RDx Bioscience: Investment Returns, Director Fees and Lab Orders

In the RDx Bioscience settlement, the laboratory and its owner and CEO agreed to pay over $13 million to resolve allegations of laboratory kickbacks and medically unnecessary testing. The government described referral payments dressed as investment returns, consulting fees and medical directorships, alongside commissions and payments to recovery-center principals and referring providers’ staff. The labels changed. The alleged purpose stayed the same: get the tests sent to RDx, then bill Medicare and Medicaid. The government alleged that taxpayers were billed for tests patients did not need.

RDx Federal and New Jersey Settlement Components

RDx, a clinical laboratory in Kenilworth, New Jersey, and its owner and CEO agreed to pay $10,315,023 to the United States and $2,934,977 to New Jersey, which jointly funded the Medicaid claims. The Department of Justice’s January 10, 2024 announcement states the federal and state payments separately.

A laboratory can have the specimen, the result and the claim while the explanation for ordering the test sits in someone else’s office. In RDx’s case, the government alleged that financial incentives reached the people sending that business to the lab.

Do Doctors Get Kickbacks for Ordering Tests?

The government alleged that health care providers received payments disguised as investment returns and professional fees to induce RDx test orders. Its account describes five alleged payment routes, reaching marketers, providers, recovery-center principals and office staff. The owner and CEO’s alleged role included paying commissions and collection fees, and billing or causing claims to be billed despite paying or knowing about the kickbacks.

Marketer Commissions Tied to Referrals

From 2018 to 2022, RDx and its owner and CEO allegedly paid independent contractor marketers commissions based on the volume and value of Medicare and Medicaid referrals. The marketers’ job was to arrange for and recommend that healthcare providers order RDx tests.

The alleged payment formula connected the marketer’s income to the business arriving at the laboratory. For an insider familiar with sales compensation, the useful connection is between the commission calculation, the referring practice and the tests billed.

Management Services Organization Payments Called Investment Returns

During the same period, RDx marketer Corum Group allegedly paid providers thousands of dollars through purported management services organization payments. The government said those MSO payments were disguised as investment returns but offered to induce RDx orders.

The allegation here was that the payment bought a provider’s testing referrals. We examine what triggered the distribution and how it connected to the recipient’s orders.

Consulting and Medical Director Fees

From 2017 to 2023, marketers BeauMed Consultants and Ralston Health Group allegedly paid health care providers thousands of dollars disguised as consulting or medical director fees. According to the government, those payments were offered to induce orders that included RDx tests.

The government’s allegation focused on what the fee purchased. For someone inside the arrangement, the work the provider actually did, the basis for the fee and the test orders coming back to the laboratory belong in the same account. A title on an agreement cannot tell that story alone.

Payments to Recovery-Center Principals

From 2019 to 2020, RDx marketer Seaworthy Recovery Services allegedly paid principals of substance-abuse recovery centers to induce laboratory referrals. This route reached people running facilities where patients were receiving treatment.

The alleged payment made that treatment relationship a source of purchased referrals.

Specimen-Collection Fees to Office Staff

RDx and its owner and CEO also allegedly paid specimen-collection fees to staff members of referring healthcare providers to induce their employers’ test orders. Here the money reached people working inside the referring practice, through a task that already belonged to the testing process.

The allegation was that the collection fee helped buy the order as well as the sample. A staff member who knew how the fee was calculated or why samples went to RDx could see a part of the arrangement that a test result would never explain.

When Are Toxicology Tests Unnecessary?

Toxicology tests are unnecessary when the testing lacks a patient-specific clinical reason. The RDx settlement addressed allegations that the laboratory billed Medicare and Medicaid for identical urine drug testing panels across all patients in a clinician’s practice without individualized decision-making. The government placed those allegations, and the other unnecessary-testing claims, in the period from 2017 to 2023.

The clinical question still concerns the patient whose sample is in the cup. In its laboratory compliance guidance, the Department of Health and Human Services’ Office of Inspector General says the requisition form should ensure an independent medical-necessity decision for each test the laboratory bills. That puts the design of the order form beside the patient’s chart when we examine why a particular set of tests kept recurring.

The 2021 clinical review Urine Drug Screening: A Guide to Monitoring Tx With Controlled Substances, published in The Journal of Family Practice, connects testing frequency to ongoing assessment, including prior results and the patient’s behavior. Its discussion of testing fraud describes practices with a financial interest that:

The review also explains that testing at every addiction-treatment visit can be unnecessary for stable patients. RDx’s specific allegation concerned a practice-wide panel that bypassed an individual decision. The patient’s care is supposed to determine the tests. A repeatable order can supply the volume without supplying that reason.

Duplicate Claims for the Same Patient and Drugs

The government separately alleged that RDx submitted or caused improperly duplicative urine drug testing claims for the same patient, the same service date and the same drugs. This concerns repeated billing for the same testing, alongside the allegation that a panel included tests without individualized need.

Those allegations point to different records. The panel question connects the order and the clinical reason. The duplicate-claim question connects what the laboratory billed for a particular patient and date. Someone familiar with both the requisitions and the billing system may be able to explain how the two diverged.

When a Collection Fee Encourages More Tests

A payment attached to specimen handling can reward the referral itself. In the blood-testing case against Health Diagnostic Laboratory, the government alleged that processing and handling fees of $10 to $17 per referral induced physicians to send patients for tests. The whistleblower’s complaint described how an apparently routine packaging charge could encourage additional orders:

The RDx allegation put collection payments in the hands of referring providers’ staff. The Health Diagnostic Laboratory allegation concerned fees to physicians. The shared question is what happens to the recipient’s income when more tests go to the paying laboratory. It is a connection between compensation and orders that someone inside the business may recognize long before it appears in a settlement announcement.

The Settlement Reached Beyond RDx

RDx and its owner and CEO agreed to cooperate with the Department of Justice’s investigations and cases involving other participants in the alleged schemes. In the same announcement, the department said it had recovered over $46 million at the time in matters involving MSO kickbacks to health care providers.

The False Claims Act connects the payment arrangements to the government money. The unnecessary-testing and duplicate-claim allegations gave the government additional grounds to challenge the bills.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Speak with our whistleblower experts about the referral agreement, the payment calculation or the recurring orders you saw.

You Saw What the Payment Bought

If you saw consulting fees tied to orders, investment returns following referrals or collection payments driving laboratory business, speak with our whistleblower experts about the payments you saw. We build your strongest laboratory fraud whistleblower case with you and bring in laboratory fraud whistleblower lawyers who understand referral arrangements and unnecessary-testing claims. We stay beside you through the case, connecting what you know about the payments to what the government paid for the tests.