Utah Lab Owner Genetic Testing Fraud: Paid Per Test, Invoiced Per Hour

The Utah lab owner genetic testing fraud case involved approximately $89 million in losses to Medicare and other federal and private health care programs, according to the Justice Department’s account of his guilty plea. The owner and his partners held interests in a call center, a clinical laboratory and a telemedicine company. They paid for cancer genetic-test referrals and orders without regard to medical necessity. For an insider who saw the orders, claims or marketing payments, the telling detail is what earned a referral payment: a test that brought insurance money back to the laboratory.

A Call Center, a Laboratory and a Telemedicine Company

The owner participated across the businesses that found beneficiaries, arranged orders and billed for testing. The Justice Department announced his guilty plea on March 28, 2023, covering three conspiracy counts involving wire fraud, health care fraud and violations of the Anti-Kickback Statute. Its account places the conduct between October 2018 and July 2019.

The criminal information underlying that plea describes a laboratory enrolled to bill Medicare and a network of suppliers selling access to potential patients. Intermediaries arranged the referrals in return for part of the kickback. The laboratory’s insurance claim came at the end of a transaction that began with someone finding a beneficiary and getting a test ordered.

That overlapping ownership is central to this case. The owner had a financial interest in the marketing, the ordering business and the laboratory collecting the payment.

How a Qualified Patient Lead Became a Paid Test

A qualified patient lead meant more than contact information. In the criminal information, it meant a Medicare-covered beneficiary eligible for reimbursement for the relevant test, whose completed kit was processed by the laboratory and billed to Medicare. Suppliers earned kickbacks on leads that produced reimbursement.

According to the information, suppliers found beneficiaries through cold calls, targeted Internet advertisements and in-person solicitation. They questioned people about eligibility, then uploaded their information through an online portal operated by the testing businesses.

The next step was the order. The information says telemedicine providers contacted the pre-screened beneficiaries with the objective of supplying test prescriptions. Those providers were not treating them for symptoms or conditions. Some suppliers used their own arrangements with healthcare providers and passed an existing doctor’s order to the testing businesses.

Once a prescription was obtained, a testing kit went to the beneficiary. The beneficiary completed a cheek swab or another collection method in the kit and returned it to the laboratory. The laboratory submitted electronic claims to Medicare, TRICARE, CHAMPVA and other health care benefit programs. Referral payments followed the kits through processing, billing and reimbursement.

The cancer genetic tests concerned inherited susceptibility to cancer. The information explains that a cheek swab supplied cells for DNA analysis and that reimbursement rates for these tests sometimes exceeded approximately $8,000 per test. That made a completed, reimbursed referral a valuable thing to buy.

The sequence explains what the marketing agreement was really purchasing. A name, an order and a returned specimen each moved the transaction closer to payment. The supplier’s compensation depended on getting through the sequence, not on the hours it spent advertising.

Medical Necessity Was Missing From the Order

The criminal information describes Medicare’s ordering rule plainly: the physician treating the beneficiary orders the diagnostic test and uses its results to manage the beneficiary’s specific medical problem.

The same filing says the laboratory had to certify on its Medicare enrollment form that its claims and the transactions behind them complied with Medicare rules, including the ban on referral kickbacks.

The arrangement substituted a search for reimbursable patients for that clinical decision. Eligibility screening came first. A provider then supplied an order for the person already selected. The question driving the transaction was whether the test could bring in payment.

Under Medicare’s ordering and documentation rule, the ordering practitioner keeps the medical-necessity documentation in the patient’s medical record. The laboratory submitting the claim keeps what the practitioner sent and documentation that its claim accurately reflects that information. The patient chart, order and insurance claim therefore describe different parts of the same decision.

The June 1997 Laboratory Medicine article Model Plan Helps Laboratories Fight Fraud described the inspector general’s recommendation for requisition forms with space for the physician to document the medical necessity of each test. It explained the reason in ordinary laboratory terms: laboratories do not treat patients. The order form is where the treating practitioner’s decision reaches the business that performs and bills for the test.

That distinction gives an insider’s knowledge its value. A billing employee may see what arrived with the order. Someone in the ordering practice may know whether the patient’s chart supports it. Someone in the call center may know what questions the beneficiary was asked.

Marketing Hours on Paper, Referrals in the Bank

The criminal information charged that the laboratory concealed some referral payments by wiring money to a New Zealand shell company controlled by an intermediary. Suppliers signed sham contracts describing marketing and referral services for that company. The contracts said compensation depended on hours and expenses.

The payment formula worked differently. The information says suppliers were paid per cancer genetic-test referral that resulted in Medicare reimbursement. They generated false hourly invoices, sent them to the laboratory or the shell company, and received wired payments through the shell company.

The filing gives a concrete example. Around January 15, 2019, a supplier emailed the owner a sham invoice requesting $54,000 for genetic tests, describing the work as marketing and processing services. The information then describes the shell company wiring approximately that amount to the supplier’s company around January 22, 2019. The invoice dressed the purchase of referrals as ordinary work for a business.

Across the arrangement described in the information, the testing businesses wired approximately $6.6 million in kickbacks through the New Zealand company for the associated suppliers. The hourly paperwork hid the reason for the payment. Taxpayers funded Medicare’s payments for tests ordered without regard to patients’ needs.

For a marketer or accounts-payable employee, the discrepancy is recognizable: a contract prices time, while the business actually pays when a referred test brings in insurance money. The invoice, referral record and incoming reimbursement tell the story together.

What Is the Genetic Testing Scandal?

Genetic testing fraud has repeatedly involved buying patient referrals and medical orders to generate claims for unnecessary tests. The Utah owner’s guilty plea shows that pattern inside a business with interests across the call center, laboratory and telemedicine company.

Do Doctors Get Kickbacks for Ordering Tests?

According to the Department of Justice’s account of the Utah owner’s guilty plea, the owner and his partners paid kickbacks for cancer genetic-test referrals and orders without regard to medical necessity. The criminal information says telemedicine providers supplied prescriptions to pre-screened beneficiaries they were not treating for any symptoms or conditions.

You Saw What Earned the Payment

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. If the marketing invoice said hours but the payment depended on reimbursed tests, tell our whistleblower experts how the arrangement worked. We build your case around the connection you can explain, bring in laboratory fraud whistleblower lawyers who understand purchased orders, and stand beside you through the pursuit of a recovery.