Laboratory Processing and Handling Fees: When a Blood Draw Becomes a Referral Payment

Laboratory processing and handling fees become kickbacks when a laboratory pays them to buy test referrals. The fee may pay, on paper, for collecting, preparing or shipping blood while the money follows the physician’s orders. If you draw the samples, process the invoices or sell the tests, you may know whether the practice did the work it was paid to do.

A whistleblower complaint concerning Labcorp described that mismatch. It alleged that Health Diagnostic Laboratory and Singulex paid a physician for processing blood samples while a Labcorp employee performed nearly all the processing. The complaint quoted an internal Labcorp report describing HDL handling fees ranging from $15 to $25, and an executive putting the problem plainly:

The allegation puts the hands and the money in different places: the physician received the fee while another business paid the worker. Someone standing beside the collection chair could see the mismatch.

Labcorp later agreed to pay $19 million in February 2023 to resolve allegations in the whistleblower case that it provided referring physicians with free blood-draw and processing services.

What Do Laboratory Processing and Handling Fees Pay For?

Laboratories describe processing and handling fees as compensation for preparing a specimen and getting it to the testing laboratory. Drawing the blood, preserving the sample and shipping it are identifiable jobs. The question is what work the recipient actually supplied.

The court’s account of the HDL arrangement separates the payment into a $3 draw fee and a $17 processing and handling fee, for a total of $20. HDL said the latter covered preserving and shipping the blood. The payment was connected to the physician ordering the laboratory’s test.

Splitting the fee into named parts leaves the same practical questions: who drew the blood, who prepared the shipment, who paid those workers and who received the check? An invoice can describe several services without showing that its recipient performed them.

The unit that matters is the draw, specimen, panel or referral that caused the payment.

Do Doctors Get Kickbacks for Ordering Tests?

Yes. Government laboratory cases describe payments to doctors for directing testing business, including payments labeled processing and handling fees. The Anti-Kickback Statute addresses payments intended to induce referrals for services covered by federal health care programs. In these cases, the concern reaches both the choice of laboratory and the tests ordered.

The useful comparison has several parts. A payment ledger shows the recipient and amount. The work records show what happened to the specimen. The order shows which tests the physician sent to the laboratory. Together, they show what the fee was buying.

Who Did the Work?

The worker’s employer matters. In the Labcorp complaint, the whistleblowers alleged that the laboratory supplied blood-draw and processing services free to referring physicians. They described the benefit in terms of the phlebotomist’s salary and benefits. That puts an employment expense beside the cash payment from the other laboratories.

The duties matter too. The HHS Office of Inspector General’s earlier laboratory-services alert addressed contracts prohibiting a phlebotomist from performing work unrelated to specimen collection. It said the contract did not resolve its concern when the employer failed to monitor the worker or enforce the restriction. What happened during the shift mattered alongside what the agreement allowed.

For an office manager or collector, that distinction is concrete. We examine which tasks belonged to specimen collection, which belonged to the practice’s other operations, and which business bore the expense.

Who Had Already Paid?

Medicare has a specimen-collection payment separate from payment for the laboratory test, with eligibility limits tied to the collection setting and service. A collection payment and a test payment therefore answer different questions.

We compare the laboratory’s handling payment with any payment for the same collection work, and with the payroll expense for the person who actually performed it. If an insurer paid for collection, what additional service did the laboratory’s fee buy? If another laboratory supplied the worker, what expense remained with the physician receiving the fee?

What Set the Amount?

When a laboratory processing fee pays a physician more than the actual service is worth, the difference brings the referral incentive into view. We examine the work used to justify the rate and whether payments rose with specimens, selected panels or testing business.

The HDL court opinion supplies a useful valuation example. The trial court rejected a proposed valuation of processing and handling services based on physicians’ charges. It found that those charges, inflated to obtain full Medicare reimbursement, did not represent the services’ actual value. A charge on a schedule and the value of the work were different things.

What Did the Payment Change?

The ordering relationship can reveal the purpose of the fee. A whistleblower complaint concerning Berkeley HeartLab described a physician who allegedly moved his testing business after BlueWave offered a blood-draw payment in exchange for an agreement to send all non-basic laboratory testing through BlueWave.

That allegation connects the offer to a change in laboratory choice. A sales conversation, the agreement and the subsequent orders can explain something a fee schedule alone cannot: why the business moved.

What About Commercial-Only Processing Fees?

The Inspector General’s laboratory-payments alert says paying fees only for non-federal patients can still disguise payment for federal-program referrals. Calling the arrangement a commercial carve-out does not answer what business the payment bought.

For a sales representative or practice manager, the question reaches beyond which specimens triggered a fee: what testing business did the laboratory expect in return? We examine that connection with you alongside the payment terms.

From the Test Order to the Handling Payment

The specimen connects the physician’s order to the laboratory’s test, the claim and the payment back to the referral source. The evidence is distributed across the practice and the laboratory.

Under Medicare’s ordering and documentation rules, the doctor’s chart holds the reason for each test. The laboratory keeps the order it received and must bill accurately from that information.

That division explains why the requisition matters to a handling-fee inquiry. A payment tied to a panel can influence the order before the specimen reaches the laboratory. The results show which tests were performed. The claim shows which tests became charges to the payer.

We connect those records to the fee agreement and payments. The relevant comparison is the work and testing attached to the same specimen, including who selected the panel and who authorized any additions. That is where an office’s account of the order can meet the laboratory’s account of what it billed.

What Happened in the Health Diagnostic Laboratory Cases?

The small fees attached to individual blood draws led to settlements in the millions: Health Diagnostic Laboratory agreed to pay $47 million, and Singulex agreed to pay $1.5 million, in April 2015. The Justice Department alleged that the laboratories bought referrals through processing and handling fees and routine waivers of patient charges, then billed federal health care programs for medically unnecessary tests.

Whistleblowers brought the cases, and the government joined parts of them. The allegations connected the payments made to physicians with the resulting Medicare testing. Patients faced testing allegedly driven by financial incentives, and taxpayers paid the claims.

A later civil trial found HDL’s former chief executive and the two people leading the sales operation liable under the False Claims Act. The court’s account describes the commission arrangement connecting HDL and Singulex to BlueWave, which marketed the tests. It also describes warnings inside the businesses about commissions tied to sales.

That sales relationship helps explain how the physician payments reached the market. According to the government, the laboratory paid for business, the sales operation recruited ordering physicians, and the physician’s office received the specimen-related fee. The collection work was only one part of the financial arrangement.

Berkeley HeartLab and the Panel That Changed

The Berkeley allegations show how a handling-fee arrangement could reach beyond the destination of a blood sample into the contents of the test order. In May 2017, the Justice Department announced that Quest Diagnostics had agreed to pay $6 million over Berkeley’s conduct. Quest had acquired Berkeley and ended the conduct described in the settlement.

The government alleged that Berkeley used processing and handling fees and patient copayment waivers to induce business, resulting in unnecessary cardiovascular testing billed to federal healthcare programs.

The whistleblower’s complaint described the sales pitch to a physician practice, HMP, in greater detail. It alleged that a representative suggested ordering a Plavix test on a separate day to justify another draw fee. It also alleged that Berkeley added the test to follow-up panels even though the physicians had discussed ordering it only for individual patients who needed it.

According to the complaint, the physicians did not complete those forms and would learn the test had been performed when they received the results. The billing staff and the ordering physicians were seeing different parts of the transaction. The allegation makes the form change as important as the fee.

Exagen Paid for Blood Draws After the Alert

Exagen admitted paying referring physicians under specimen-processing agreements and billing federal healthcare programs for their patients’ tests even after learning of the government’s warning about those payments. Its October 2023 settlement announcement states that the autoimmune-testing company agreed to pay $653,143 to resolve allegations that the fees induced use of its tests.

The company admitted that it paid for blood draws and billed Medicare and other federal programs after becoming aware of the Inspector General’s June 2014 Special Fraud Alert about laboratory payments to referring physicians. The warning arrived. The payments continued.

For an insider, that sequence raises a concrete question: what did the company learn about its payment arrangement, and what did it continue paying afterward?

The case began with a whistleblower’s qui tam lawsuit. The government announced a whistleblower share of 16% of the recovery.

CorePath and the Payment for Each Biopsy

The same payment pattern appeared in bone marrow biopsies. In its April 2024 civil settlement announcement, the Justice Department alleged that CorePath Laboratories agreed to pay $115 for each biopsy referred by Oncology San Antonio and its physicians.

CorePath provided in-office biopsy services at the practice’s locations and performed the subsequent diagnostic testing. According to the government, the referral payments went to the private practice entities of three physicians. The laboratory providing the service was also allegedly paying the sources of the specimens.

The alleged payments for individual biopsies led to a $2,746,275 civil settlement for CorePath. Oncology San Antonio and its physicians agreed to pay $1.3 million under their settlement, which also covered separate allegations of unnecessary tests, services and treatments. That settlement also resolved claims brought by a physician formerly employed by one of the practice’s physicians.

This example extends the inquiry beyond the blood-draw chair. The specimen was a biopsy, the recipients were physician practice entities, and the alleged payment followed each referral. Identifying the entity that received the money matters as much as identifying the location where the procedure occurred.

What Evidence Is Needed to Prove Fraud?

We work with you to connect the fee, the actual work, the order and the government claim. The agreement describes the promised service. Invoices and payment records show what was paid. Work records and firsthand knowledge show who performed the service.

A phlebotomist may know who drew and prepared the specimen. An office manager may know whose payroll covered that work. A sales representative may know which payment was offered to win the account. Billing staff may see the panel selected, the results returned and the claim submitted.

We work through those connections with you, including what you saw yourself and what the documents show. A change in the payment formula, a revised order form or an instruction to continue payments after a warning can explain how the arrangement operated. The strongest account connects decisions inside the business to the money it paid and claimed.

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

When You Know Who Did the Work

If you know why a practice received handling fees while someone else supplied the labor, talk with our whistleblower experts about the payments and the testing behind them. We build the case with you around the work, the referrals and the claims, and bring in laboratory fraud whistleblower lawyers who understand specimen-processing arrangements. We stay beside you as your partners throughout the case.