Cordant Health Solutions: Referral Payments and Repeated Residential Testing

The Cordant Health Solutions settlement required the company to pay $11,942,913 to resolve allegations that it bought urine drug test referrals with kickbacks. A later settlement addressed a different problem: repeated testing of residential treatment patients and Medicaid overpayments the government said Cordant failed to return. For someone inside a laboratory or treatment program, the cases reach both the agreement that brings specimens through the door and the decisions that keep the same patients’ tests coming.

Sterling Healthcare Opco does business as Cordant Health Solutions. The Denver-based company provides healthcare testing and monitoring services nationwide. The Justice Department announced the referral-payment settlement on July 20, 2020, followed by the separate Connecticut resolution in February 2021.

Referral Payments to Northwest Physicians Laboratories and Genesis

The government alleged that Cordant paid millions of dollars to Northwest Physicians Laboratories and Genesis Marketing Group in exchange for urine drug test referrals paid by federal health care programs. The alleged transaction put money back into the hands of the businesses sending the testing work.

Both referral relationships involved claims from 2013 into 2015.

The settlement covered two Cordant-operated laboratories: Regional Toxicology Services LLC, doing business as Sterling Reference Laboratory in Tacoma, and Rocky Mountain Tox LLC, doing business as Forensic Laboratories in Denver.

The Justice Department described the alleged payments as violations of the Anti-Kickback Statute and the False Claims Act. It explained the concern in practical terms: paying providers or provider-owned laboratories for referrals encourages medically unnecessary services. The announcement identified Medicare and TRICARE among the government programs implicated by this kind of referral payment.

The same announcement described a separate December 2019 criminal indictment charging Northwest Physicians Laboratories and three executives with conspiracy to pay and solicit kickbacks in dealings with urine-testing laboratories.

Why Urine-Test Referrals Carry Value

A laboratory’s testing revenue starts with someone else’s ordering decision. The clinician selects the tests, the laboratory performs them, and a health plan pays the claim. The commercial relationship is with the person directing the specimens, whose orders bring the laboratory its testing work.

Medicare’s payment structure helps explain that incentive. For covered laboratory services under its fee schedule, the patient pays no deductible or coinsurance, and the ordering clinician does not pay for the test. The laboratory receives the payment. The person choosing the service and the party paying for it are separated.

In Cordant’s case, the government’s allegation was that money moved back toward the referral sources. The laboratory acquired testing business, the referring businesses received payments, and federal programs paid for the tests. The taxpayer was funding a transaction in which the government alleged that the referral itself had been bought.

Crossroads’ Testing Schedule and Connecticut Medicaid

Cordant and its subsidiary SECON Laboratories paid $845,108 in a separate settlement over allegedly unnecessary urine tests and unreturned Connecticut Medicaid overpayments. The February 5, 2021 announcement concerned tests ordered by Crossroads, a behavioral health residential treatment center in New Haven, Connecticut. Crossroads was a client of SECON, which is based in Worcester, Massachusetts.

Many Crossroads residents were enrolled in Connecticut Medicaid. According to the government, Crossroads introduced a regular urine-testing policy in 2015, largely for residential monitoring. It ordered both presumptive screening and definitive confirmatory tests for each resident weekly.

The frequency went further. In many cases, Crossroads ordered duplicative tests more than twice a week, sometimes three, four or five times. Cordant performed the tests and billed Connecticut Medicaid.

The government alleged that Cordant knew or should have known that the tests ordered more than twice weekly were medically unnecessary. It also alleged that Cordant failed to report and return the resulting overpayments. The settlement covered overpayments between October 6, 2015, and February 8, 2017.

The residential center set the testing pattern, but the laboratory submitted the claims and received the money. That is why the account matters to someone working in laboratory billing or compliance as well as someone working at the treatment center. The allegation followed the tests through to the laboratory’s decision to keep the payments.

When Are Toxicology Tests Unnecessary?

Toxicology tests are unnecessary when the testing lacks a patient-specific medical reason. In the Crossroads matter, the government challenged duplicative testing beyond twice weekly that it said Cordant knew or should have known was unnecessary.

The clinical literature explains why the patient’s circumstances matter. The Journal of Family Practice’s 2021 review, Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, distinguishes addiction-treatment testing from monitoring patients prescribed controlled substances. In its discussion of addiction treatment, it describes visits and testing becoming less frequent as addiction behavior diminishes, and more frequent when it increases.

The review makes a point that a fixed testing calendar can obscure:

Screening and definitive testing also answer different questions. A presumptive screen indicates the presence or absence of drugs or drug classes. Definitive testing identifies specific substances and metabolites. The review describes the greater specificity, expense and waiting time of laboratory chromatography with mass spectrometry.

That distinction matters in the Crossroads account because the government described both kinds of testing on the recurring schedule. Frequency and test selection are separate decisions. A treatment program’s routine can determine when specimens are collected, while the patient’s condition and the clinical question explain which tests are needed.

For an insider, the useful connection is between the recurring order, the patient’s changing circumstances and the tests that continued to be billed. A calendar records how often testing happened. The clinical record explains why.

Corporate Integrity Agreement and Referral Review

The earlier Cordant settlement also required outside review of its business arrangements. According to the Justice Department’s announcement, Cordant entered a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General. It had to retain an Independent Review Organization to monitor arrangements with other individuals and entities and report routinely to the inspector general.

The review requirement went directly to the commercial relationships at issue: who the laboratory dealt with and what those arrangements involved. The settlement also required Cordant to cooperate fully with the government’s investigation.

The inspector general’s agreement register lists its effective period from July 16, 2020, to November 12, 2025.

What a Laboratory Insider Can Connect

The Cordant matters show why the referral agreement, the test order and the paid claim belong in the same account. Someone working with laboratory accounts may understand the payments tied to a referral relationship. Someone at a residential program may know how a recurring testing schedule was set and whether it changed with the patient. Billing and compliance staff may know what reached the payer and what happened after questions arose about the payments.

The laboratory’s order forms matter too. In its clinical laboratory compliance guidance, the inspector general said requisition forms should support an independent medical-necessity decision for each test billed. It also identified problems with invented diagnosis information and software that inserts diagnosis codes without information from the ordering clinician.

That gives the order more meaning than a signature or a selected box. It connects a clinical decision to the services the laboratory performs and bills.

For the Crossroads allegations, that account also reaches the money already received. The government pursued the failure to report and return overpayments. Knowledge inside the laboratory about repeated testing and the response to that knowledge can therefore matter alongside the original order.

The Cordant Whistleblower’s Share

A whistleblower brought the qui tam case that alerted the government to the referral-payment conduct in 2015. The Justice Department’s Washington announcement allocated 20% of the settlement to that whistleblower.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Your Knowledge of the Referral Business

If you know how a laboratory won its referrals, why the same tests kept coming or what happened to payments questioned inside the business, talk with our whistleblower experts. We build your strongest laboratory fraud whistleblower case around that knowledge, bring in laboratory fraud whistleblower lawyers who understand referral payments and medical-necessity disputes, and stay beside you throughout the case.