Private Equity Laboratory Fraud: Whistleblowers Alleged the Investor Knew About Our Testing Practices

Private equity laboratory fraud can involve an investor directing unnecessary testing and the systems used to bill government health care programs. If you work in a laboratory, pain clinic or billing office, you may know who approved the standing order, who changed the patient-risk settings and who kept the policy in place after physicians objected. Those are the decisions we examine with you.

Logan Laboratories and the Automatic Testing Policy

In April 2020, Logan Laboratories, Tampa Pain Relief Centers and two former executives agreed to a $41,000,000 settlement over alleged unnecessary urine drug testing. Whistleblowers brought the cases that led to the government’s settlement. The settlement agreement filed with the SEC says Surgery Partners owned Logan and Tampa Pain. Tampa Pain operated pain-management practices. Logan supplied urine testing.

The government alleged that the defendants made both presumptive and definitive testing automatic for every patient at every visit, without a physician deciding whether either test was necessary for that patient. Tampa Pain performed and billed the presumptive testing. Logan performed and billed the definitive testing. The claims went to government programs including Medicare and Medicaid. Taxpayers were billed for tests the government alleged patients did not need.

One policy could therefore generate bills from both the clinic and the laboratory. The alleged shortcut came before either bill: the patient’s visit supplied the occasion for testing, and the standing policy supplied the decision.

The agreement assigned payment obligations to Logan, Tampa Pain and the two former executives. It also covered corporate parents and owners for the specified testing conduct. But it expressly preserved the government’s claims against the former owner, H.I.G., for its own independent conduct beyond its role as investor or owner.

That distinction puts the investor’s decisions in focus. Who directed the testing policy, and what did that person know about the claims it produced?

How H.I.G.’s Management Role Entered the Allegations

The allegations against H.I.G. connected management authority to pressure for more testing. The Eleventh Circuit’s account of the whistleblowers’ allegations described an H.I.G. affiliate’s management contract giving the private equity firm control over Surgery Partners’ operations, together with representation on its board. H.I.G. and Surgery Partners subsequently formed Logan as a urine-drug-testing business.

The whistleblowers alleged that Surgery Partners, under H.I.G.’s guidance, pressured medical providers to send patients to Logan for quantitative testing even when a cheaper qualitative test would have sufficed. They alleged that Logan ran excessive panels and submitted the resulting claims to government healthcare programs. Their allegations also reached H.I.G. executives on the board, whom they accused of furthering the scheme through changes to the electronic medical records software.

The management contract describes who had authority. The testing instructions show how that authority reached the clinic. A direction to change the order form or the patient-risk tool can connect a decision above the clinic to what happens at the specimen table.

The Order Was Built Into the Software

The Pennsylvania whistleblowers alleged that the electronic record system made broad confirmation testing automatic. Their complaint described the NextGen workflow this way:

The complaint also alleged that the system restricted physicians’ choice of laboratory. Separately, it described authorizations for a predefined testing panel that lasted a year from the physician’s signature. A signature obtained once could keep generating the same testing instruction across later visits.

The Florida whistleblowers described a further change to the apparent clinical justification:

On that account, the software helped create the reason for repeating the test. A patient-risk label would appear to support the order, while the setting that produced the label reflected a company decision.

The same complaint alleged that staff at a Colorado practice overrode a physician’s referrals to other laboratories and changed them to Logan. It also described reports tracking confirmations per patient, which executives allegedly circulated to pressure providers to increase referrals. The alleged control reached the test selection, the laboratory destination and the measurement of the physician’s output.

The Clinical Decision Behind a Urine Drug Test

Ethical Perspectives on Urine Drug Screening for Pain Physicians, published in Pain Physician in 2014, describes how quantitative testing can inform opioid choices, drug interactions and metabolism. It also explains that screening methods can miss some drugs and that results need clinical context.

The paper’s clinical account makes the automatic-testing allegation more concrete. A company-wide default can repeat the laboratory work while bypassing the patient-specific judgment the government said was missing at Logan and Tampa Pain.

The business also divides that work between people who hold different records. Under Medicare’s diagnostic-testing requirements, the ordering practitioner retains the medical-necessity documentation. The billing entity retains what it received from the practitioner and documentation that the claim reflects that information. The clinician’s record and the laboratory’s claim describe different parts of the same service.

That is why a change to the clinical template matters to a laboratory billing inquiry. We examine how the order arose, what justification accompanied it and how it reached the claim.

What Evidence Is Needed to Prove Fraud?

We examine private equity laboratory fraud with you by connecting the order, the patient’s clinical justification, the test performed and the claim to the people who directed the practice. For investor involvement, management authority, instructions and responses to objections help explain who knew what the testing policy was doing.

The Logan complaints show how those connections can appear in ordinary work. A laboratory employee sees the panel that keeps arriving. A clinician sees an order replaced or a risk setting changed. A billing employee sees the tests charged to Medicare. A manager sees the testing-volume report and the instruction sent after it. We connect those accounts to the same decisions and claims.

Payment incentives add another part of the picture. The Florida complaint alleged that Surgery Partners’ physician employment agreements provided incentive compensation based partly on profits from ancillary services, including Logan. It alleged that the compensation was intended to induce referrals. The employment agreement, the calculation and the testing instructions can show how management linked the physician’s pay to laboratory business.

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

The Same Testing Shortcut Appears in Other Laboratories

Custom profiles can turn a provider’s advance selection into recurring laboratory business. In its 2023 civil settlement, Genotox Laboratories admitted offering forms that allowed providers to preselect tests for all or nearly all their patients. Genotox performed and billed those tests, generally in the highest reimbursement categories.

In the 2024 Precision Toxicology settlement, the government alleged that custom profiles operated as standing orders for large numbers of tests without an individualized assessment. These cases put the same business decision in view: who made the continuing instruction, and how many later orders did it control?

Referral incentives can also supply the demand. The Millennium Health settlement covered allegations that the company provided free point-of-care test cups to physicians who agreed to refer laboratory testing. The benefit went to the practice that could send the next specimen.

When the Referral Payment Is Called an Investment Return

A separate laboratory referral pattern uses investment returns to pay the ordering provider. In its RDx Bioscience settlement announcement, the Justice Department alleged that payments routed through management services organizations were disguised as investment returns but offered to induce laboratory orders. The same announcement described alleged referral payments disguised as consulting or medical-director fees.

In that allegation, the investment return went to the provider being induced to order tests. In the H.I.G. allegations, the question concerned a private equity firm’s role in directing the testing business. The roles matter because they identify different decisions: who sent the specimen, who paid for that referral and who controlled the policy producing the claims.

When You Know Who Approved the Testing

If you know how an investor’s instructions reached the clinic, the laboratory or the claim, speak with our whistleblower experts about the decisions you saw. We work beside you to build the case around that knowledge and bring in laboratory fraud whistleblower lawyers who understand investor control, testing practices and referral payments. Bring us what you know about who approved the policy and what happened after objections so we can build your strongest laboratory fraud whistleblower case.