1st Choice Healthcare Services: Laboratory Payments Into a Behavioral-Health Practice

The 1st Choice Healthcare Services fraud case concerned more than $2.5 million in Medicaid urine drug testing claims and alleged laboratory kickbacks to Life Touch staff. In the criminal information against the laboratory owner, prosecutors alleged that testing money flowed back to people working inside the North Carolina substance abuse treatment provider, which operated in Kinston and Goldsboro. For someone inside a laboratory or clinic, the revealing connection is between the patient referral, the test claim and the person who receives the proceeds.

According to that information, the laboratory owner had worked at Life Touch’s Kinston office, handling patient intakes and answering the phone. She was the daughter of the office manager there. She formed 1st Choice in November 2016 and enrolled it with North Carolina Medicaid by October 2019. The laboratory business grew out of the treatment operation’s own staff and patient relationships.

How the Laboratory Referral Payments Worked

The criminal information says 1st Choice almost exclusively billed for services to Life Touch patients and used a standing order for repeated testing of their samples. The alleged laboratory claims ran from October 10, 2019 to March 2023.

The same information describes an arrangement among the laboratory owner, Life Touch’s Medicaid biller in Goldsboro and its Kinston office manager. They allegedly agreed to participate as equal partners, each receiving approximately one-third of the billings associated with Life Touch patients. Yet the laboratory’s Medicaid enrollment identified only the laboratory owner as its owner.

The payments made that difference concrete. Prosecutors alleged that the biller and the office manager each received more than $400,000 from 1st Choice between 2019 and 2023. The biller received the money as a share of the laboratory proceeds, rather than employee pay. The office manager did no work for the laboratory at all, according to the information.

In an interview during the state’s civil investigation, the laboratory owner allegedly described the biller’s compensation as only 2% of Medicaid reimbursements. Prosecutors put the actual share at approximately 33%.

We see a profit share dressed up as a small billing fee. The enrollment form, the explanation to investigators and the bank payments told different stories about the same business.

Why Treatment Attendance Was Valuable to the Laboratory

Life Touch’s patients generated treatment claims and separate laboratory claims. The criminal information explains that periodic urine samples were used to assess compliance with substance abuse treatment, with an outside laboratory billing Medicaid for the analysis. That gave the same patient stream value on both sides of the referral.

According to the information, Life Touch tied gift cards to attendance. Patients generally received $60 for five visits in a week, $50 for four and $45 for three. They could receive another card for bringing in a new patient. The alleged inducement bought both continued attendance and introductions to more people whose treatment could be billed.

Prosecutors described patients exhausting their available benefits under the Substance Abuse Intensive Outpatient Program and the Substance Abuse Comprehensive Outpatient Treatment Program, then returning to those programs year after year. The programs were intended to help patients recover and move to a lower level of care. The alleged payment arrangement instead rewarded keeping them in the treatment stream.

The Justice Department’s account of the criminal case puts the wider scheme in perspective: more than $1 million in patient kickbacks resulted in more than $12.7 million in fake Medicaid billings. The gift cards bought attendance. Medicaid paid for the claims that followed.

The Audit Changed the Explanation

The criminal information alleges that Life Touch continued paying gift cards after Eastpointe, its Medicaid managed-care organization, investigated the practice and gave it written notice of the kickback finding. Eastpointe’s January 2018 audit began with a patient’s account of being offered gift cards for attending classes. Notice received. Cards kept coming, according to prosecutors.

The information against the laboratory owner describes the changing story. In 2021, the biller told auditors that Refuge House of God supplied the cards. In 2022, the explanation named Changing Lives Community Resources instead. Prosecutors alleged that Life Touch was still financing the purchases and its staff were still distributing the cards.

The alleged bank trail reached directly into the laboratory owner’s accounts. More than 5,700 gift cards totaling over $460,000 were purchased through her Navy Federal accounts, funded primarily by Life Touch money, 1st Choice money and cash deposits.

The information also says the office manager and biller created false documents for patients, staff and auditors. One statement read:

Patients had to acknowledge the documentation, and signed copies went into their charts. Prosecutors alleged that consent forms also made the rewards appear to come from outside organizations. We see a particularly cynical use of the patient chart here: paperwork about supposed outside assistance helped conceal money supplied by the treatment business itself.

When Laboratory Money Pays the Treatment Staff

Urine drug testing in this treatment setting was meant to help assess the patient’s progress. The criminal information ties periodic samples to the effectiveness of the treatment programs.

In the 1st Choice information, the allegation was a direct division of proceeds among people inside the treatment operation. The LabTox whistleblower complaint and a whistleblower’s complaint concerning Edgewater Recovery Center and Thoroughbred alleged another way laboratory money benefited treatment providers: payments for collection work subsidized their payrolls.

Who Inside the Operation Sees the Connection?

Here, Life Touch supplied treatment and patient samples while 1st Choice submitted separate laboratory claims. An intake employee may understand how patients arrived. A laboratory employee may know how orders were processed. A biller or manager may know the payments and the explanation offered during an audit.

Our work with an insider is to connect that knowledge to the claims and the decisions behind them.

The Laboratory Owner’s Guilty Plea

The Justice Department’s March 5, 2026 announcement reports that the laboratory owner pleaded guilty to a conspiracy involving illegal kickbacks, healthcare fraud and false documents, and to filing a false tax return.

The same announcement reports that Life Touch’s compliance director, who handled Medicaid billing, and its Kinston office manager also pleaded guilty to conspiracies involving healthcare fraud, kickbacks and false documents. Life Touch pleaded guilty to health care fraud. Its owner pleaded guilty to failing to file federal tax returns.

The FBI, IRS, U.S. Department of Health and Human Services Office of Inspector General, and the North Carolina Attorney General’s Office Medicaid Investigations Division investigated the case.

You Know Where the Samples and Payments Went

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If your work connects treatment referrals, laboratory claims or payments to clinic staff, talk with our whistleblower experts about what you saw. We work beside you to build the case and bring in Medicaid health care fraud whistleblower lawyers who understand laboratory referral payments.