Diagnostics and Laboratory Services: Enforcement Trends and Practical Safeguards

The US Department of Justice’s record-setting 2025 National Health Care Fraud Takedown, for example, reported that 49 defendants were charged in connection with the submission of over $1.1 billion in fraudulent claims linked to telemedicine and genetic testing alone. 

The cases highlighted below — drawn from the past year’s enforcement actions against diagnostic testing companies and laboratories — offer a window into the trends shaping 2026 and practical steps to stay in compliance.

Continued Targeting of Illegal Remuneration

The federal Anti-Kickback Statute (AKS) prohibits offering, paying, soliciting, or receiving anything of value to induce or reward referrals for items or services covered by federal health care programs. AKS violations can also give rise to liability under the False Claims Act (FCA). In 2025, several diagnostic and testing companies faced enforcement actions for offering illegal kickbacks to providers in exchange for laboratory and testing referrals.

In December 2025, a Virginia clinical laboratory, NEXT Molecular Analytics (NEXT), agreed to pay at least $758,000 to resolve allegations that it knowingly paid kickbacks to induce laboratory referrals. As in the True Health matter, physician payments were disguised as consulting or medical director fees. NEXT also allegedly paid independent marketing contractors volume- and value-based commissions tied to physician referrals. 

Just one month later, Clinical laboratory LTD Holding LLC, formerly known as Labtech Diagnostics LLC (Labtech), and its founder and CEO, Joseph Labash, agreed to pay a settlement of at least $6.8 million after allegedly providing kickbacks to induce laboratory testing referrals. Labtech also pleaded guilty to five counts of offering and paying health care kickbacks in violation of the AKS.

These cases reinforce a familiar message: the DOJ remains committed to curbing illegal remuneration in the diagnostic and laboratory space. Physician consulting or director fees that function as inducements — and commission-based payments to independent contractors—remain high-risk areas under the AKS.

EKRA and the Ninth Circuit’s Guidance in Schena

In 2025, the Ninth Circuit issued the first appellate ruling interpreting the Eliminating Kickbacks in Recovery Act (EKRA) (18 U.S.C. § 220) in United States v. Schena, 142 F.4th 1217, 1219 (9th Cir. 2025). The ruling expanded EKRA’s reach, stating that both health care providers and marketers can face liability for paying remuneration to induce a referral if there is evidence of undue influence.

Like the AKS, EKRA prohibits soliciting, receiving, or paying kickbacks in exchange for referrals to rehabilitation or treatment facilities, as well as medical testing laboratories. Although enacted as part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (the SUPPORT Act), EKRA applies to all laboratories regardless of the type of test performed. Importantly, unlike the AKS, EKRA is not limited to federally funded health care programs — it covers remuneration for services reimbursed by private payers as well. The safe harbor provisions under each statute also differ, so arrangements that are protected under the AKS may not be protected under EKRA.

In Schena, the Ninth Circuit upheld the conviction of Mark Schena, an executive who operated a medical testing laboratory. Schena paid commissions to marketing professionals to induce referrals and made misleading claims about allergy and COVID-19 tests. The Court clarified that percentage-based payments to marketers are not automatically unlawful under EKRA. However, EKRA is violated when such payments are coupled with “undue influence” — here, that meant targeting less sophisticated providers, misrepresenting testing capabilities, and pushing tests without regard to medical necessity. The US Supreme Court denied Schena’s petition for certiorari on March 23.

Schena highlights two key lessons for diagnostic companies. First, EKRA can impose liability on both health care providers and their marketers. Second, percentage-based compensation arrangements become especially risky when marketing practices do not prioritize medical necessity or involve misrepresentations about testing capabilities.

Medical Necessity and Improper Billing Under the Microscope

Recent enforcement actions also demonstrate that the government is placing increased scrutiny on whether tests are medically necessary — a trend that is likely to continue.

In May 2025, Gulfcoast Eye Care paid $615,000 to resolve allegations that it submitted false claims to Medicare and Medicaid for medically unnecessary trans-cranial doppler ultrasounds (TCDs). According to the government, Gulfcoast informed patients of serious diagnoses — before receiving any test results — that could qualify them for a reimbursed TCD. In nearly every case, the patient’s medical history and test results did not support the diagnosis used to justify the test. Gulfcoast also allegedly paid a third-party testing provider based on the volume or value of the tests ordered. In January, five additional Florida ophthalmology practices agreed to pay nearly $6 million to resolve nearly identical allegations involving TCDs.

Medical necessity scrutiny has also extended to genetic testing. In November 2025, two telemarketing company operators were sentenced for soliciting Medicare beneficiaries for medically unnecessary cancer genetic (CGx) tests, paying and receiving kickbacks, and causing $17.3 million in false Medicare billing. The DOJ emphasized that CGx testing is not diagnostic and that Medicare covers it only in limited circumstances. This trend is continuing into 2026 — in January, a Florida man pleaded guilty to submitting over $52 million in false and fraudulent claims for unnecessary genetic testing, and in February, a Texas laboratory owner was convicted after orchestrating a $328 million cardiovascular genetic testing scheme. 

In September 2025, medical device manufacturer Semler Scientific Inc. and its distributor, Bard Peripheral Vascular Inc., agreed to a $29.75 million settlement to resolve allegations that they violated the FCA by submitting false claims to Medicare for photoplethysmography tests. The DOJ alleged that Semler knew its tests did not meet applicable Current Procedural Terminology (CPT) code requirements and that Medicare did not cover photoplethysmography-based vascular tests yet continued to submit claims and promote Medicare reimbursement to customers.

Together, these cases underscore that medical necessity will remain a central focus of enforcement efforts. They also highlight the significant risks of billing federal health care programs for specialized testing without first verifying coverage eligibility and ensuring compliance with applicable CPT codes.

Compliance Takeaways

Diagnostic and laboratory companies should expect continued scrutiny of referral arrangements, marketing practices, and testing documentation. To mitigate risk, companies should keep the following guidance in mind.

• Build and Document Medical Necessity: Maintain clear records establishing medical necessity before ordering any test.

• De-risk Marketing Compensation: Avoid volume- and value-based payments to independent contractor marketers. When using contract sales forces, structure compensation at fair market value, determined in advance, and without volume- or value-based metrics.

• Monitor Marketing Activities, Including Interactions With Physicians and Other Health Care Professionals: Implement oversight mechanisms to prevent deceptive or aggressive marketing and ensure that sales and marketing arrangements include clear boundaries designed to prevent improper interactions with health care professionals.

• Validate Coverage and Billing Practices: Confirm that each test satisfies applicable coverage criteria and coding requirements before submitting claims. Do not promote reimbursement without supporting medical history or documentation.

Conclusion

Federal enforcement in the diagnostic and laboratory space remains robust, with recent actions underscoring sustained government attention to kickbacks, medical necessity, and false claims tied to coverage and coding. We expect the government to continue leveraging coordinated takedowns and FCA investigations while scrutinizing marketer-driven referral pipelines, consulting arrangements, and specialized test reimbursement claims. Companies that invest in strengthening compliance programs — particularly around medical necessity documentation, compensation structures, and billing validation — will be best positioned to navigate the evolving enforcement landscape. For tailored guidance, please contact the authors or the ArentFox Schiff attorney who regularly handles your work.