NextHealth: Lab Commissions and Orders Over Physicians’ Objections

The owner of The ENT Institute agreed to pay approximately $3 million to settle laboratory and medical-device kickback allegations, including the NextHealth fraud claims. The government alleged that he directed employed physicians to order toxicology and genetic tests they said their patients did not need. The alleged commissions came from the testing revenue. The doctors questioning the orders worked for the person collecting the money.

NextHealth was a Dallas, Texas medical testing laboratory that the Justice Department described as defunct in its December 8, 2021 announcement. The announcement paired the practice owner’s settlement with a separate $1.2 million resolution concerning Entellus Medical, a sinus-surgery device company. Its $4.2 million headline covered both arrangements.

Do Doctors Get Kickbacks for Ordering Tests?

In the NextHealth case, the government alleged that the laboratory paid the practice owner 50% of the revenue generated by tests he directed other physicians to order. The payment followed the laboratory’s revenue, giving the person directing the orders a financial stake in the testing.

He was the founder and owner of Milton Hall Surgical Associates, which did business as The ENT Institute, also known as The Ear, Nose & Throat Institute. From 2014 to 2018, he was a non-practicing physician acting as the practice’s CEO and medical director. The practice employed approximately 12 to 18 physicians across North Georgia.

According to the government’s account, the NextHealth arrangement began around January 2016. The owner required physicians to order toxicology and genetic testing from that laboratory despite their objections that the tests were medically unnecessary. Those objections went to the reason for testing the patient, while the commission rewarded the person requiring the order.

The government said increasing physician complaints brought the arrangement to an end around February 2017. A physician who questioned an order could see something a laboratory revenue report would never explain.

In the separate Physicians Choice Laboratory Services case, the government’s complaint alleged a contract paying a practice manager a commission based partly on the laboratory’s Medicare collections from referrals.

When Are Toxicology Tests Unnecessary?

Toxicology tests are unnecessary when they lack a patient-specific medical reason. Medicare’s ordering rule ties diagnostic laboratory testing to the treating clinician’s use of the results in managing the patient’s particular medical problem. In the NextHealth allegations, the physicians responsible for those patients were the ones objecting to the tests.

The physician’s name on a requisition and the clinical reasoning behind that requisition are different pieces of evidence. Pressure to produce orders can reach the laboratory as apparently routine paperwork.

That clinical perspective gives the objections in the NextHealth case their weight. The government’s allegation was that the owner overrode the judgment of the physicians treating the patients while receiving money from the laboratory they were told to use. Patient care supplied the reason an order should exist. Laboratory revenue supplied the alleged reason management demanded it.

Why the Tests Selected Matter to the Commission

A commission tied to testing revenue makes the selection of tests financially important. The Department of Health and Human Services Office of Inspector General’s analysis of 2024 Medicare Part B laboratory spending shows progressively higher median payments across the main definitive-testing tiers as the number of drug classes increases. A policy that routinely selects broader testing can therefore change the bill as well as the work performed.

Genetic testing illustrates a different imbalance between test volume and dollars. The same report found that genetic tests accounted for 5% of tests but 43% of spending. That category includes tests of human and pathogen genetic material.

Those later industry figures show why counting orders tells only part of a laboratory’s financial story. NextHealth’s alleged arrangement joined both decisions to the practice owner’s income: which laboratory received the orders and which tests the physicians were directed to request.

What Evidence Is Needed to Prove Fraud?

For a laboratory commission case, the evidence connects the medical reason for testing, the order, the test performed, the claim and the payment returned to whoever supplied the business. In NextHealth’s alleged arrangement, the physician objections and the practice owner’s authority are central to that connection.

We examine what a compensation agreement rewarded and how that formula appears in payment records. We compare the orders and test results with the clinical reasons for testing, and examine communications about who selected the laboratory or required the tests. If a physician objected, the response can show how management handled the conflict between its revenue arrangement and the physician’s judgment.

Different people know different parts of that history. A physician may know why a test was challenged. A billing employee may recognize what reached the payer. A laboratory salesperson or practice manager may understand the commission calculation and the pressure to keep orders coming. The value is in connecting those accounts to the same healthcare business.

The Entellus Allegations Concerned a Different Stream of Business

The Entellus allegations concerned sinus procedures and devices. The government alleged that the company provided cash and all-expense-paid trips in return for the practice owner requiring physicians to use its sinuplasty devices and increase the volume of sinus surgeries. More procedures meant more supplies ordered from Entellus.

After Stryker acquired Entellus, its compliance personnel flagged the consulting arrangement with the practice owner and elected not to renew it. The government alleged that the payments bought more sinus procedures and device orders.

The laboratory and device allegations shared the same source of influence: the owner could direct physicians employed by his practice. The government described different payments for different streams of orders, with the patient’s treatment decision sitting between the supplier and the person being paid.

A Physician Brought the Whistleblower Case

A former physician-employee of The ENT Institute brought the qui tam case under the False Claims Act.

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

When You Know Why the Orders Kept Coming

If you saw physicians overruled while someone collected laboratory commissions, speak with our whistleblower experts about the orders and payments you know. We build the case with you and bring in laboratory fraud whistleblower lawyers who understand referral payments, medical necessity and the records connecting them. We stay beside you as your knowledge of the practice becomes the foundation of a health care whistleblower case.