Physician’s Choice Laboratory Services: Equipment, Loans, and Tests on Repeat

In the Physician’s Choice Laboratory Services settlement announced in March 2021, a former owner agreed to pay $2,021,795 to resolve allegations that equipment, loans and referral payments generated false Medicare urine-test claims. The government’s complaint describes how the business worked behind those benefits: standing panels kept tests coming, commissions followed collections, and an auditor’s recommendation came back the next year because the laboratory had not acted on it. Someone inside the laboratory or a referring practice could see a different part of that arrangement every day.

Physician’s Choice was a urine drug testing laboratory formerly based in Charlotte, North Carolina, and Rock Hill, South Carolina. By the time of the resolutions, it had closed. Two whistleblower complaints led to the government’s civil case against the laboratory, former owners and other participants.

The Owners’ Settlement and Judgment Covered Different Arrangements

The owner settlement covered alleged referral inducements from June 2013 through October 2015. The Justice Department described desktop analyzers, supplies and services supplied to physicians, loans to physicians, and compensation for a person who could influence referrals from medical practices. That compensation began as volume-based commissions and later became a salary.

The government alleged that the arrangements induced referrals for quantitative urine drug tests, which Physician’s Choice then billed to Medicare. The office test and laboratory confirmation were separate steps: the whistleblower complaint alleged that Complete Family Care sent every in-house urine test to Physician’s Choice for confirmation.

A different former owner consented to a $4.5 million judgment announced on March 30, 2021. That resolution concerned alleged kickbacks to the owner of a medical practice in Knoxville, Tennessee, and resulting Medicare claims from September 2012 through July 2014.

A Sales Manager Paid to Route the Practices He Managed

The Physician’s Choice sales manager also managed physician practices that sent urine samples to the laboratory. In its December 16, 2019 announcement, the Justice Department said he had paid $649,407 to resolve allegations that he helped induce physicians to send medically unnecessary urine drug tests to Physician’s Choice.

The government alleged that Physician’s Choice paid him to channel tests from practices he managed. It also alleged that he and another defendant supplied physicians with equipment and related services in exchange for referrals.

The government’s complaint puts the compensation formula alongside the job. It alleges that his contract paid a commission based partly on a percentage of the laboratory’s Medicare collections for tests from specified practices. Physician’s Choice allegedly paid him more than $600,000 in commissions on those referrals. The person helping determine where the samples went also earned money when Medicare paid the laboratory.

Do Doctors Get Kickbacks for Ordering Tests?

The Physician’s Choice case alleged that physicians received benefits in exchange for urine-test referrals, including equipment, expense reimbursements and loans. The value could arrive as something the practice would otherwise have had to buy or finance. The government brought its case under the Anti-Kickback Statute and the False Claims Act because it alleged that these arrangements produced claims to Medicare.

One arrangement connected an owner’s benefits to a substantial stream of testing. According to the government complaint, the former owner who later consented to the $4.5 million judgment supplied the owner of the Knoxville practice with $300,000, a BMW, MedX software and continuing technical support. Physician’s Choice then submitted more than 8,700 Medicare claims and received more than $2.7 million for tests on that practice’s referrals. The benefit went to the referral source. The testing bill went to Medicare.

The complaint also alleged that the same former laboratory owner told an employee he did not worry about getting paid for MedX because the laboratory’s referral revenue more than made up for it. To the practice, software could look like a cost removed from its budget. To the laboratory, the alleged return was in the samples that followed.

In another arrangement, the sales manager and an owner allegedly reimbursed a physician for analyzer testing and other operating expenses. The complaint said the physician consequently bore no out-of-pocket cost for the analyzer or testing while receiving payments for sending referrals to Physician’s Choice. Another physician allegedly agreed to send samples in exchange for a $50,000 loan.

An internal proposal quoted in the government’s complaint made the business pitch unusually clear:

Setting up the physician’s laboratory was presented as a way to bind the businesses together. That is why the equipment arrangement belongs in the same story as the referral agreement and the commission contract.

One Form Set the Panel for Every Sample

The laboratory’s Provider Acknowledgment Form allegedly established the tests the laboratory would run on every sample a provider sent, unless the provider checked a box requesting different tests. The government complaint described an account-opening form that did two jobs: it put a physician’s signature on file and selected a standing panel. After that, Physician’s Choice allegedly did not require the physician’s signature on individual urine-test orders.

The panel was the operational link between winning the practice’s business and deciding what to run. Once it was set, a new sample brought the same selection of tests unless the provider changed it on the requisition.

The treating clinician holds the patient’s medical justification in the practice’s chart, while the laboratory bills for the tests selected through the standing panel.

When Are Toxicology Tests Unnecessary?

Toxicology tests are unnecessary when they lack a patient-specific reason for diagnosis or treatment. In the Physician’s Choice case, the government alleged that referral benefits induced medically unnecessary testing, while the whistleblower’s complaint described routines that kept repeat testing in place.

According to that whistleblower complaint, Complete Family Care required monthly urinalysis. The complaint also alleged that managers at a Knoxville pain practice briefly reduced routine monthly testing, then restored it over an insider’s objection because they needed the revenue.

The government’s complaint describes pressure from the laboratory as well. Physician’s Choice allegedly monitored a physician’s referrals and warned that the volume had fallen below the expected 200 samples per week. The commercial expectation concerned the number of samples. Patients’ health care needs were supposed to determine the testing, but the whistleblower described a monthly schedule restored because the practice needed the revenue.

For someone who handled requisitions or managed a practice, those are recognizable decisions: which tests became the default, how often patients returned, and who complained when referral volume fell.

The Audit Recommendation Came Back Unchanged

The government complaint alleged that the laboratory’s auditor repeated a recommendation about annual physician acknowledgments because the laboratory had not implemented it. Quoting the audit report, the complaint stated:

The complaint places that warning in the 2014 audit. It gives an insider something more specific than a general concern about too much testing: a recommendation, a decision to leave it unimplemented, and a later report saying so.

The laboratory field had discussed these controls long before the Physician’s Choice case. Model Plan Helps Laboratories Fight Fraud, published in Laboratory Medicine in 1997, described the government’s model compliance plan. It recommended physician acknowledgments for customized profiles, monitoring standing orders for continued validity, and retaining and analyzing test-use data.

That paper explains why the audit issue mattered to the testing itself. A standing panel needs continuing attention to whether it still fits the orders it is meant to serve. The complaint against Physician’s Choice describes a system that kept using the panel and an auditor repeatedly asking for an acknowledgment control around it.

What an Insider Can Connect

The Physician’s Choice allegations run through records that different employees see in ordinary work: equipment arrangements, practice loans, provider acknowledgment forms, requisitions, referral counts, commission calculations and audit reports. A sales employee may understand why a practice received an analyzer. Someone handling orders may know how the standing panel was applied. A billing employee may see which claims generated the collections used to calculate a commission.

Our whistleblower experts assess how the referral payments and standing orders fit together and build the laboratory fraud case with you. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know How the Samples Got There

If you saw a practice benefit tied to referrals or a test panel kept running to meet a revenue target, speak with our whistleblower experts. We build the laboratory fraud case with you, bring in healthcare fraud whistleblower lawyers who understand referral compensation and urine-test billing, and stay beside you through the pursuit of a recovery.