A clinical lab in Anderson, South Carolina, and its founder and CEO have agreed to pay a minimum of $6.8 million to settle a federal qui tam case based on allegations for paying illegal kickbacks to physicians in exchange for referrals of laboratory tests. Under the settlement agreement, this figure may increase to approximately $10.1 million if certain financial contingencies are triggered.
The Government alleged that from March 2018 to November 2021, the laboratory and its CEO offered inducements aimed at directing referrals for clinical lab services. As part of the investigation and settlement, the DOJ identified and alleged five distinct types of illegal kickbacks:
- Fraudulent Contracts: Payments disguised as office rental, phlebotomy services, or toxicology services and allegedly falsified payments, square footage and hours in certification forms;
- Hand-Delivered Money Orders: The CEO personally delivered money orders to referring physicians to mask their intent;
- Inflated Equipment Sale: Inflated payment was made to a physician practice for used lab equipment in late 2016 to generate referrals; and
- Free Services and Supplies: A pain management practice was provided with free drug-screening services and supplies, securing consistent test referrals.
The government focused on these kickbacks because the government claims it corrupted the impartiality of medical decision-making and improperly induced referrals, thereby violating the False Claims Act.
As we start 2026, this case is another demonstration of the DOJ’s ongoing focus on laboratories and other healthcare providers and executives. It also highlights the importance of thoroughly vetting and asking questions around any arrangements, particularly those related to office rental space and phlebotomists and whether one purpose is to induce referrals. With references to documentation in the case of “certifications” of compliance, this highlights the focus on the “commercial reasonableness” prong of the safe harbor and highlights that purported documentation alone is not sufficient. Overall, this enforcement action underscores the legal and financial risks of non‑compliant referral arrangements. It serves as a strong reminder for laboratories and healthcare organizations to carefully audit and document all arrangements to ensure they are commercially reasonable, properly disclosed, and compliant with federal regulations—both to protect patients and avoid significant penalties.
For a full overview, see the DOJ press release here.
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