statute.
• No Liability Determination: The settlement resolves allegations only, underscoring DOJ’s ongoing focus on False Claims Act enforcement tied to kickbacks and unnecessary testing.

Deep Dive

Patients Choice Laboratories, an Indianapolis-based diagnostic testing company, has agreed to pay $9.62 million to settle federal allegations that it billed Medicare for unnecessary respiratory tests and used kickbacks to generate referrals, according to a settlement announced by federal prosecutors on Thursday.

Central to the allegations is a 2020 Marketing Services Agreement between PCL and a company that claimed to provide infection-prevention support to long-term care facilities. The government says the arrangement wasn’t about marketing at all. Instead, PCL allegedly paid the company $5,000 a month, ultimately totaling about $1.86 million, in exchange for steady streams of referrals. Those referrals led to thousands of RPP claims from 43 long-term care facilities nationwide, generating more than $6 million in Medicare reimbursements.

Investigators also allege the company performed specimen collection inside these facilities, swabbing residents for COVID-19 and forwarding the samples to PCL. PCL then used those same swabs to run, and bill Medicare for, RPPs that were not medically necessary. In some cases, prosecutors say PCL billed Medicare for RPPs without performing COVID-19 tests at all.

The government further claims that from January through March 2021, PCL hired independent 1099 sales representatives and paid them commissions based on the revenue from tests they helped arrange. Because those individuals weren’t bona fide employees, their commission-based compensation allegedly violated the Anti-Kickback Statute. Those payments totaled at least $372,000.

Federal officials stressed that schemes like this drain public health programs and put patients at risk. Hayes called the conduct “simply unacceptable,” noting that kickbacks tied to unnecessary testing “waste taxpayer dollars and undermine trust.” Wheeler said the case reflects the Justice Department’s commitment to holding accountable those who seek to profit “at the expense of federal healthcare programs and the patients they serve.”

As this settlement lands, it also marks the federal government coming back online after the recent shutdown ended, and agencies are resuming enforcement work that had been paused or slowed. For prosecutors and regulators, cases like this signal a return to business, and a reminder that healthcare fraud remains firmly on the agenda.

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