Ark Laboratory Network and Privy Health: Gift Cards, DNA Samples and Sham Hourly Invoices

In the Ark Laboratory Network fraud case, a laboratory intermediary admitted participating in a DNA-referral kickback scheme that generated approximately $4.6 million in Medicare payments, according to the Justice Department’s account of his guilty plea. The criminal indictment separately alleged that Ark worked with Privy Health to obtain patients’ DNA samples and Medicare information without a treating health care professional involved. For someone inside a laboratory or its marketing operation, the revealing detail is the invoice: it described hourly services, while the payment depended on samples delivered or Medicare revenue.

Ark Laboratory Network LLC purported to operate a network of laboratories that facilitated genetic testing. The indictment alleged that Privy Health helped acquire the samples and beneficiary information. In his guilty plea, the intermediary admitted participating in arrangements in which Ark supplied samples and genetic-test orders to laboratories. The laboratories performed the tests and billed Medicare, then paid Ark for the referrals.

What the Gift Card Bought

The criminal indictment alleged that gift-card offers bought access to both DNA samples and patients’ Medicare information. As the Justice Department reported in September 2019, the indictment charged that Ark partnered with Privy Health and another company to collect those materials from hundreds of patients, including through offers of $75 gift cards. The collection process allegedly operated without a treating health care professional. As the indictment charged it, a gift card brought in the patient, false medical histories supplied a reason to test, and Medicare paid the bill.

That puts patient acquisition at the beginning of the story. A laboratory receiving a swab and an order sees a specimen ready for testing. The allegations ask how that specimen came to exist: who approached the patient, what they offered, and whether anyone treating the patient had decided the test was needed. The Medicare information traveled with the DNA because the eventual transaction included a bill to Medicare.

A separate patient account in the July 2019 announcement of the criminal complaint against Ark’s chief medical officer makes that distinction concrete. The patient told investigators that a Facebook advertisement offering a $100 gift card led to the DNA swab. The swab was taken in an ordinary office building, outside a medical office. The patient said there had been no conversation with a treating physician about the genetic testing and no contact with the physician identified on the order.

The patient was in Oklahoma. The ordering physician practiced in Florida, and investigators said he was not licensed in Oklahoma. The patient had supplied a sample after answering an advertisement. The paperwork would present something much more valuable to the laboratory: a medical reason to test it.

The Order Allegedly Supplied a Cancer History the Patient Denied

The criminal complaint alleged that a test request gave that patient a personal history of breast cancer at age 44, a prerequisite for Medicare coverage of the particular test requested. The patient told investigators that the history was false: the patient had never had cancer and had never told anyone otherwise.

This was a specific contradiction between the person and the form. The criminal complaint alleged that Ark’s operators approached a New Jersey clinical laboratory in October 2018 with a proposal to send ten DNA swabs. An operator subsequently sent ten test orders identifying Ark’s chief medical officer as the ordering physician and certifying that the tests were medically reasonable and necessary. The government alleged that the requests contained false medical histories and falsely represented that the physician had provided the patients with information about genetic testing.

The criminal indictment alleged the same problem across hundreds of patients: the ordering physician had never seen, examined or treated them, yet the orders certified that he was their treating physician. Many orders allegedly supplied a personal or family cancer history for patients who had no such history.

For a laboratory insider, the distinction is between a form that carries a physician’s name and the medical relationship that the form represents. The alleged false history mattered because it supplied the reason Medicare would cover the particular test. The allegedly false treating-physician certification supplied the relationship behind the order. Together, they made a purchased specimen appear to come with a clinical justification.

Why the Requisition Matters to the Laboratory

Under Medicare’s laboratory-ordering rule, the treating physician or qualified practitioner orders the test and retains the documentation supporting medical necessity. The laboratory performs the service, reports the result and submits the claim. The supporting clinical record can therefore sit outside the business sending Medicare the bill.

The industry has long recognized the importance of that gap. Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in 1997, describes the use of requisition forms with space for physicians to document medical necessity through a diagnosis code. It also describes monitoring standing orders for continued validity and analyzing test-use data. Those are controls over why testing happens, alongside the laboratory’s work on the specimen itself.

In Ark’s case, the alleged fabrication occupied precisely that part of the process: the history and ordering relationship that explained why the test should happen. A laboratory could receive a physical sample and a completed form while the patient denied the medical history written on it. According to the charges, the clinical explanation was part of what the referral business supplied.

The Hourly Invoice Hid a Referral Payment

In his criminal guilty plea, the laboratory intermediary admitted participating in kickback arrangements that Ark concealed with sham hourly invoices. The parties had already agreed on a bribe calculated from Medicare revenue or a payment for each DNA sample.

The intermediary recruited outside marketing groups, including Ark, on behalf of laboratories. He and other participants entered into agreements under which laboratories paid Ark for delivering DNA samples and genetic-test orders.

The order of events is the point. The parties agreed what the referral was worth, then issued an invoice describing services by the hour. The amount came from the referral arrangement. The invoice gave it a different explanation. Someone who calculated the payment knows what set its price, whatever the invoice says.

The criminal complaint alleged a concrete example of those economics. For the batch offered to the New Jersey laboratory, Ark’s operators sought approximately 50% of the total Medicare payments the laboratory received from the tests. That proposal tied Ark’s compensation directly to what Medicare paid.

In the scheme described in the intermediary’s criminal guilty plea, the laboratories paid Ark at least $1.8 million in bribes from January 2018 through January 2019. Medicare paid the laboratories for testing, and the laboratories paid Ark for the referrals. The referral business shared in the money generated by the samples it delivered.

The Same Invoice Device in Another Genetic-Testing Case

The invoice disguise also appeared in the criminal trial of the owner of Axis Professional Labs and Kingdom Health Laboratory. In its account of the jury conviction, the Justice Department described sham contracts and invoices for purported marketing hours that were reverse-engineered to match agreed per-sample kickbacks.

That parallel explains why the compensation calculation matters as much as the invoice. In both accounts, hours supplied the description while referrals supplied the price. The person who negotiates the referral rate and sees the hourly invoice sees how those descriptions diverge.

What Evidence Is Needed to Prove Fraud?

For this kind of laboratory fraud, the useful evidence connects how the patient was recruited, why the test was ordered, what the laboratory billed and what the referral source was paid. We examine those connections with the insider who knows how the business worked.

The recruitment side can explain why a sample arrived. In the criminal complaint, the patient’s description of the advertisement and collection visit exposed a gap between the encounter and the medical history on the order. Someone who handled the gift-card offer and patient intake knows what was offered and what information was collected.

The requisition and patient record address a different question: who supplied the clinical justification. The laboratory’s claim then shows how the testing reached the payer. Connecting those records gives meaning to a diagnosis field that otherwise looks like routine billing information.

The payment side can reveal why the referral went to a particular laboratory. In the intermediary’s criminal guilty plea, the agreed compensation and the hourly invoice described the same payment in different ways. The employee who negotiated the referral payment knows the bargain. The person who calculated it knows the formula. The person who approved the invoice knows what explanation they accepted.

The person who understands the transaction can explain how a gift-card offer became a test order, how the order reached the laboratory and how the laboratory’s payment was calculated. We work with that knowledge to connect the documents to the decisions behind them.

The Civil Whistleblower Connection

For an insider seeing the same referral economics, the civil whistleblower question is how the payments connect to claims for government money. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Our whistleblower experts assess the healthcare referral arrangement and the billing together, with whistleblower lawyers who know laboratory kickback cases.

You Know What the Invoice Paid For

If you saw the sample purchases, the order forms or the calculation behind an hourly invoice, speak to our Whistleblower Experts about what the invoice really paid for. We work with you to build your strongest laboratory whistleblower case and bring in laboratory fraud whistleblower lawyers who understand the connection between patient recruitment, test orders and referral payments. We stay beside you as partners through the case.