Pinnacle Laboratory: Urine Referrals Disguised as Rent

The Pinnacle Laboratory kickbacks case involved $475,992 that a laboratory owner and marketer admitted paying for urine drug-testing referrals, often disguised as office rent. Their criminal plea agreements, described in the Justice Department’s December 2020 announcement, put a familiar business expense at the center of the scheme. The physician receiving the payments sent his patients’ urine testing to the owner’s laboratories. For someone who knows the medical office, the rental payments and the laboratory account, those pieces belong in the same story.

Pinnacle Laboratory in Lexington, Kentucky, was one of several toxicology laboratories the owner operated. The owner lived in Houston, Texas, and the marketer who worked on behalf of his labs lived in Deer Park, Texas. The referring physician practiced in the Houston area. The payments went to him and his wife, who owned the office space used to disguise the arrangement.

Do Doctors Get Kickbacks for Ordering Tests?

Yes. In the Pinnacle case, the physician acknowledged in his criminal plea agreement that he received kickbacks in exchange for referring his patients’ urine drug testing to the owner’s laboratories, though he disputed the amount. The laboratory owner and marketer admitted making the payments between November 2014 and August 2017. The Justice Department described the criminal case as a conspiracy to violate the federal Anti-Kickback Statute.

The doctor sent the laboratories his patients’ testing, and the laboratory owner and marketer paid rent to the physician and his wife on office space the couple owned. The referral decision brought money back to the person making it. The Justice Department also reported that his wife admitted her role in the criminal case.

The person who negotiated the arrangement or worked in the office may know what the laboratory expected in return. Here, the plea agreements connected the payments to urine referrals. The ordinary name on the expense did not describe what the money bought.

The Medicare Claims Behind the Referrals

Pinnacle and the owner’s other laboratories billed Medicare for urine testing tainted by the kickbacks. According to the Justice Department’s account of the criminal case, all the defendants agreed that Medicare paid the laboratories $325,739 to which they were not entitled.

The industry structure helps explain why the physician relationship was worth buying. The clinician orders the test, the laboratory performs and bills it, and Medicare pays. For covered clinical laboratory services paid under the fee schedule, MedPAC’s payment overview explains that patients pay no share of the cost. The referring practice directs the healthcare business, while the laboratory receives the government payment.

In Pinnacle’s case, the physician’s referral decision was the link between the rent payment and the Medicare claim. A biller’s view of the test and an office employee’s view of the payment describe different parts of that same transaction. We bring those accounts together around the referring practice, the laboratory that billed and the money that moved between them.

The Pinnacle case supplies an exchange its defendants admitted: laboratory payments for the physician’s referrals. The rent arrangement inserted a personal payment into that health care decision.

A separate whistleblower complaint made a similar rent allegation against Genotox Laboratories, saying the laboratory paid medical practices for office space its specimen collectors used.

What Evidence Is Needed to Prove Fraud?

We connect the lease and payment records to the referrals the laboratory received. We focus on what the office agreement covered, what actually happened in the space and the communications tying payment to the laboratory account.

The person responsible for the office may know who used the rented space and for what work. The employee handling the laboratory relationship may know what was promised when the account was secured. Read together, those accounts can explain why a payment appeared in the rent ledger and what the laboratory expected it to produce.

We then connect that arrangement to the testing billed to Medicare. Pinnacle’s criminal plea account makes that connection explicit: the defendants agreed that the laboratories billed for testing tainted by the payments. For an insider with a similar concern, we build a qui tam case around that connection between the office arrangement and the government claim.

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

You Know What the Rent Bought

If you know a laboratory’s rental payments were buying referrals, speak to our whistleblower experts about the arrangement inside the practice. We build your case around the connection between the payments and the testing, bring in laboratory fraud whistleblower lawyers who understand referral schemes, and stay beside you through the pursuit of a recovery.