Florida Laboratory Agrees to Pay $9.8 Million to Resolve False Claims Act Allegations Involving Below-Market Consulting Services and Referral-Based Compensation

The Department of Justice (DOJ) has announced that NeoGenomics Laboratories Inc., a Florida-based clinical laboratory, has agreed to pay approximately $9.8 million to resolve allegations that it violated the False Claims Act (FCA) through compensation arrangements with health care providers and independent consultants. According to the government, NeoGenomics provided certain consulting services to referring providers for less than fair market value and paid independent consultants compensation that varied based in part on the volume or value of resulting laboratory referrals.

Notably, the settlement followed a voluntary self-disclosure by NeoGenomics. The government also credited the company for its cooperation and remediation, including terminating the arrangements at issue, terminating responsible employees, and providing detailed information to assist the investigation.

Below Fair Market Value Laboratory Consulting Services

According to the government, NeoGenomics operated a Laboratory Clinical Initiative program through which it provided consulting services to 28 health care providers seeking to establish in-house flow cytometry and Fluorescence In-Situ Hybridization, or FISH, testing capabilities.

The government alleged that NeoGenomics provided some of those services for less than fair market value to induce the providers to refer other clinical laboratory testing to NeoGenomics. The government contended that these arrangements violated the Anti-Kickback Statute (AKS) and that the resulting financial relationships and submission of claims also implicated the Stark Law.

Independent Consultant Compensation Based on Referrals

The government also alleged that NeoGenomics entered into agreements with independent consultants who identified potential health care provider customers for the company’s laboratory services.

According to the DOJ, the consultants’ compensation varied in part based on the volume or value of referrals generated by the health care providers they identified. The government alleged that the payments therefore created an improper financial incentive tied to federal health care program business.

Commission-based compensation arrangements can be particularly risky in the laboratory industry. Although percentage-based and success-based compensation is common in many industries, the AKS can restrict arrangements under which marketers, sales representatives, or independent contractors are paid based on federal health care program referrals.

The regulatory analysis often depends on the structure of the relationship, the services actually performed, the methodology used to determine compensation, and whether the arrangement satisfies an applicable statutory exception or regulatory safe harbor. Companies should be especially cautious when independent contractors are paid per referral, per test, as a percentage of collected revenue, or under another methodology that increases compensation as federal program business increases.

GWB represents healthcare providers in connection with government investigations and False Claims Act litigation. If you need assistance with such a matter, contact us today.