LabXperior: A Middleman’s Cut of Medicaid Drug-Test Revenue

In the LabXperior settlement, the laboratory and its owner paid $235,000 to resolve allegations of urine drug testing kickbacks and medically unnecessary claims to North Carolina Medicaid. The alleged arrangement gave a referral middleman a cut of Medicaid testing revenue while the orders failed to reflect what each patient needed. Under that alleged arrangement, taxpayers funded tests that lacked the patient-specific medical decision meant to justify them.

The Justice Department announced the civil resolution on October 11, 2024. Federal and North Carolina authorities alleged that LabXperior Corporation submitted false claims from September 28, 2016, through December 20, 2017. The settlement resolved allegations under the Federal False Claims Act and the North Carolina False Claims Act.

When Are Toxicology Tests Unnecessary?

In the LabXperior case, the government alleged that the urine drug tests were medically unnecessary because the orders were not patient-specific and did not reflect a qualified medical provider’s determination that the patient needed testing. The missing part was the individual clinical decision behind the order.

LabXperior’s alleged referral chain ran through BPolloni Consulting, LLC, which arranged for Do It 4 the Hood Corporation, known as D4H, to send urine drug tests to the laboratory.

The industry’s division of responsibilities explains the importance of that allegation. In its clinical laboratory compliance guidance, the HHS Office of Inspector General places the medical-necessity decision with the clinician treating the patient. A laboratory’s requisition should capture that independent decision for each test it will bill.

Urine testing has a clinical purpose that makes those individual decisions consequential. The Journal of Family Practice’s 2021 review, Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, describes its use in treating substance use disorders and monitoring patients receiving chronic opioid or benzodiazepine therapy. The review recommends a patient-centered approach and a testing frequency based on risk.

Its account of how financial incentives distort testing reaches beyond the referral payment:

The review describes several ways testing can serve revenue. LabXperior’s case puts the question at the order itself: did a qualified provider decide this patient needed this test?

Medicaid Revenue Allegedly Funded the Referral Payment

The government alleged that LabXperior paid BPolloni a percentage of the revenue or profit from Medicaid reimbursement for each urine drug test that BPolloni arranged for D4H to send.

The federal and state governments alleged that this was an illegal kickback arrangement and that the resulting claims were false.

An insider who knows how the commission was calculated knows what the claim alone does not show.

The order concerns why a patient needed a test. The compensation arrangement concerns why that testing business came to this laboratory. In the government’s account, public money financed the testing and supplied the basis for the referral payment.

The Earlier Guilty Pleas in the Referral Business

According to the Justice Department’s settlement announcement, BPolloni’s chief executive and individuals who operated D4H had previously pleaded guilty to conspiracy to commit health care fraud and Anti-Kickback Statute violations arising from D4H’s kickback arrangements with urine drug testing laboratories.

LabXperior and its owner resolved the civil allegations about the laboratory’s Medicaid claims and its arrangement with BPolloni. The criminal pleas belonged to the people operating the referral businesses.

What Evidence Is Needed to Prove Fraud?

For an arrangement like the one alleged here, the useful evidence connects the patient-specific order, the Medicaid claim and the referral compensation. Our whistleblower experts examine how those records fit together with someone who knows how the business actually worked.

An order-processing employee may know whether the requisition reflected an individual assessment or arrived as part of a repeated referral workflow. A billing employee may know which Medicaid claim corresponds to that order. A person familiar with the compensation records may know how the payment to the intermediary followed the reimbursement. In a healthcare referral business, those employees see different parts of the same transaction.

The commission schedule is especially useful when it explains what triggered payment and what revenue or profit formed its basis. Set beside the associated claim and order, it can connect the referral incentive to the testing the government paid for. That is the connection our whistleblower experts pursue with an insider, including what the people approving the arrangement knew.

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

The Same Missing Assessment in Another Drug-Testing Case

Precision Toxicology’s $27 million settlement in 2024 concerned a different way of generating testing without an individual assessment. The government alleged that Precision promoted custom profiles that functioned as standing orders, causing physicians to order large numbers of tests without assessing each patient’s needs.

The much larger settlement concerned a recognizable problem at the same point in the workflow. Precision’s alleged mechanism was a preselected testing profile. LabXperior’s announcement describes orders without a patient-specific determination alongside payments tied to Medicaid reimbursement. In each account, the government looked behind the completed testing and billing to the decision that generated the order.

You Know How the Referrals Were Paid

If you know how a laboratory turned referrals into Medicaid claims and commissions, speak to one of our Whistleblower Experts about how the referrals were paid. We work with you to build your strongest laboratory fraud whistleblower case around the orders and payments you understand. We bring in laboratory fraud whistleblower lawyers and stay beside you throughout the case.