NeoGenomics Settles False Claims Allegations Over Referral Arrangements for $9.8 Million

Key Takeaways

• $9.8 Million Settlement: NeoGenomics agreed to pay $9.81 million to resolve False Claims Act allegations that its consulting and compensation arrangements violated federal healthcare laws governing referrals.
• Below-Market Consulting Services: The Justice Department alleged NeoGenomics provided consulting services to 28 healthcare providers below fair market value through its Laboratory Clinical Initiative to induce referrals for laboratory testing, implicating both the Anti-Kickback Statute and the Stark Law.
• Referral-Based Consultant Compensation: Federal authorities also alleged the company paid independent consultants compensation that varied, in part, based on the volume or value of referrals generated for NeoGenomics' laboratory services.
• Self-Disclosure Earned Cooperation Credit: The government acknowledged that NeoGenomics voluntarily disclosed the conduct, cooperated extensively with the investigation, ended the consulting arrangements, terminated responsible employees, and implemented remedial measures, resulting in cooperation credit during the settlement.

Deep Dive

NeoGenomics, the Florida-based laboratory company, has agreed to pay $9.81 million to resolve allegations that it violated the False Claims Act by providing consulting services below fair market value to healthcare providers whose business it hoped to win and by paying independent consultants in ways that rewarded them for generating referrals. The settlement, announced Monday, resolves the government's civil claims and recognizes what happened after the conduct came to light as much as the conduct itself.

According to federal authorities, the case centered on NeoGenomics' Laboratory Clinical Initiative, or LCI, a program through which the company worked with healthcare providers seeking to establish in-house flow cytometry and Fluorescence In-Situ Hybridization (FISH) diagnostic capabilities. The government alleged that 28 providers received consulting services priced below fair market value, not simply to help them build laboratory operations but to encourage them to send clinical laboratory testing to NeoGenomics.

That distinction matters because federal healthcare law draws a sharp line between legitimate business relationships and financial arrangements that influence where patients are referred. The Justice Department contended that the consulting arrangements violated the Anti-Kickback Statute and that the resulting financial relationships, together with claims submitted under them, also ran afoul of the Stark Law.

The government's allegations did not stop there. Prosecutors also said NeoGenomics entered into agreements with independent consultants who were paid to identify potential healthcare provider customers for the company's laboratory services. According to the United States, those payments varied, at least in part, according to the volume or value of referrals those providers ultimately generated. What appeared to be business development, the government argued, crossed into compensation tied to federally regulated referrals.

Assistant Attorney General Brett A. Shumate said the case serves as another reminder that companies cannot use discounted services as a vehicle for securing referrals reimbursed by federal healthcare programs. Federal law, he said, prohibits paying remuneration to induce those referrals, including through services offered below fair market value. At the same time, he pointed to another message the department wanted companies to hear: those that uncover improper remuneration should disclose it and cooperate if they expect credit for doing so.

That second point shaped the outcome here. Rather than learning of the arrangements through a whistleblower or enforcement action, the government said NeoGenomics disclosed the conduct itself through the Department of Health and Human Services Office of Inspector General's Self-Disclosure Protocol. The company also cooperated throughout the investigation, ended the consulting agreements at issue, terminated employees deemed responsible, and supplied investigators with a detailed account of the conduct along with additional information requested during the inquiry.

Miranda L. Bennett, Acting Deputy Inspector General for Investigations at HHS-OIG, said arrangements that provide services below fair market value in exchange for referrals undermine independent medical judgment. She described the Self-Disclosure Protocol as an important mechanism for bringing potential violations into the open and ensuring they are addressed before they become something larger.

That acknowledgement appears throughout the settlement announcement. The Justice Department expressly credited NeoGenomics for voluntarily disclosing the conduct, cooperating with investigators, and taking remedial steps before the matter was resolved. It does not erase the government's allegations, but it does illustrate that regulators are prepared to pursue companies that structure relationships around referrals, while also offering tangible credit to those that identify problems themselves, dismantle the arrangements, and help investigators understand exactly how they worked.

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