Laboratory Sales Commissions: What the Commission Was Really Buying

Laboratory sales commissions can conceal kickbacks paid to steer specimens, test orders and healthcare revenue to a laboratory. The arrangement becomes visible when the compensation agreement, the test records and the money tell the same story. A sales representative may know which accounts earned a commission. Someone in finance may know why an invoice for marketing work rises with the number of specimens. The question connecting them is what the laboratory was paying the recipient to deliver. When a lab buys Medicare referrals, taxpayers fund the claims and honest laboratories lose business to the kickback.

Per-Cup, Per-Paid-Test and Percentage Commissions

The payment formula identifies what earns the commission. A specimen delivered, a test reimbursed and a share of collections each tie compensation to a different part of the laboratory’s business. That difference tells us which records to connect.

Per-Cup Payments and the Middleman’s Share

A per-cup arrangement prices the specimen sent to the laboratory. In the Justice Department’s September 2018 announcement in the Accu Reference criminal prosecution, the laboratory’s urine-testing profits were to be divided equally between the lab and pain-practice personnel.

A middleman told the practice-side recipients that the agreed kickback was $35 per specimen cup. According to the department, that was substantially below what the laboratory’s owner had actually agreed to pay, allowing the intermediaries to keep approximately 60% of the kickbacks.

An insider who knew only the rate quoted to the practice would see only part of the arrangement.

Per-Paid-Test Commissions

A per-paid-test arrangement makes reimbursement the event that earns the fee. The commission calculation therefore connects to the insurer’s payment record as well as the test.

An order, a completed test and an insurer’s payment can leave different records. The agreement identifies which event earns the fee, and the commission sheet shows which event the laboratory actually counted.

A Percentage of Genetic Testing Revenue

When a laboratory pays a marketing firm a percentage of genetic testing revenue, the calculation connects the marketer’s earnings to the laboratory’s collections.

The criminal charges involving Ark Laboratory Network described an alleged formula combining $1,500 per hereditary-cancer DNA sample with about 50% of net Medicare revenue on pharmacogenomic tests. The government also alleged that sham hourly invoices concealed payments whose amounts had already been agreed.

The hereditary-cancer payment followed the sample. The pharmacogenomic payment followed the revenue. A specimen count alone would miss how the second payment was calculated.

What Evidence Is Needed to Prove Fraud?

The useful evidence connects the payment formula, the testing business it generated, the insurance claim and the people who approved the arrangement. We work through those connections with the insider who understands the account.

The agreement supplies the promised services and the method of payment. Commission reports, reconciliation sheets and invoices show how the parties put that promise into numbers. The comparison matters most where an invoice describes hours of work but the calculation behind it uses specimens or insurance collections.

The requisition, test result, claim and insurer’s payment connect the commission to the testing behind it. We work through those records with the person who understands how the account ran.

The recipient matters just as much. Was the money paid to a sales employee, an outside marketing company, a specimen collector or someone at the referring practice? Did it stop there? The Accu Reference account shows why a payment to an intermediary belongs beside the payment reaching the people directing specimens.

Instructions about obtaining orders, directing samples or selecting tests can show what everyone expected in return for the payment.

Marketing Hours Calculated From Specimens

An hourly invoice can disguise a per-sample payment when the parties agree on the sample price first and construct the hours afterward. The document then makes a referral payment look like payment for time.

In its account of the criminal trial of the owner of Axis Professional Labs and Kingdom Health Laboratory, the Justice Department described sham contracts and invoices for marketing hours. The invoices were calculated backward to match the agreed per-sample kickbacks. The hours supplied the description after the parties had settled the price.

The department’s account also described marketers hiring other companies to solicit Medicare beneficiaries and pressure their primary care physicians to approve genetic-testing orders. Nonmedical personnel had already purported to qualify the beneficiaries during telephone calls.

The invoice and the order belonged to the same business arrangement. The invoice disguised what earned the payment. The solicitation explained how the testing business arrived. We put those records together to examine who chose the test, who obtained the order and who earned money when the specimen reached the laboratory.

The Ark charges describe the same invoicing device as an allegation. According to the charges, the hours measured the price of a referral, not time spent working.

The Commission Reaches Back to the Order

A laboratory’s sales arrangement can influence both where specimens go and which tests get ordered. The clinical and financial records explain different parts of that relationship.

For Medicare diagnostic testing, the treating physician or qualified practitioner orders the test and maintains the medical justification. The laboratory performs and bills for testing. Under the Medicare documentation rule, the entity submitting the claim keeps what it received from the ordering practitioner and documentation that the claim accurately reflects that information.

The economics put the ordering relationship at the center of laboratory sales. For covered services under Medicare’s Clinical Laboratory Fee Schedule, MedPAC’s payment guide explains that beneficiaries have no cost sharing. The clinician chooses the testing, Medicare pays and the laboratory receives the business. A payment that influences the ordering practice reaches the person deciding where that business goes.

Genotox Laboratories illustrates how much the order form can decide. In its civil settlement announced in April 2023, Genotox admitted offering custom profiles that let providers preselect tests for all or nearly all their patients. Genotox performed and billed those tests generally in the highest reimbursement categories, including definitive testing for 22 or more drug classes. The settlement also addressed allegations of kickbacks to third-party marketers.

The whistleblower’s complaint alleged that the terminology itself had a purpose:

The admitted ordering practice puts the test selection beside the sales arrangement. When we examine a commission tied to an account’s business, we also examine the order forms and how the tests entering that calculation were selected.

A 2014 ethics paper in Pain Physician, Ethical Perspectives on Urine Drug Screening for Pain Physicians, argues that financial incentives for both physicians’ offices and testing laboratories may have contributed to the growth in urine screening. The paper puts the incentive on both sides of the order. That is why the commission inquiry reaches beyond the sales representative to the practice sending the specimens.

Employees, Contractors and Marketing Companies

A sales employee, an independent contractor and an outside marketing company can occupy different positions in the same payment chain. The recipient’s actual duties and the business the payment bought matter alongside the contract’s description.

Admera Health’s July 2024 settlement resolved allegations involving commission-based payments to independent-contractor marketers. The company agreed to pay $5,389,648. The whistleblowers were the co-founders of a former third-party marketer for Admera. The people on the receiving side of the sales arrangement brought the case about it.

A marketing business can have direct knowledge of the terms, the work expected and the payments. We examine that commercial relationship with you, including what happened between the marketing company and the practices generating orders.

The Genotox whistleblower’s complaint raised a different question about a marketing-services agreement. It alleged that a former sales representative had an agreement for annual pay but did no work beyond ensuring that Genotox kept an account. The allegation was about buying access to an account through an agreement that promised services.

BlueWave, a marketing company for Health Diagnostic Laboratory and Singulex, was involved in a whistleblower case that the government joined. In its description of the civil case involving Health Diagnostic Laboratory and Singulex, the Justice Department explained that the laboratories paid BlueWave commissions based on the number of blood tests sold. A jury found Health Diagnostic Laboratory’s former chief executive and two BlueWave marketers liable for causing false claims to Medicare and TRICARE. The government argued that these commissions induced representatives to sell as many tests as possible and also challenged BlueWave’s payments to its salespeople for recommending the tests.

The laboratory-to-marketer agreement and the marketer-to-salesperson arrangement are separate parts of the money trail.

Medicare, Private Insurance and EKRA

Laboratory referral payments can raise questions involving both government programs and private insurance. Which payer funded the testing is part of understanding the arrangement.

The Anti-Kickback Statute addresses improper financial incentives involving federal health care business. The Justice Department has explained in a civil laboratory settlement that claims submitted in violation of that law may give rise to False Claims Act liability.

The Eliminating Kickbacks in Recovery Act, commonly called EKRA, reaches laboratory referral arrangements involving public or private health benefit plans. The payment formula and what the recipient did both belong in the conversation.

For a potential False Claims Act case, we examine the connection to government claims. If your concern involves commercial-insurance testing, tell us how the laboratory paid for the business and which insurers it billed. Our whistleblower experts work with laboratory fraud whistleblower lawyers to assess the arrangement and the case it may support.

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

What Proof Do You Need as a Whistleblower?

To begin a conversation with us, tell us what you know about the agreement, the calculation or the decision to approve payments. Sales representatives, marketers, billers and specimen collectors see different parts of the connection between laboratory business and compensation.

We work with what you know about who negotiated the terms, who approved invoices, what the payment counted and where the money went. Someone who understands why an invoice was prepared a particular way can explain a connection that the document alone leaves hidden.

You Know What Earned the Commission

If you know why a laboratory’s payments followed specimens, paid tests or collections, speak to one of our Whistleblower Experts about what the commission bought. We build your strongest laboratory kickback case with you around what the payment bought, the claims it generated and who approved the arrangement. Our experts stay involved throughout, bringing in laboratory fraud whistleblower lawyers with the referral payment experience your case needs.