Molecular Testing Labs: Payments to Local Labs for Referrals

The Molecular Testing Labs kickbacks settlement called for payment of up to $1,777,738 over allegations that the laboratory paid local labs for Medicare and TRICARE referrals, then billed those programs for the resulting tests. If you worked on those accounts, you may know what the local lab did for the money and who approved the terms.

The Justice Department announced the settlement on December 19, 2018. It identified Molecular Testing Labs as a toxicology and genetic testing laboratory in Vancouver, Washington, and a wholly owned subsidiary of Blackfly Investments, LLC. The alleged referral payments ran from August 2014 through July 2015.

How the Referral Payment Worked

The government alleged that Molecular Testing Labs paid local laboratories for referrals of Medicare and TRICARE business, then submitted claims to those programs for the resulting tests. That is the transaction the government challenged: money going to the source of the testing business, followed by claims going to the government programs.

The United States alleged that the payments violated the Anti-Kickback Statute and that billing Medicare and TRICARE for tests arising from those referrals violated the False Claims Act.

The same account can generate revenue for the receiving laboratory and a payment back to the source that supplied the business.

An employee who deals with those local accounts may recognize something a claim alone does not show: what the referring laboratory expected in return for sending business, and what the receiving laboratory agreed to pay. The account relationship connects the sales side of the laboratory to the claims leaving its billing department.

Why the Local Laboratory Matters

The government explained the concern in the Molecular Testing Labs announcement: paying medical providers or provider-owned laboratories for referrals encourages medically unnecessary services. The incentive can reach the decision about how much testing to order as well as where to send it. Taxpayers bear the cost through government health care programs. Buying the referral also shuts honest laboratories out of competition for that work.

A 2021 review in The Journal of Family Practice, Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, describes how financial interests can drive excessive urine testing: large, expensive panels, frequent tests and unnecessary confirmatory analysis. Its point reaches beyond where a specimen is sent. The business can earn more by expanding the work performed on it.

That industry analysis helps explain the government’s concern about purchased referrals. The account brings access to testing revenue, and the financial incentive can affect how much testing follows. Someone managing a referral account may understand both the payments that brought the work in and the pressure to generate more tests from it.

Do Doctors Get Kickbacks for Ordering Tests?

The government has alleged that doctors received payments disguised as fees for services in exchange for sending tests. The Molecular Testing Labs settlement focused on payments to local laboratories.

Other laboratories, including Health Diagnostic Laboratory, were accused of paying doctors per-referral processing fees.

The useful question is what the recipient actually supplied. A contract may describe processing, consulting or another service. The work performed, the amount paid and the business sent back tell the fuller story. We examine that relationship with the insider who knows how the arrangement operated, including what happened beyond the contract’s description.

Cordant Shows the Same Lab-to-Lab Referral Pattern

Cordant Health Solutions agreed to an $11,942,913 civil settlement announced on July 20, 2020, over alleged kickbacks for urine-testing referrals. The alleged payments went to Northwest Physicians Laboratories and Genesis Marketing Group.

That separate case gives the local-laboratory relationship a concrete parallel. A laboratory seeking testing business can pay another laboratory or an intermediary able to send it. The person who understands the referral account may see the purpose of the payment even when the testing and billing happen elsewhere.

Cordant’s case also began with a whistleblower who filed a qui tam case about the conduct. The government announced that the whistleblower would receive 20% of the settlement. Knowledge of a referral arrangement can matter from either side of the business relationship.

What the Referral Agreement and Payment Records Show

For an arrangement like the one alleged here, we compare the referral agreement, payments to the local laboratory and claims associated with its referrals. We look at those records together with someone who knows what work the local laboratory actually performed. The purpose is to understand what the payment bought and how the resulting business reached Medicare or TRICARE.

We examine the payment formula and the work behind it with you.

People on either side of the arrangement can know different parts of it. Someone at the receiving laboratory may understand the payment terms. Someone at the referring laboratory may understand the work performed for that money. Billing personnel may see the claims generated from the account. Our work is to connect that knowledge to the alleged purchase of referrals.

Why the Settlement Amount Was Conditional

The settlement announcement tied the final amount to a separate dispute with the Centers for Medicare & Medicaid Services over potential Medicare overpayments. Depending on that dispute’s outcome, the government said the payment could be as low as $180,000. A separate fight over Medicare claims could determine how much Molecular Testing Labs owed to resolve the referral allegations.

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

You Know What the Local Lab Was Paid For

If you know why a laboratory paid the accounts sending it tests, speak with our whistleblower experts about the referral arrangement. We work beside you to build your strongest laboratory fraud case and bring in whistleblower lawyers who understand lab referral payments and healthcare billing. We stay with you from the first conversation through the case.